How Does Airbnb Work?
Are you thinking of hosting on Airbnb? If so, it’s time to get your bearings. Understanding what the service is and who’s involved could help you decide which steps to take next. So how does Airbnb work? Here’s everything you need to know before becoming a host.
What Is Airbnb?
Otherwise known as Air Bed and Breakfast, this service lets hosts rent out accommodation around the world. Travelers are free to reserve rooms, homes or villas for themselves or a group. Accommodation and pricing vary widely as do booking conditions.
Airbnb was launched in 2007 but has since skyrocketed in popularity. Its founders, Brian Chesky and Joe Gebbia, cite necessity as the mother of invention. The two industrial designers began renting out their apartment to visitors to make up for high rental prices in San Francisco. The simple concept has taken on countless iterations and redefined property rental.
Who Uses Airbnb?
There are as many types of guests as there are property types, though the site attracts a younger audience. Specifically, approximately 60% of Airbnb guests are millennials with different needs and priorities than traditional hotel-goers. They tend to appreciate the local, authentic experience offered by individual service providers as well as the unique accommodation. Bonus points are awarded to hosts in or around cultural activities, local hotspots or other area-specific ambiance.
This business was born out of economic demands and appeals to guests for the same reason. Hotels are still widely available, though Airbnb offers a fun and more affordable option.
What Hosts Can Expect
Whether you’re renting out an extra room or partnering with a vacation rental property, you’ve got options. Your existing reservation system can even be integrated into their platform fairly easily. If you already have an Airbnb account, you may be able to integrate your Airbnb listings without sacrificing your ranking. Just remember that Airbnb charges a 3% commission per booking beyond integration pricing.
There’s a lot of talk about Airbnb, so it’s best to separate fact from fiction. Here are a few of the upsides for prospective hosts.
- Free listing. Listing your property on Airbnb won’t cost you a bean.
- Get noticed. The brand has global name recognition and more users than you can imagine.
- Unrestricted rates. No one knows your property better than you, so rental rates are yours to decide.
- Safety in numbers. The Airbnb Host Guarantee covers property damage up to $1,000,000.00. Not all countries are eligible.
- Wide net. Room rental is definitely doable but so are boats, treehouses and islands. List your accommodation of choice for a wide range of travelers.
There are countless reasons to consider hosting, though earning extra income is certainly one of them. Start small and grow your business to see where housing takes you!
Hosting is a rewarding experience for many, though it’s not without issue. You may face a few downsides as part of the rental process:
- Property damage. Most guests are respectful of your belongings, though property damage does sometimes occur. Sign up for Airbnb’s host damage protection program otherwise known as AirCover for added protection. Certain items like jewelry, cash and pets may not be covered.
- Added costs. Airbnb charges additional fees to hosts and guests alike. For example, you can expect to pay a service fee as well as bank or credit card fees in some cases.
- Legal matters. Airbnb may span the globe, though laws are location-dependent. Check with your local zoning authority and government office to find out what’s required. For example, permits or licenses may also be necessary.
FAQs for Airbnb Hosts
Still got questions? We’ve got you covered. Here are a few fast facts hosts should know.
How much does it cost?
Airbnb charges acquisition rates starting at 3%, which is lower than other sites. You won’t have to worry about credit card processing fees, either.
How are hosts paid?
Airbnb features its own secure online payment system. Guests are charged upon booking, and hosts get paid 24 hours after guests check in. There are several payment options to choose from including direct deposit, PayPal, Western Union and more. It is worth noting that Airbnb does not collect tax automatically.
How much should I charge?
As with any property rental, rates vary considerably based on location, amenities, size and demand. Guests expect to pay less than a hotel room of similar quality, though it also offers luxury accommodation. Check similar listings in your area as a point of comparison.
How are cancellations handled?
Cancellation policies vary by host. However, hosts usually receive applicable payment 24 hours after the guest’s scheduled check-in time. (Haustay collects security deposits from every guest prior to arrival.)
Are you thinking of hosting on Airbnb? If so, plan to provide 30+ days of availability over the next 12 months per listing. Be sure to include applicable pricing for every potential stay.
Beyond scheduling requirements, Airbnb holds its hosts to a certain standard. Here’s how to get ready for guests prior to their arrival:
- Cover essentials. For example, hosts must include the basics like toilet paper, soap, sheets, towels and pillows. If you’d like to be the hostest with the mostest, consider adding little extras to boost your ratings.
- Stay connected. Hosts are required to stay on top of their reservations with good reason. Specifically, plan to respond to questions and potential bookings within a 24-hour window.
- Don’t dawdle. Accepting reservation requests in a timely manner makes guests feel welcomed. Stay on top of your reservations each and every time.
- Be reliable. Cancellations are not taken lightly since travelers schedule their visits around accommodation. Do your best not to cancel to stay in Airbnb’s good graces.
- Quality control. Keep the customer satisfied with consistent attention to detail. Don’t take high rankings for granted.
The Key Exchange
No stay is complete without a key, so perfecting the handoff is your first order of business. Set up guests for success using one of the following strategies:
- Meet in person. If your schedule allows, meet your guests in person when they arrive. This requires a great deal of flexibility and planning with every guest.
- Enlist a friend. Does your friend or family member live nearby? If so, they may be willing to meet the guest(s) for you.
- Use a safe. Meeting people in person isn’t always realistic. Instead, put your keys in a safe location like a safe or a lockbox with a passcode. Other options like KeyNest offer practical handoff solutions.
- Hire out. Management companies can fill in the gaps when you need a hand. Guest liaison services are especially useful for busy professionals or hosts of multiple properties.
At Haustay, we’re here to simplify the hosting process. Check out our step-by-step guide for soon-to-be hosts.
1. Get Permission
- Find out exactly what you’ll need to get your space up and running. Beyond researching local ordinances, check in with your landlord, co-op or homeowner association if needed.
- Check your lease to find applicable information on subletting.
- Determine whether extra rules apply to short-term rentals.
2. Choose Your Space
Now it’s time to zero in on a designated room, home or property and prepare it for rental. You may need to update the space before going public. Here are a few related costs to consider:
- Install a keyless lock for simpler check-in.
- Build a wall for room separation.
- Purchase upgrades for a more comfortable stay, including a mini fridge, microwave and coffee station.
- Create a TV and/or miniature office area.
- Stock up on linens like clean sheets, extra towels and toilet paper.
- Hire a cleaning service for every night or at the end of a guest’s stay. (Check out our professional housekeeping and maintenance services, among others.)
- Make allowances for higher electricity bills.
- Pay your co-host while keeping a record for tax purposes.
- Include applicable taxes and hosting fees in your room rate.
3. Set Your Price
There are many factors at play with pricing including audience, affordability and location.
- In most cases, Airbnb charges hosts 3% of the booking total. Expect to pay more if you are an Airbnb Plus host, are located in a country with extra fees or have a strict cancellation policy. Note that the advertised list price exceeds what you earn.
- Use Airbnb’s metrics to change your prices based on demand. You can also use them to track the prices of competitors in the area. Consider setting minimums for the number of nights per booking, which may lower your cleaning and maintenance costs overall. You can also charge additional fees for extra guests or complementary services like cleaning, equipment rental or tours.
- Guests are charged before arriving and hosts select their preferred payment method 24 hours after guest check-in. Popular payment options include PayPal, direct deposit, Visa, MasterCard, Apple Pay or Google Pay. Cash is not a valid payment option.
- Other factors that impact payment include discounts, co-host payments, seasonal rates or VAT in some locations outside the US.
4. Launch Your Listing
Are you ready for guests? If so, it’s time to go public. Our professional marketing services ensure optimal audience exposure across a variety of channels. We’ve also compiled a few top tips for successful hosting:
- Hit the highlights to showcase your space’s best attributes.
- Mention special features for a more convenient stay including potential add-ons.
- Take professional photos to win guests over. (Vacation rentals are our business, so ask us about our photography packages.)
5. Hire Out
Some hosts go solo, while others need an extra set of hands. Here are some services you could consider outsourcing:
- Emails/guest contact
- Repairs and requests
- Time-sensitive matters
- Insights about the neighborhood and activities
- Checking in/out
Note that co-hosts should be added to your listing and adhere to the co-host terms of service. Payment is up to you and your co-host to decide. We’re happy to offer co-host services including cleaning, guest communication and more for your convenience. Contact us today for more information.
6. Host Experiences
Not everyone has extra space, though Airbnb isn’t limited to rentals. Here are the ins and outs of hosting an Airbnb Experience.
- Airbnb Experiences offers tours to interested participants. The idea is to connect guests with local, knowledgeable people to pique their interest. Activities may include fitness classes, beach lessons, food outings or walking tours specific to the site. Unfortunately, these aren’t available everywhere.
- As with other Airbnb services, what you offer is flexible. Choose your schedule, hosting frequency, group size and prices.
- Experience hosts are required to apply to vet their knowledge. Airbnb responds to applications in about a week. You may need to register as a business or obtain a license depending on your location and activity. For example, experiences involving alcohol, food or transportation may be subject to more regulations.
The Tax Breakdown
Keeping your financial house in order is important for the stability of your business. Get familiar with the following four tax categories before hosting:
Some cities require hosts to collect sales tax from guests, which should be shared before booking. Tax is often due at the same time as regular booking costs.
Becoming an Airbnb host places you in the category of a small business owner. You can expect to report your income and expenses on your federal taxes to the IRS. Airbnb, the IRS and your state of residence will send a 1099-K form if your earnings exceed $600 per calendar year. The form is used to determine and report your business income.
Transit Occupancy Tax
As with many tax categories, this type varies by location. Airbnb hosts in San Diego are required to pay a 10.5% TOT and apply for a registration certificate.
Airbnb hosts are eligible to deduct certain expenses associated with their listings. Some common examples are as follows:
- Property rent or mortgage
- Utilities during booking periods
- Cleaning costs
- Property insurance
- Repair fees
Contact a CPA or other tax professional to ask about applicable deductions before getting started.
If you’ve ever wondered, “How does Airbnb work?” we hope we’ve answered your questions. Becoming a host is an excellent way to grow your business and boost the local economy. We encourage you to maximize your potential with the help of our vetted Airbnb services.Got any questions for us? If so, we’d be happy to oblige. Best of luck on your hosting journey, and thanks for stopping by!
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