What is Airbnb?
Airbnb began in 2008 as an online marketplace to arrange lodging between individuals looking to rent out their space and those looking for accommodations.
It seems like a lot of work to manage an operation that is effectively a mini motel. The truth is, you don’t have to have experience or a ton of capital to get started. The sharing economy is in its primitive stages right now and if you get in on this side hustle while the market is yet to be saturated, you can build a nice nest egg for your journey towards
How Does it Work?
Have you ever wondered how people are renting their apartments or homes on Airbnb?
The business model is very simple: individuals like yourself have extra space in their property and want to utilize it in a way to subsidize their cost of ownership, just like house hacking. Travelers need an affordable place that they can rest for a quick trip to town or an alternative option to corporate housing if they need longer accommodations.
Airbnb was created with a sharing economy in mind – it started out just as a small startup in San Francisco but is operating more listings than the largest hotel chains in the world!
Can you make good money from Airbnb?
Airbnb hosts make nearly three times as much as other workers,” Priceonomics reported. “Workers at the general task-service platform, TaskRabbit, rank second at $380 per month.” But as it noted, Airbnb earnings can range drastically, with some hosts making more than $10,000 per month, while others make less than $200
How Airbnb Makes Money
With listings in over 65,000 cities spread out in more than 191 countries, Airbnb’s reputation and revenues have rapidly grown. The primary source of Airbnb’s revenue comes from service fees from bookings. Depending on the size of the reservation, guests are required to pay a 6-12% non-refundable service fee. A more expensive reservation will result in lower service fees for guests. Airbnb reasons that families or groups with larger reservations can save money for other travel expenses. With every completed booking, hosts are also charged a 3% fee to cover the processing of guests payments. When a reservation is booked, guests pay the service fee unless the host cancels or retracts the listing. If the reservation is altered, Airbnb adjusts service fees to accommodate users.
Depending on local or international tax laws, users are also subject to a value-added tax (VAT). A value-added tax is a tax assessed on the final sale of goods and services. For guests seeking accommodations in the European Union, Switzerland, Norway, Iceland, and South Africa, Airbnb charges a VAT in addition to its service fees. Due to different tax laws, Airbnb does not charge a VAT to every guest across the board. In particular, guests with reservations in the EU are subject to taxes based on the rate found in the guest’s home country. Furthermore, guests paying for bookings in a currency different than the one the host has chosen are subject to varying exchange rates determined by Airbnb. Likewise, hosts are also subject to a value-added tax which is deducted from income earned from booking reservations. Although recently Japan legalized Airbnb, resulting in a loss of tens of thousands of listings and angry sentiments from tourists and travelers.
Tips to Make money with Airbnb
Get familiar with laws in your area
As Airbnb becomes more popular, more cities and states are trying to regulate it. In our native Indianapolis, the rules are fairly loose. But some outlying nicer neighborhoods, like Carmel, Indiana, are trying to ban Airbnb hosting altogether. Be sure you understand the rules and regulations in your local area so that you don’t run afoul of the law.
Decide up front how often you want to host
One of the best things about Airbnb for hosts is that it lets you set up rules for bookings ahead of time. For instance, you can set minimum and maximum stay limits. And you can automatically block out the calendar the day before and/or after a booking.
These rules are great if you’re listing out a larger space that will take longer to clean. It’s not worth your time to list a whole house, kitchen included, to a messy guest for a single night. So think about your capacity for cleaning up the space, and set your rules accordingly.
For our family, our single-ensuite Airbnb room takes about 20 minutes to clean. Because it takes so little time, we have no minimum booking requirement, and we don’t block out a night before or after a stay. Sometimes it gets hectic when we have a different guest every night of the week. But we can manage because the space itself is so easy to clean. I just have to stay on top of all that laundry!
Be completely honest in your listing
To get good reviews, it’s absolutely essential that you’re honest in your listing. For me, this means making clear that our space is in a developing neighborhood. Yes, there are abandoned homes on our block. And, yes, we live in a lower-income area with all that this entails. Generally, though, we’ve always felt safe here, so we are comfortable hosting guests. We’re also honest about what they’ll see when they get here.
In all, we’ve had just two guests refuse to stay after they arrived because they were uncomfortable with our neighborhood. And we’ve only had a couple of negative comments in reviews about our area. That’s because we are up front about what guests should expect.
You should also be very up front about your home’s feel and any rules you expect guests to follow. We have young children, and our guest room is right next to the kitchen and their play area. So I tell guests more than once that they can expect noise in the mornings as early as 6:30 AM. I try to keep the kids upstairs a little later on the weekends, but that doesn’t always happen.
Again, we’ve only had a couple of complaints about this because guests know what to expect from our detailed listing.
You don’t have to be a Negative Nancy that nitpicks every aspect of your space or your location. Just tell guests what they can expect, and they’ll give you credit for that in their reviews.
Find your niche in your area
If Airbnb is already popular in your area, you might have some steep competition to get started. People are more likely to book a place that already has a wealth of good reviews. You can overcome this issue, to a point, by finding your niche.
For us, our niche is that we are a little further from downtown, but we also list a private space for much less than downtown offerings. We generally list for $18 to $35 per night, depending on the day. Our guests sacrifice walkability to downtown. They have to Uber, drive, or take the bus to most of the city’s main attractions. But they also get a private space with its own bathroom and entrance for a very low price.
At downtown Airbnbs in Indianapolis, that same rate will put you in a spare bedroom in someone’s home, where you’ll share an entrance, living spaces, and bathroom. Either that, or you’ll just pay a whole lot more for a private space.
That’s our niche. You need to find yours as a host. Look for ways that you drive a particular value for your guests. That could be access to specific locations in your city. It could be extra amenities and perks. Or it could be monetary value in providing a similar space for a lower price. Whatever it is, be sure you advertise that particular selling point in your listing.
Look at Airbnb’s pricing rules, or set your own prices
We have used Airbnb’s auto-pricing rules for a while, simply because I don’t have the time to stay up- to date on the latest listings in town. They work well for us most of the time. Sometimes if I know there’s a big weekend–like the Indy 500 weekend, for instance–I’ll bump up the price manually. Airbnb doesn’t stay on top of local events well enough to account for this type of major bump.
If you have a higher-value place to list, though, you might consider setting your own prices based on market research. This takes more time, of course. But it can be worth your while if you’re listing a whole home that goes for hundreds of dollars per night.
Keep your calendar current
One of the criteria for earning a Superhost badge, which is valuable in driving more bookings, is to never cancel a visit once a guest has booked. This means you have to keep your calendar up-to-date. Otherwise you risk a guest booking during a time when you actually can’t handle the booking. Then you have to cancel, and it’s a big mess for everyone involved.
If you struggle with this piece, consider restricting how far out guests can book. You can set the limit to three months instead of six. Then you can also block out dates that are not even available for guests to book yet. It’s a good idea to do this for dates you think you may be unavailable. You can then unblock those dates if your own plans fall through.
Have backup for emergencies and when you’re out of town
One way to avoid canceling bookings is to have a backup. We have a full-time roommate and a plethora of neighbors who can help with our listing in a pinch. For instance, last summer on our family vacation, the couples who checked in asked for a few random items after check-in. We were hours away, but quickly found a neighbor who has access to our whole home (Airbnb guests do not unless we are at home) to gather up the necessary items and run them over.
We also have high schoolers that we can pay to flip the room for us if we’re going to be out of town. This can really eat into our profits since we’re only listing for $20 a night or so. But it’s worth paying instead of cancelling a guest’s visit because we were unexpectedly out of town.
Be prepared for misunderstandings
As I said above, even with as up-front as we are in our listing, we’ve had people complain about things that are out of our control, such as our neighborhood or the noise our kids make in the morning. It’s just going to happen.
You should also be prepared for misunderstandings as guests arrive. Our standard check-in time is 5PM. That’s because we often need time to get home from work and turn the room around when we have back-to-back bookings. But many guests will book the room and tell me they’re arriving at noon. I just have to message back to remind them, gently, that our listing sets a check-in time of 5PM and that I’ll let them know if I can have the room ready earlier.
We also have issues with guests not fully reading check-in directions. The key to the Airbnb room door is at the back of the house in a coded key box. So if we are going to be busy during check-in, I send guests clear directions of how to park, get the key, and let themselves in. It’s astounding the number of people who come to the front of our home and root around in the mailbox looking for a key.
We’ve had neighbors call asking if someone was trying to break into our house as a guest tries to get into the front door. So prepare for these types of misunderstandings by letting your neighbors know what you’re doing. And always be sure to keep your phone available for guest questions around check-in time.
Get at least two of everything
At first, we thought we’d host with two sets of sheets but only one set of bath mats and one comforter. Unfortunately, bath mats and comforters take forever to dry, so that wasn’t working with back-to-back bookings. Now we have at least two of everything so we can easily turn the room around.
Even if you block out time around your booking, keeping extras on hand is wise. That way if something gets ruined during one stay, you’re not scrambling to replace the item before your next booking.
Stay in communication with your guests
Come up with a routine for communicating with your guests in a timely fashion. I typically thank guests right after I get a notice of their booking. Sometimes their booking message will include questions and I answer those right away, too.
I also check our upcoming Airbnb calendar every Monday morning. This allows me to send out check-in instructions and find out guest arrival times for the week. I also send the list of guests and check-in times to my husband, since we co-manage the room.
Sometimes fielding inquiries and booking messages is a pain. I can get several messages on my phone’s app as I sit in a meeting at work. But prioritize guest communications, and you’ll get better ratings and more bookings.
Don’t sweat a few negative reviews
Some people are just going to be annoyed about things, even if they’re things you can’t help. We’ve had guests complain about our neighborhood, noise levels, or the mattress in the room. While we did eventually upgrade the mattress, we can’t do much about the other factors. So we don’t sweat it when we get a few negative reviews about those things.
If you need to, you can always respond to a negative review. You can’t change it, but you can at least add context to the review for other potential guests to see. Whenever possible, point back to your listing and guest handbook. For instance, if guests complain about the kids’ noise at 7AM, I apologize but then refer them to our handbook, which warns of this particular issue.
Leave reviews for great guests
At first, I tried to leave an individualized review for every single guest. But we have seven guests some weeks, so this just isn’t possible. Now, I make a habit to at least leave reviews for exceptional guests who communicated well and left the room really tidy. I also always leave reviews for guests who review us.
Again, get into a habit here of going through and doing reviews once in a while. Airbnb will send you reminders to review guests. So try to get into the habit of responding to those reminders for at least most of your guests.
Keep track of your income and expenses
Finally, be sure you understand how taxes will work for your Airbnb income. And know that you can write off expenses directly related to this income. One good option is to keep a credit card just for Airbnb expenses, including any cleaning supplies, linens, towels, and other supplies for your guests. Keep those expenses separate, and document the receipts. That way you can recoup at least some of your costs come tax time.
Though it is taxing work to keep up with the duties that come with opening your home to guests, the financial gain you receive is well worth the time invested. For current Airbnb hosts, these 13 tips should help elevate your listing, bring in more bookings and increase your income. For brand new or future hosts, this may be a hefty amount of information to take in but it will serve as an excellent guide to Airbnb success.
The Airbnb Referral Program
Anybody can hop on this train as there are no strict requirements to join. The Airbnb referral program is a more informal program provided by Airbnb to enable referrers to earn some money.
The Airbnb Referral Program aka “The Program” allows members to earn promotional coupon credits aka “Travel Credits” toward future homes/experiences bookings by referring friends to become new users on Airbnb. Friends can be invited to Airbnb via email, or through social media platforms such as Facebook or Twitter where the referral code could be shared.
For example, if you send a friend $25 in Airbnb credit, will earn you $15 when they travel and $80 when they host. The remaining travel credit available then appears automatically in the form of a coupon on the checkout page.
Although the Referral Program is decent enough, you will not be paid in cash, and the lifetime limit seems to be capped at $5,000. It is, however, a fun incentive for non-affiliates as this enables them to earn some travel rewards points with Airbnb from friends and family.
If you’re looking to make more money and have an extra room in your house that you could list, Airbnb might be a great opportunity to turn that spare bedroom into real money.