Renting your home on Airbnb may be a good way to earn extra income. But the new rate policy shows how quickly the economics of short-term rental operations can change.
Airbnb announced that it will transition all hosts in the United States to the new pricing structure by September 15th. Under the old system, hosts typically paid a service fee equal to 3% of the reservation subtotal, and guests paid a separate service fee of 14.1% to 16.5% on top of that price at checkout. Under the new system, hosts will instead pay a single 15.5% service fee, and guests will not be charged a separate service fee at checkout.
The move could prompt some hosts to raise their list prices to avoid losing revenue from bookings. When Airbnb transferred its initial group of hosts to a new structure last year, about 30% raised prices enough to completely offset the higher fees, and another 30% partially offset them, according to an analysis by short-term rental data firm AirDNA.
The changes have sparked complaints on Airbnb’s host forums, including comments from people saying they are considering leaving the platform or switching to long-term rentals. But other hosts told CNBC they are moving forward with the change, even as they increase their list prices to maintain what they pay.
“I think the new 15.5% is more transparent,” said Chris Dickey, a communications expert in Jackson, Wyoming. Mr. Dickey has been renting a single-family home in Moab, Utah since 2021. Mr. Dickey increased the list price to account for the fees, while keeping the total amount guests paid about the same.
“But I think the market has not yet normalized rate changes because we are seeing a slowdown in bookings,” Dickie said.
Airbnb told CNBC Make It that the changes are aimed at making upfront fees more transparent to guests, which it believes could drive demand and benefit hosts.
Changing rates is just one of the changes that short-term rental owners must manage. Fluctuations in demand, operating costs and local regulations can also determine whether a property makes money, hosts told CNBC Make It.
Short-term rentals are “not an easy way to make money. It’s never easy. It’s very intense,” said Sebastian Long, founder and CEO of furnished rental operator Lojour. “You have to be a bit of a masochist to tackle this.”
Short-term rental hosts may rent out a single room or home, or manage a portfolio of hundreds of units, but even at the smallest scale, hosting requires active management of pricing, expenses, guests, and the property itself, which can consume a significant amount of the owner’s time.
“Hospitality shouldn’t be a hobby,” Long says. The company operates approximately 200 fully furnished rental properties in Texas. “Welcoming people into your home is a pretty tough job.”
That applies to the mom-and-pop level as well. “It’s definitely a small business,” says Dickie, who owns and manages a three-bedroom rental home herself.
“If you’re looking for passive income rather than active income, don’t touch it,” says Jason Baxter, founder of short-term rental income management company Marketix. “If you don’t like hospitality, don’t touch it.”
Hosts and short-term rental operators who spoke to CNBC Make It highlighted four factors that determine rental success:
1. Reservation platform
Hosts should consider changes to their booking platform’s rates and policies, including Airbnb’s new pricing structure.
“Airbnb is the market leader by a wide margin and has the largest market of renters,” Dickey said. “Unfortunately, as an STR owner, you have to play by its rules.”
That dependency can extend beyond rates and policies to how hosts approach potential guests. Long said changing a platform’s search algorithm can affect where a listing appears in search results, which can affect how much exposure a listing gets.
2. Price and demand
Before purchasing a property to use as a short-term rental, owners should consider local competition, seasonal demand, and the rates they can realistically charge, says Avery Kahl. She owns and self-manages 10 short-term rental properties and runs The Short Term Shop, a real estate agency specializing in short-term rentals.
“Location is really important,” Dickey says. “I think there are a lot of amateur Airbnb owners who don’t do their due diligence before purchasing an STR property.”
Mr Dickey says problems can arise when owners buy properties in a saturated market and then struggle to fill them.
Pricing also requires ongoing management. Karl says two identical homes in the same area can produce “very different income numbers” depending on how they are managed. She recommends regularly reviewing and adjusting nightly rates based on demand and competition, even if you’re using automated pricing tools.
“The system is great, but you have to manage the system,” Karl says.
3. Operating costs
Cleaning, maintenance, utilities, insurance, and other costs ultimately reduce the income owners receive from their properties.
“This is something investors need to research and get an idea of before they buy,” Karl said. She recommends estimating your monthly operating expenses in advance and setting aside an emergency fund for costly repairs.
Some costs are easily underestimated. “Cleaning is always a sleeper,” says Dickie. He typically budgets 2.5 hours for cleaning between guests, but says the job often takes longer, especially when factoring in washing and drying linens.
Hosts can offset some of that cost by charging guests a cleaning fee. But Airbnb acknowledges guests’ dissatisfaction with cleaning fees and advises hosts that setting cleaning fees too high can discourage bookings.
Airbnb allows hosts to charge guests a separate cleaning fee to cover their costs. However, hosts also need to consider how much their guests are willing to pay, as the fees are added to the total cost of the night.
The accumulation of smaller expenses, such as maintenance and software services that hosts use to manage their assets, “kills you by 1,000 cuts,” Long says.
4. Local regulations
Local regulations determine where short-term rentals are allowed and may impose additional permit, license, and tax fees on owners.
These rules may also change after the owner has already begun operations. New York City began enforcing new registration requirements in 2023, further restricting Airbnb-style rentals of entire homes or apartments for stays of less than 30 days.
To reduce that risk, “investors should choose tourism-dependent vacation markets where the short-term rental industry has been established for many years,” Karl said, but STR restrictions “are highly unlikely because they would have a negative impact on the local economy.”
Regulation can also benefit existing operators by limiting new competition. Dickey’s Moab properties are zoned for commercial lodging in areas that are difficult to develop new short-term rental properties.
“Local regulation can definitely be expensive, but in our case it protects us from oversaturation by making the development of new STRs nearly impossible,” Dickie says.
In any case, Long says prospective owners should research both the current rules and the market’s regulatory history before entering the short-term rental market.
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