In addition to the service fees that hosts and property managers have been accustomed to for years, Airbnb is also introducing a new service cost structure.
Pricing on a split-fee basis
Hosts pay 3% of the overall payment, while visitors pay a Service Fee that ranges from 13 to 20% of the total payout.
Streamlined Pricing
The service cost will not be apparent to the visitor, and the host will get 15% of the total payment.
What factors should you consider before selecting a model?
Since December 7, 2020, Airbnb has made Simplified Pricing essential for hosts who use third-party applications. If your listings are in one of the countries listed below, or if you aren’t using software, you may still pick which structure to use by logging into your Airbnb account.
- The United StatesÂ
- CanadaÂ
- MexicoÂ
- The BahamasÂ
- ArgentinaÂ
- TaiwanÂ
- Uruguay
Suppose you have at least one conventional hospitality listing (aparthotel, hostel, serviced apartment, etc.) regardless of location. In that case, you will be shifted to a host-only charge and will not be able to modify it to a split fee.
Because this option is tucked away on the Airbnb website, here’s a direct link to it: https://www.airbnb.com/account-settings/payments/api-host-service-fee
Let’s do some math before settling on a charge structure to see how these two models affect how much a visitor and host spend for a reservation.
What does it cost my visitors to stay at my place?
With the present structure of Airbnb, this was an unresolved question. We used to set our pricing for our house, and Airbnb would tack on a service charge. The hosts would not know how much the visitor paid to stay at their home. Airbnb’s guest fees range from 10% to 20%, depending on a variety of criteria such as duration of stay, traveler’s nationality, and more…
With the new Simplified Pricing system, the host has complete control over the entire amount the visitor pays, and no additional fees are added to the final cost. Booking.com has been using this structure for a long time.
When you go to Simplified Pricing, it looks like this. When the visitor clicks to learn more, they will see a $0 Service Fee and an explanation.
Let’s examine how much a visitor pays and how much a host earns for the standard Split-fee and the new Simplified Pricing in a variety of situations. In our instances, we will compare a 3-night stay at a nightly fee of $100. I looked at my home from two different angles, and the guest service charge was roughly 16-17 percent.
If you look at the statistics in the chart above, you can see that if you want to maintain earning the same amount, you’ll need to boost your rates and cleaning charge by 14%. Alternatively, you may use Simplified Pricing to increase your rates by 15%, resulting in a 1% increase in revenue while the visitor pays the same. It is entirely up to you whether you want to exploit the new structure to obtain a competitive edge against comparable listings or just increase your earnings.
Another thing to keep in mind is that I ran the numbers in a scenario where certain occupancy taxes apply (Florida, USA). When your lodging cost increases, so does the tax that your guests must pay. With the decreased service price of Simplified Pricing, there is still a margin to pay that. If your government does not levy additional taxes, you have an extra 1% margin to utilize to your advantage or get a competitive pricing advantage.
In the present arrangement, Airbnb’s service charge reduces to about 10% if you host longer stays (28 days or more). Switching to Simplified Price in this situation may be unfavorable for you since the Host Service Fee is set at 15% for the new pricing structure. For the time being, it is not adapting to the length of stay. We told the Airbnb staff about our concerns regarding lengthier stays, and we’ll see whether they will implement additional policies in the future.
At the end of the day, which is better?
During the test phase of Simplified Pricing, Airbnb claims that listings with the new pricing structure received up to 17% more reservations than listings with the standard service charge. You may learn more about Simplified Pricing from Airbnb’s information document.
The following are some of the additional benefits of Simplified Pricing:
- Have complete control over how much your visitors pay to stay at your propertyÂ
- Remove an additional service cost from the guest’s billÂ
- Have a pricing structure comparable to platforms like Booking.com
- Increase your compensation while keeping your visitors’ payments the same.
On the other side, you should be mindful that:Â
- Your nightly rate will seem higher than your competitors;Â
- Guest expectations may rise as a result of the apparent nightly rate; andÂ
- The hosting charge may be greater for longer stays.
Given the above information, you must choose the best solution for your company and adjust to the changes. Because Airbnb actively supports the new Simplified Pricing, there are grounds to assume that converting to the new structure will provide you greater visibility in search results.
How can you adjust to the new Simplified Pricing system?
If you want to adopt Simplified Pricing or are required to do so for a reason (e.g., utilizing third-party software in certain regions), you will need to boost your rates by 14-15 percent to maintain the same level of final payment. Remember that the service cost is applied to both the accommodation and cleaning fees, so you’ll need to alter your cleaning fee as well.
Please keep in mind that if you change your Airbnb pricing, you’ll need to change your mark-up settings across the board to reflect the new rates. On other sites like Booking.com and Vrbo, Lodgable will automatically compute your daily prices and change your schedule.
Sign up for Lodgable today and see how it can make all the difference for your business.Â
