The more time I spend speaking and interacting with Airbnb hosts, the more I realise that there is a lot of misinformation in the industry that is hurting hosts without them even knowing it. Most hosts don't have enough volume to be able to notice the subtle changes in policy and how they effect their business until of course, something goes wrong.
To help hosts to have the best information available, I decided to put together a list of the top 10 myths that people believe about Airbnb and the accommodation industry. This is a list of the myths that I will be either proving or disproving in this blog, see below for a full explanation:
Airbnb is the biggest accommodation privider in the world without owning any hotel rooms - Myth
Airbnb only charges a 3.3% fee which is cheaper than the industry average - Myth
Airbnb has insurance for hosts (Host Guarantee) - Myth
Hosts can claim the damage/security deposit charged to guests for damages or extra cleaning - Myth
The fees listed in your house rules are enforceable - True (sort of)
If a guest cancels under the COVID-19 Extenuating Circumstances Policy, you are eligible for the 25% of your normal cancellation payout - True (sort of)
Airbnb cannot overide your cancellation policy for stays outside of the dates specified in the COVID-19 Extenutating Circumstances Policy (currently 31st of March) - Myth
Airbnb hosts are partners with Airbnb - Myth
Airbnb smart pricing helps you make more money - Myth!!!
Booking.com has a higher cancellation rate than Airbnb - Myth
For most Airbnb hosts, these myths might come as a surprise. A lot fo people believe a lot of things about Airbnb that simply aren't true. I don't expect you to take my word for it though so I have included an in depth explanation of each statement above and how I concluded that they are a myth or not.
Airbnb is the biggest accommodation provider in the world without owning any hotel rooms
I hear this phrase thrown around in host circles all the time and it simply isn't true. This phrase has been around for a while, ever since the total number of listings on the Airbnb platform overtook those of the major Hotel chains such as Marriot and Hilton. A recent publication states the total number of Airbnb listings at over 5 million while the Marriott has only roughly 1.3 million.
Without context, this seems to support the statement that Airbnb is the largest accommodation provider in the world as it is almost 5 times larger than one of their closest competitors. However, that is kind of like comparing apples and oranges. The Marriot, owns their rooms while Airbnb does not (for the most part).
To compare apples and apples, you have to take Airbnb for what it really is, a booking channel. Much like booking.com which has a reported 28 million accommodation listings including over 6.2 million unique stays and stand alone homes/apartments. This means that booking.com is more than 5 times larger than Airbnb. So, Airbnb is quite definitively not the largest accommodation provider, far from it.
Airbnb only charges 3.3% fees which is much cheaper than the industry average
This is one of the most frustrating conversations I have with Airbnb hosts. Yes, they do charge the host 3.3%. However, they also charge the guests an additional service fee of 12-16% on top of what you charge.
For example, if you set your rates to $375/night for 3 nights with a cleaning fee of $150, Airbnb would charge the guest and additional service fee of up to 16% on the total amount ($1,275).
The actual % amount varies by region but here on the Gold Coast of Australia, the service fee is 15.53%.
Which means that we set our rates at a total price of $1,275 and Airbnb adds an extra $198 on top of that so the total price charged to the guest is $1,473.00.
Although, Airbnb will only charge you the host a 3.3% fee, they add an additional 15.53% to what the guest pays.
It is important to remember that guests don't care how much money goes to you, how much goes to Airbnb, they only want the best price for their accommodation and an additional $200 can be a deal breaker.
If you need an example of how consumers think, if you saw two petrol/gas stations side by side on a road and one had a 15% higher price, which would you pull into?
When you compare Airbnb with the industry leaders, they are actually the most expensive of the big 3 (Expedia/HomeAway, Airbnb & Booking.com).
Booking.com charges 15%, even factoring in 2.9% for credit card fees (booking.com doesn't take payments) that is still 17.9% in total. HomeAway charges guests 11% and hosts 5.5% for a total of 16.5%.
While Airbnb is actually significantly more expensive than the competitors with a total commission rate of 18.83%.
This concept tends to confuse some people but to put it simply, it doesn't matter where the fees are charged, they're still charged to guests. Don't be fooled into thinking Airbnb only charges 3.3%, they are actually the most expensive booking channel.
Airbnb has insurance for hosts (Host guarantee)
This one is by far the most dangerous myth for hosts. So many people have been told by a friend or other well meaning individual that the host guarantee offered by Airbnb is like an insurance policy and not to bother getting adequate cover from a third party.
To make it crystal clear, here are some screen shots from the Airbnb terms of service:
This is a direct screen shot of the terms of US$1 Million host guarantee. As you can see, it quite clearly states that it is not an insurance policy, but instead is a marketing tool to build consumer confidence.
So what, I still get paid right?
Well, an insurance company is governed by very strict laws that set out how they must handle claims, what time frames they must abide by and how much information they are allowed to require before making a payment. The host cover is not governed by these same laws meaning that Airbnb at their sole discretion can decide if and when to pay out a claim.
This might not be so bad for a broken drinking glass or damaged painting worth less than $200 but what happens if you have something really out of hand happen? What if Airbnb decides to take 3 months to get you your money to pay for the damages. If in that time frame, you're unable to rent your property then you're losing income for all of that period as well as potentially getting less than you need to pay for the damages.
I won't go into examples of when this has happened but join any Facebook group or forum for Airbnb hosts and there will be a post about someone who has had a nightmare with the company.
It also states in the general terms and conditions that hosts should obtain adequate insurance for their property as well.
It is also highly important to think about the whole picture of Airbnb's position as a company right now. As they grew and took on billions of dollars in funding as well as revenue, they were able to payout the host guarantee fairly liberally. However, with a looming public offering, Airbnb is being forced to tighten up it's spending to make the financial balance sheets as appealing as possible.
With COVID-19 decimating the global tourism industry with no real end in sight, Airbnb is also facing some really tough times financially which means they have to be more frivolous with their spending and limit the amount that they pay out under the host guarantee.
Simply state, you need insurance, relying on Airbnb host guarantee is a recipe for disaster.
Hosts can claim the damage/security deposit charged to guests for damages or extra cleaning
If you didn't know there is an option in the Airbnb dashboard to add a security deposit charged to guests. It doesn't work in the same way as a regular security deposit and this is one fo the reasons that I hate using Airbnb.
Normally a security deposit is charged to guests and held until checkout when the property can be inspected for any damage or missing items. If there are any damaged items, the cost of replacement or repair is subtracted from the damage deposit before it is refunded. If there is significant damages then the deposit will be used to offset the cost of the insurance claim.
With Airbnb however, the guest never actually pays the deposit as part of their booking. They simply have an agreement buried within the fine print to Authorise Airbnb to charge their card for that amount. The good news is that it is Airbnb's responsibility to chase them for that money, not yours.
So, as a host if you have a security deposit on your account, then you have no way of withholding that from the guest or claiming it if something goes wrong. Airbnb has ultimate control over that money and if you ever get paid.
What is more frustrating is that Airbnb does not allow you to ask the guest for a security deposit either at the property or via the platform. You can try but it violates their terms of service and will likely cause trouble for you.
My question is that with the host cover being a tenuous, and human resource intensive program for Airbnb to run that doesn't help hosts at all, why don't they allow us to take a security deposit independently? It is probably down to the fact they don't want hosts to have control over their listing and would prefer to be able to keep guests happy as much as possible.
The fees listed in your house rules are enforceable
Although this is true for the most part, there are some important caveats to take notice of.
All fees listed in your house rules must be charged to the guest before check-in or they are not enforceable. Which means that pet fees, any additional service like high chairs must be charged and accepted by the guest before check-in.
If a guest has not paid any of these fees before check in then you as a host can cancel penalty free and still receive the payout as a result of the guest not adhering to your house rules.
However, if you have something like a smoking fee, stained or damaged linen fee etc in your house rules then these are not enforceable as you can only charge the guests after check out for situation like this.
Sometimes you might get a nice guest who accepts the charges but if you have to involve Airbnb you can't enforce those fees. What you can do is show an invoice or a receipt for the repair of damages, or replacement or extra cleaning and you can claim that. But without the receipts or invoices you probably won't get a payout.
If a guest cancels under the COVID-19 Extenuating Circumstances Policy, you are eligible for the 25% of your normal cancellation payout
There has been a lot of controversy around the Airbnb policies with COVID-19 especially when they decided to overrule our host cancellation policies with a special extenuating circumstances policy.
After a lot of backlash from hosts, the company finally relented and offered to pay hosts 25% of their normal cancellation policy. Unfortunately, in reality this is not happening. In my own experience, I have had many guests cancel under the COVID-19 policy and I'm somehow not eligible for the 25% payout.
Now, in some cases, you will get paid out through Airbnb. If a guest clicks the option to take a travel credit you will qualify. If they choose to take the refund offered by your cancellation policy then they won't. On the surface, that makes sense, if a guest selects the 50% refund option then you would get the other 50%.
Unfortunately, a lot of guests have seen documentation or news reports that they get 100% of their money back even if a host has a strict cancellation policy and this is where the problems occur.
This means that if the guests choose the option to accept the cancellation policy but they still expect to get the full refund. However, if they do this it automatically disqualifies you as a host from receiving the 25% cash of your normal policy.
There is also a third option for guests where they can submit documentation to get the full cash back. It is unfortunately hidden from the main screen behind a learn more button. If the guest does use this option and can provide sufficient documentation then you are eligible for the 25% payout of your cancellation policy.
Airbnb cannot override your cancellation policy for stays outside the dates of the COVID-19 Extenuating Circumstances Policy (currently 31st of March)
If you go to the Airbnb website and have a read of the extenuating circumstances policy for cases related to COVID-19 then you will find a timeframe for bookings to be able to cancel due to the pandemic. At the time of writing, the dates covered are reservations with a check in between the 14th of March and the 31st of May 2020. The reservation must have been made prior to the 14th of March to be eligible.
That seems fairly straightforward with no way to wriggle around it. The problem is that I have now had two bookings cancelled due to COVID-19 by Airbnb and my cancellation policy has been overturned for reservations outside of these dates.
The latest was a booking for July where the guest sent documentation to Airbnb to say they had been affected by COVID-19 and even though their reservation was not for another 3 months Airbnb cancelled the reservation and gave the guest their money back apparently under the COVID-19 Policy. When I raised my concerns about the legitimacy of this, they told me they can and will make the cancellation even outside the policy they set.
In this case, the guests had shown some kind of documentation to show that they can't travel which makes sense. My problem with it however is that as a host, you stay up to date with the policies, you read them top to bottom and you still can't be sure whether you will be able to rely on your cancellation policy or not.
The bottom line is that none of your reservations are safe from Airbnb and they will give full refunds at their total discretion. The kicker was that we don't qualify for the 25% host payout as it was outside the COVID-19 policy dates.
Airbnb hosts are partners with Airbnb
In a recent webcast to Hosts, Brian Chesky stated that they had not treated us (hosts) like partners and that they would do that from now on. Obviously, this isn't the case because when you look through the terms on the Airbnb platform, it clearly states that hosts are not in fact partners in any way shape or form.
I doubt that Brian has read these terms in quite a while but the fact remains that he says one thing and then the policies state something completely opposite. Either he doesn't know what is going on inside his own company or he's being purposefully misleading. Either option is a scary prospect for hosts who rely on the platform.
I do want to point out that Brian's webcast was for the most part a welcome apology for the behaviour of the company towards hosts and I do applaud him for standing up and saying sorry. It doesn't fix their mistakes but credit where credit is due.
Airbnb smart pricing helps you make more money
Again, this one is just plain wrong. It does help you get more bookings, mainly because the prices are set at a rate that will sell. Airbnb has a lot of data about consumer activity on their site and they know what price range will make a guest book the first time they visit a page.
Although this sounds like a good thing for you, remember that Airbnb competes with a large number of other booking websites and guests aren't loyal to any one of them. Which means that if a guest is looking at Airbnb and the prices are too high then they can and easily will look at another booking website. This means that Airbnb is happier to get 80% of the potential nightly rate and the guest books on their platform instead of potentially losing that customer to another platform.
I have consistently set rates at up to 70% more than Airbnb smart pricing guidelines and achieved 80%+ occupancy. We do list our properties across the major booking platforms so to us, it doesn't matter if a guest finds us on Airbnb, booking.com or HomeAway, we can still take the booking.
This strategy has helped us make our clients up to 112% more money compared to their previous years earnings. If you're not ready to list your space on multiple booking channels that is not a problem. Simply switch off the smart pricing, set your own rates and if you want the freedom of an automated approach look into a third party pricing automation tool such as Pricelabs or wheelhouse. Remember though, that these third party systems are only as good as your settings. With the wrong settings, you can do more harm than good.
Booking.com has a higher cancellation rate than Airbnb
This one is pure myth. We have been using the platform for just as long as we've used Airbnb and there is simply no difference between the two. There was a learning curve where if your settings aren't configured properly then it is easy for a guest to cancel. However, once we learned how to do it, you have an almost unlimited number of options for setting your cancellation policies. You don't have to choose form a pre set list, you get to make it up the way you want it. The other end of that equation is that if you don't set it up, then guests can and will cancel anytime.
There are a lot of myths about booking.com that people in the host community believe and I will also put together a list of myths to help hosts to understand that the world is bigger than Airbnb and going multi channel is easier than you think.
Thanks for reading and if you have any other myths or questions about Airbnb, please put them in the comments.
P.S. If you're looking to take your Airbnb earnings to the next level and implement the same strategies the big hotels have been using for years to dominate the market...