If you haven’t heard it yet, you probably will in the coming days. Airbnb is rolling out a new policy whereas they will now start moving hosts from a split-fee commission structure to a host-only fee. Allow us to explain.
The Split-fee structurecalled a split-fee structure. This implied that both the host and the guest would pay a service fee to Airbnb. The host’s fee would typically be 3% and the guest would normally pay an additional 12% on the total accommodation and cleaning fees.
The Host-only fee
More recently, however, Airbnb introduced a new optional fee structure called “host-only fee”. As the name implies, this fee would eliminate the 12% that the guests were paying and would give the option to the Host to pay this fee. So instead of paying 3%, the host would now pay 15% (3% + 12%). In some European countries, the fee is actually 14%, which we can assume was set for Airbnb to better compete with leading European booking platforms such as Booking.com, which charges a 15% commission.
Not an option anymore
Based on the information available today, starting in December, Airbnb is moving from offering the Host-only fee as an option to making it mandatory for software-connected hosts (i.e. most Professional Property Managers).
Who does this change apply to?
According to this Airbnb article, this new policy is aimed towards the European and Asian markets, since Airbnb states that it won’t apply to hosts who have the majority of their properties in the US, Canada, the Bahamas, Mexico, Argentina, Taiwan, or Uruguay.
Why is Airbnb doing this?
According to the email Airbnb has been sending to Hosts, showing Guests a price that already includes fees results in 17% higher bookings. We don’t doubt this is true, but not for the reasons Airbnb wants us to believe. Most hosts were caught by surprise with this host-only fee and didn’t have the time to adjust their rates upwards. So of course, if a guest compares a listing at $100 per night to another one at $115 per night, the guest will logically choose the one at $100.
However, when/if Hosts adjust their rates to $115 to compensate for the increase in fees, the 17% increase becomes highly questionable. We think they are doing this to make sure that the prices guests see in Airbnb are easily comparable to those they see on leading platforms like Booking.com.
What should you do?
If you have properties in markets affected by this new policy, it is extremely important to adjust your rates proportionally to this increase in fees, otherwise, your costs will simply go up. By increasing your rates by 12% you would simply be charging the client the same amount they were previously paying.
Possible short-term pain
We think it is safe to assume that most Professional Property managers will also increase their rates by 12% to counter the additional fees. This being said, it is unlikely that all Property Managers will react at the same time. Those managers that take longer to make the adjustments will benefit from higher reservations, but they will inevitably soon realize their error, especially when the owners they represent receive their monthly account statements.
In conclusion
Starting in December 2020, the host-only fee will be the only option available for software-connected hosts (i.e. most Professional Property Managers) who don’t have the majority of their listings in the US, Canada, and a handful of other countries (i.e. this policy mainly affects European and Asian hosts).
Affected hosts will now pay a ~14% commission on the booking subtotal, that is, the nightly rate, cleaning fee, and additional guest fees, excluding Airbnb fees and taxes. To counter this increase in fees, we strongly recommend adjusting your rates proportionally to this increase, otherwise, you will end up with a much smaller profit margin.
The Angel Host Advantage
At Angel Host, we regularly monitor any changes that could adversely affect the performance of your property portfolio. Our clients can rest assured that their rates will be correctly adjusted the day this new policy takes effect thus ensuring we maintain their profit margins.
We think our clients should only worry about growing their business and not being bothered by the constant monitoring and adjustment of their rates. If you are also interested in removing this stress from your life, get in touch with our team and we will be happy to discuss the many ways in which we help our clients grow their business and eliminate the anxiety that comes with it.