On June 4, 2019, Airbnb changed the service fee structure in order to remain competitive in the vacation rental space, especially with Booking.com, one of the largest travel e-commerce giants that has never charged guests fees to its consumers.
According to Skift.com, “under the new business model, property managers that create accounts starting June 4 and connect to Airbnb via software in the Asia Pacific (except Japan), Europe, the Middle East, and Africa will be charged a 14 percent host-only fee by default. Until now, the default was that Airbnb charged hosts a 3 to 5 percent fixed fee, and guests paid a fee of up to 20 percent of the rate for the listing.”1
Under the new fee model, there are two different service fee structures for reserving a place to stay: a shared host and guest fee and a host-only fee.
Shared host and guest fee
According to Airbnb.com, the shared host and guest fee is the standard fee structure for individual home hosts, with the following specifications for host service fees and guest service fees.2
Host service fee. This fee is 3%, but may be higher for hosts in Italy or for listings that have a Super Strict cancellation policy.
This fee is calculated from the reservation’s subtotal (the nightly rate plus cleaning fee and additional guest fee, if applicable, but excluding Airbnb fees and taxes) and is automatically deducted from the host payout.3
Guest service fee. This fee ranges up to 20% of the booking subtotal (the nightly rate plus cleaning fee and additional guest fee, if applicable, but excluding Airbnb fees and taxes).
This is calculated by using a variety of factors, including the reservation subtotal, the length of the stay, and characteristics of the listing. In general, the service fee gets lower as the reservation cost gets higher. Guests can review this fee on the checkout page before they book a reservation.4
The host-only fee structure was created so that hospitality businesses can offer a predictable, competitive price to their guests. The host-only fee ranges from 14% to 20% (plus 2% for listings that have a Super Strict cancellation policy) and is the required fee structure for hotels and other hospitality businesses.5
Previous Service Fee Model
Until now, the default was that Airbnb charged hosts a 3 to 5 percent fixed fee, and guests paid a fee of up to 20 percent of the rate for the listing. Together, these guest and host commission fees made up a total Airbnb service fee that would represent some 23 to 25% of the total cost of a stay.
What does the new service fee structure mean to Airbnb hosts?
You might be wondering, what the heck does all of this mean to me as a host and what do I need to do? The first thing you need to understand is that Airbnb isn’t eliminating guest fees all-together, the elimination of the guest fee only applies to a small portion of Airbnb’s inventory of more than 6 million listings and counting.6 Airbnb will continue to get their 23-25% share.
All existing Airbnb hosts who started using Airbnb before June 4, regardless of whether they’re professionals or just occasional Airbnb hosts, can keep using the old fee structure where both guests and hosts pay a small amount to Airbnb.
But for hotels that are new to Airbnb as of June 4, and for select professionally managed rentals, travelers will soon notice they don’t have to pay that guest fee anymore.7
Why you don’t need to worry
If you’re a host you might be thinking… “Oh great! My commission just increased from 3-5% to a whopping 14%! That’s not fair!” First, you don’t need to worry or freak out; but you will need to make small changes to your nightly pricing.
Based on some tests conducted by Airbnb of the new fee structure, hosts did indeed notice an increase in bookings. And this all makes sense.
From a guests perspective, there is a benefit of “savings” and clarity; there is more transparency and guests don’t have to figure out where all of these extra fees came from.
To the guests, the way pricing will be displayed is all psychological. It’s similar to how retailers triple their prices then advertise a 50% discount to make shoppers think they’re getting a great deal.
You need to increase your nightly rate
If you choose the new structure, for you, as a host, to make up for the increased commission, you need to increase your nightly rate. Airbnb still gets their commission, it’s just shown on the host’s side.
When this new fee structure is rolled out to your area, it will simply be a matter of raising your prices to adjust for the fees coming out of your side of the transaction.
My advice to you is to embrace this new change; take advantage that while other hosts are complaining about the change, you will be getting their reservations because your deal will be more attractive to travelers.