Airbnb is now introducing a new sort of service charge structure in addition to the one that has been in place for years for hosts and property managers.
Pricing on a fee-for-service basis
Hosts pay 3% of the entire payment, while visitors are charged a Service Fee ranging from 13% to 20%.
There will be no apparent service cost to the visitor, and the host will be responsible for 15% of the total payment.
How do I choose a model to use?
Since December 7, 2020, Airbnb has made Simplified Pricing essential for hosts who use third-party applications. If you have listings in one of the countries listed below or are not linked to software, you may still pick which structure to use by logging in to your Airbnb account.
• the United States of America
• the Bahamas
Regardless of location, if you have at least one conventional hospitality listing (aparthotel, hostel, serviced apartment, etc. ), you will be automatically shifted to a host-only charge and will not be able to modify it to a split fee.
Before we decide on a fee structure, let’s do some calculations to see how these two models affect the amount a visitor or host pays for a reservation.
How much do my visitors pay for their stay at my establishment?
This was an unresolved issue given Airbnb’s present structure. We used to set our pricing for our house, and Airbnb would tack on a service charge. The hosts would have no way of knowing how much the visitor paid to stay at their property. Airbnb’s guest fees range between 10% and 20%, most likely depending on a variety of criteria such as duration of stay, traveler’s nationality, and more…
With the new Simplified Pricing system, the host retains complete control over the total amount paid by the visitor, and there is no additional guest charge added to the final rate. Booking.com has been using this framework for years.
Compare the amount a visitor pays and the amount a host earns in many situations using the old Split-fee model and the new Simplified Pricing model. In our instances, we’ll compare a three-night stay with a $100 nightly cost. I checked my property from two separate sites and discovered a service charge of about 16-17 percent for the visitor.
When you examine the data in the table above, you’ll see that you need to increase your rates and cleaning charge by 14% to maintain your current earnings. Alternatively, by using Simplified Pricing, you may increase your rates by 15%, earning you an additional 1% while maintaining the same cost for the client. This is a business choice whether to exploit the new structure to obtain a competitive edge against comparable listings or to simply increase your income.
Additionally, I calculated the amount of occupancy taxes that apply (Florida, USA). When you increase your lodging price, the tax that your guests must pay increases as well. However, with Simplified Pricing’s reduced service price, there is still a margin to pay this. If your government does not impose additional taxes, you have an additional margin of 1% to utilize to your advantage or to maintain a competitive pricing advantage.
If you host longer stays (28 days or more), Airbnb’s service charge lowers to around 10% under the present arrangement. In this scenario, moving to a Simplified Price may be detrimental to you, since the Host Service Fee for the new pricing structure is set at 15%. For the time being, it is not adapting to the length of stay. We communicated our concerns to the Airbnb team regarding the longer stays; we’ll have to wait and see whether they implement new restrictions for longer stays in the future.
Which one is superior in the end?
According to Airbnb, during the Simplified Pricing test phase, properties with the new pricing structure received up to 17% more reservations than listings with the standard service charge. You may read more about Simplified Pricing on Airbnb’s information page.
Several more benefits of Simplified Pricing may be described as follows:
• Maintain complete control over the amount your visitors pay to stay at your establishment
• Eliminate an additional service cost from the guest’s perspective
• Maintain a comparable pricing structure to platforms such as Booking.com
• Increase your compensation while maintaining the same level of service.
On the other hand, you must consider the following:
• Your nightly rate will seem higher than your competitors;
• Guest expectations may rise as a result of the apparent nightly rate
• The hosting charge may wind up being greater for longer length stays.
Taking into account the above, you must determine the best course of action for your firm and adapt to changing conditions. Given that Airbnb actively encourages the new Simplified Pricing structure, there are grounds to anticipate that converting to the new format may result in increased visibility in search results.
How to Adjust to Simplified Pricing
If you choose to switch to Simplified Pricing or are required to do so for legal reasons (using third-party software in select locations), you will need to increase your rates by 14-15 percent to maintain the same level of the final payout. Bear in mind that the service cost is applied to both the accommodation and cleaning fees, which means that you will need to modify your cleaning fee as well.
Please keep in mind that if you change your Airbnb pricing, you will also need to amend your mark-up settings on other channels to reflect the updated rates for your listing. Lodgable can compute and change your daily prices and schedule automatically on other sites like Booking.com and Vrbo.