Guest service fee? What is this?

[HostAirbnbVRBO]

Interesting.

It seems to me – kindly correct me on this – that because Airbnb shows the total cost before occupancy costs, that if you increased your nightly rate to exactly compensate for the Guest service fee, that total cost that Airbnb shows would be the same whether you went with the HO model or not. Right? But with HO your nightly rate is higher, so you’re hoping that the guest compares the total before-occupancy taxes cost that Airbnb shows right under that nightly rate, I assume. That’s what I do as a guest.

However, because the occupancy taxes will be based on your now higher nightly rate with the HO method the REAL all-in costs to the guest – all-in costs including occupancy costs – is now higher, right?

So either the increment of the occupancy taxes on the service fee is small (if the Guest service fee and occupancy taxes were each 15% then the increased taxes would be 2.25% [= .15 x .15]) and/or that you feel that slightly increased cost is outweighed by the guest’s not getting pissed off about the service fee.

[Islacat]

It must be different in different regions, but in my patch, traditionally, Airbnb advertises the asking price of the host, then adds 15% “service fee” at booking time.

With the “HO” model, they still advertise the asking price, but without adding the “service fee” at booking time.

This does make the price appear higher at first glance, although in reality, it’s the same.

As far as “occupancy taxes”, on our listing, it’s added to the “asking price”, so that’s the price advertised with either model, and it doesn’t change either way.

The problem we have with the old model is that we are listed with other platforms, specifically a couple of boutique platforms which target a specific demographic which delivers a consistently higher quality of guest without the risks of Airbnb. We have a “price guarantee” agreement with those platforms, and although we are equally priced on Airbnb, the advertised price on Airbnb is 15% less than on the other platforms. So, they object to this because it violates their “price guarantee” clause.

By using the “HO” model, we no longer have this conflict.

It hasn’t had any impact on bookings so far. In fact, we’re not only fully booked into November, but the quality of guests we’re receiving is generally higher. Although we still receive quite a few dubious inquiries from Airbnb, but they’re rejected in short order.

[HostAirbnbVRBO]

I understand what you’re saying, and my ‘small’ point is that if we went with the HO model two things would happen here in US:

1. The nightly rate would go up so we could look more expensive to the less astute/experienced prospective guest though if they looked at what Airbnb shows as the ‘Total before taxes’ these totals would be the same whether HO model or not, but

2. If they did the math on the Total after taxes the total after taxes would be just a wee bit higher (like maybe 2%) because the occupancy taxes here are not included in the nightly rate shown and adding the Guest service fee to the nightly rate would increase the taxes by that ~2% because of the occupancy taxes applying to the higher nightly rate.

Three more things:

Think of Airbnb’s approach as that of a magician. The guest enters the area of interest, dates and number of guests.

1. Now the magician’s ‘turn’: Listings are displayed by Airbnb’s hidden algorithms. The nightly rate is shown prominently and in a bigger font than the Total before taxes. So it’s that more natural a guest might focus if not obsess on it. Call this misdirection.

2. While the HO model has the virtue of not resulting in and therefore not later revealing that hefty Guest service fee the less astute/experienced guest doesn’t know about that until they go forward to book.

So, with that last reveal of the Guest Service fee on booking the prestige goes instead to Airbnb leaving the guest (especially if they think that the Host receives the Guest service fee too) potentially put off.

Not seeing that Guest service fee with the HO model doesn’t win the Host any points. It just dodges the bullet of a potential irritation for some guests when they discover it.

[Maybe too many mixed metaphors]

3. It seems to me that if Airbnb would just show the Total before taxes, or at the least show it more prominently and in a bigger font than the nightly rate (since it IS the bottom line, after all) more Hosts here might consider the HO model.

[Islacat]

Agreed. But that’s Airbnb.

Unfortunately, they’re the biggest and most productive booking platform for hosts. It’s much too easy to become utterly dependent on them. And considering their guest favouritism, that’s quite risky. I warn newbies against this often.

Our “occupancy tax” (known as “tourist tax” here) is not a percentage of the asking price, but a fixed per person rate, which varies between high and low season. It’s the same regardless of the asking price, and it’s not collected and distributed automatically by Airbnb. I have added it in the taxes section, so it becomes part of the asking price, but Airbnb doesn’t charge commission on it, and it’s deposited to our account as a separate line item.

Also, we have the advantage of being in a highly desirable tourist destination, so as long as the price is somewhat reasonable for the class of accommodation, it will be booked, guaranteed. We are lucky to have the luxury of picking and choosing our guests, even though Airbnb frowns on this, and in some cases can penalise us for it, but we’ve largely devised ways around that.

Still, it’s no guarantee, and so we’re always at risk of getting clobbered by some clever but dubious guest (on Airbnb anyway). And that explains why we’re very active in diversifying our “supply chains”. But you have to be careful with that too. The major platforms are all just booking machines. Their focus is getting bookings. That’s really all they care about. And that comes with risks too.

In our case, the HO model solves some problems for us. But I can see why it wouldn’t necessarily be a positive for everyone.

Anyway, good chatting with you. Keep up the good fight

[HostAirbnbVRBO]

Well, that’s a nice arrangement you have.

@Islacat

but we’ve largely devised ways around that.

I like that!

If you don’t mind saying, where are you?

Nice chatting’ with you too.

[Islacat]

We’re in Mallorca. Supposedly the most popular destination in Europe at the moment. That’s both a plus and a negative. But mostly a plus…

[HostAirbnbVRBO]

Mallorca was my father’s favorite travel destination, and I have an Italian cousin who wants to live somewhere in the Canary Islands, don’t know if it’s Mallorca.

Very nice.

[Islacat]

The canaries are off the west coast of Africa. In the Atlantic.

We’re off the east coast of Spain, in the Mediterranean.

[JohnF]

@Islacat

It must be different in different regions, but in my patch, traditionally, Airbnb advertises the asking price of the host, then adds 15% “service fee” at booking time.

Please stop posting misleading information, it doesn’t help new hosts who come here for help.

Your region is no different to anywhere else in Europe, and certainly no different to mainland Spain.

Under European consumer law Airbnb have been advertising the actual nightly rate, followed by the total cost of the booking for quite some time now, several years I believe. It makes no difference which commission model the host is using, Airbnb must show consumers the actual price, not the price minus service fees etc.

No service fee:

With service fee:

It’s fairly obvious, with some simple arithmetic, that the total equal the daily rate times the number of nights.

For someone who has allegedly been with Airbnb since 2008, your grasp of how they operate is somewhat weak.

JF

[Islacat]

Well, we were alerted to this by the other platforms, and had to run a check to test it. It’s how we discovered it. It’s the whole reason why we changed it.

Airbnb may have changed it since then, and I admit I haven’t bothered to check, because I have no need to do so.

I sense you’re just trying to be petty and argumentative. I really don’t care if I pay €3.69 or €7.50 in iva on Airbnb commissions. I spend 10 times that in hospitality alone for every guest. It’s a minor difference, and irrelevant to the point of my original post.

[JohnF]

@Islacat

I sense you’re just trying to be petty and argumentative.

No, I’m highlighting the fact you are posting information that is incorrect, there is a difference.

I can do petty, and I can do argumentative, but not today.

JF

[HostAirbnbVRBO]

Well, I just proved to you I’m a real American.

[HostAirbnbVRBO]

So what Airbnb is doing is just what I was suggesting in another post that I thought that they could ‘develop’ but you’ve shown they have developed: build the fees into the nightly rate. [Though we were just focused on the cleaning fee in one thread, the Guest service fee in another. Airbnb in Europe now builds ALL the fees into the nightly rate.]

So what you’re showing is really great news for us here in the U.S. where there is a little commotion just now on Twitter on cleaning fees in addition to the nightly rate because in these other posts here there was a concern that Airbnb might eventually try to force Hosts in the U.S. to build in their cleaning fee into the nightly rate, which the Hosts agreed would be impossible to do.

So this programming project is all done! The way that Airbnb does it there is, in my opinion, how they should do it here. It’s much simpler than the current way in the U.S., totally easy to understand. I’m just amazed that this is not done this way in the U.S. so the consumer is not surprised with other fees when they actually book.

The only reason I can think of for not doing it that way here is that it the way things are now it would result in slightly (like ~2% of the nightly rate without fees) more occupancy taxes.

[JohnF]

@HostAirbnbVRBO

they have developed: build the fees into the nightly rate.

Yes, however it was European consumer law that was the driver behind it. It’s likely that in the short term future it’ll be rolled out to the rest of the platform along with the HO commission structure and any other methods they’ve come up with to make it a better guest experience.

@HostAirbnbVRBO

I’m just amazed that this is not done this way in the U.S. so the consumer is not surprised with other fees when they actually book.

If the US was capable of passing consumer legislation a la EU, then it’d be straightforward.

JF

[Islacat]

Ok, you win.

But back to the original point: other platforms charge the host the entire commission. In fact, the others we’re listed on charge 20%, not 15%. We pay iva on that too. But it’s just a cost of doing business. And in the macro view, insignificant.

Navigating two different models creates additional problems, such as those I previously mentioned.

But there’s other problems with Airbnb’s models too. For example, we have a very different market here from summer to winter. In summer, you can have a flat rate for the entire villa, and it will be fully booked at full rate, guaranteed. We accommodate 8 pax.

In winter, it’s a very different demographic. Typically 6 or fewer pax, often just a couple wanting to take a week away from the cold North and go golfing or hiking or cycling…

The problem is this:

If we charge flat rate on the basis of 8 pax, we’ll be largely priced out of market in winter. However, if we reduce-priced our flat rate to attract 2-4 pax groups, we’d certainly be booked all winter with 8 pax, because it would be just too cheap to resist.

Conversely, if we charged on a per person basis in summer, we’d be booked all summer for 2 pax at 25% of our full rate.

So we need two models on a seasonal basis. Flat rate in summer, per pax in winter. Airbnb doesn’t allow the different models on a single listing (but others do). I’ve been begging Airbnb for this for years, to no avail.

So, we had to create separate listings for summer and winter. Winter is blocked all summer, and summer is blocked all winter.

Good solution, you say? Well, now we can’t calendar sync both listings with other platforms, because the other platforms will be eternally blocked. So we have to do it manually. And that’s a big pain in the arse. And in certain months when everybody’s booking their Mallorca holidays, double bookings are a real risk. Have to be really on top of it. One hour lag can end up getting double booked.

So, as an expert in these things, what would you suggest?

[Islacat]

Yes, well, your “sales tax” (VAT, IVA) is also charged as an “extra” to the price.

Here, it’s included in the price (for consumer goods anyway). Professional commerce tends to price without VAT (or list both), because most professional buyers are VAT registered, and don’t need to pay VAT. They’re only interested in the actual sale price without VAT.

[JohnF]

@Islacat

other platforms charge the host the entire commission.

No they don’t, Vrbo (ex Homeaway listings) are still operating on a split fee model for hosts who choose to pay per booking. As far as I’m aware, if you utilise their API then it’s host only commission structure.

JF

[Islacat]

Oh, ok, well, we don’t use VRBO anymore. In 3 years, received 3 bookings, 2 of which were disaster guests. And VRBO has never responded to any support ticket I’ve ever opened. Admittedly, I’ve only asked benign questions about calendar sync and about their extra fees such as payment processing and trip insurance… Tickets closed, no reply.

At least Airbnb responds, even if the results are limited to a link to some unrelated help file.

I’ve learned that it’s just the nature of the beast. It comes down to which one delivers the bookings with the least burden. And that’s also tricky. Airbnb delivers the bookings, but it’s also the riskiest for hosts, except for perhaps booking.com.

Our boutique platforms are really great at support, and are very personal and attentive (like Airbnb once was), but just can’t compete with Airbnb. I have to block ranges of dates on Airbnb to give them the opportunity to get the bookings. Sometimes they do, sometimes they don’t. If not, just unblock on Airbnb, and the inquiries and requests flood in. And then I have to screen each one. About 30% exhibit red flags. About 10% are very obviously basket cases.

It’s work. I hate having to do that.

[HostAirbnbVRBO]

Yes, I think you’re right on both counts and it would be a welcome development.

[Tranquility_Base]

Hi, @HostAirbnbVRBO ,

Sorry for the delay. I haven’t been active on here lately.

I’m not sure how the math equations fit in here exactly, as this is not a strictly financial decision we’ve made, but this is what it looks like if I put in dates as if I’m about to rent our cabin.

As a guest I’d enjoy seeing that I’ll pay zero service fees. As a guest I also have no idea if the nightly rate is higher than it would have been had the fee been non-zero. My point is that the perception of the potential guest would be such that they may me more likely to book. In the end the total cost to the guest, and our payout, is roughly the same. But this looks better to the guest, hence, greater likelihood of getting the booking.

Bob