I just got the option for my charges to guests to automatically adjust so that my payout stays the same but my booking prices increase, ostensibly so that my income does not change with the new set up. Thoughts on this? On one hand, keeping my prices the same will give me an advantage - while I lose a few dollars. On the other hand I’m as greedy as every host and every dollar counts.
1 Like
I imagine the vast majority of hosts will use the price adjustment tool to uplift their nightly rate. So yes, if you are willing to absorb the entirety of the new host fee, you will be more competitively priced.
I can’t remember whether they actually had the tool available when they first told UK hosts that they would need to adjust prices to maintain income under the new structure, but they certainly ramped up encouraging hosts to use it as the deadline got closer and closer.
You can use the tool and then immediately adjust prices further so you could easily move it up or down at that point to ensure you earn what you need/want and still remain booked.
If you adjust prices accordingly, then it shouldn’t make any difference to you or the guest. In fact, you end up making a few cents more on the single fee system, while the guest sees no difference in price.
The exception, I understand, is that in the UK, hosts are taxed on the gross amount the customer pays, not on their actual earnings. So, if the guest pays 1000 in total, then that’s what the host is taxed on, even if the host only actually earns half of that after taxes, fees and expenses. They’re taxed on the income of others (platform commissions, electricity, water, cleaning, laundry, VAT, etc). Absolutely insane.
So, in the split fee system, the host is charged 3% commission, and (in the UK), the host pays 20% income tax on that commission. The other 15% is paid separately by the guest so it doesn’t show up as host “income”. But with the single fee, the host is charged 15.5%, so it shows up as “income”, and a UK host is taxed on the full 15.5%, so it actually makes things much worse, tax wise.
Crazy tax system. I can’t imagine how any business can survive under that absurd system.
But I understand that the tax system in most other countries allow for deductions, and so it shouldn’t make any difference for you. Just simplifies it all.
I’m a bit confused. If my room is, say, $100 a night now if I accept their situation, the room will go up to say 110 but the guests ultimately do not see a change in I’m only concerned that my price appears to go higher to myguestsprice?
What’s the difference? It’s the same price they’d pay anyway.
I really don’t understand. I’m concerned that if I modify my pricing that I will appear more expensive. Are you saying using their system I will not look more expensive?
I think that depends on how your rates are advertised. In the UK for instance, it has been a legal requirement for some time that the advertised nightly rate includes all fees upfront rather than a low nightly rate which suddenly gets increased at checkout by all the additional fees.
So for us at least, the advertised rates look the same to the guest once the adjustment tool gets to work. They only see the breakdown at checkout - which from previously showing a nightly rate, a cleaning fee/pet fee etc and a separate service fee to Airbnb, now just shows nightly rate and any additional host fees. The guest is not charged anything by Airbnb for using the platform.
And if everyone is using the adjustment tool, it will mean you are still as competitive as currently - just that everyone has higher nightly rates.
It may be different elsewhere.
If your price was $100, then the guest paid $115 (100+15% commission). Airbnb took 3% commission from your 100, so your payout was $97.
Notwithstanding any sales tax on the Airbnb commission, if you raise your price to $115 (the same price the guest paid before) then Airbnb will take 15.5% or $17.25.
€115 - $17.25 = $97.50, so a slight increase in payout, while the guest sees no difference in price.
Again, if Airbnb is also charging sales tax on their commission, then you may also have to factor that in and adjust your price accordingly to match, but the guest still won’t see any difference because they were also paying sales tax on the commission that they were previously paying to Airbnb. In any case, the sales tax would be rather insignificant anyway.
The other thing to consider is that Airbnb will now charge commission on extras such as cleaning fees (I suspect to keep hosts from offering a place for $25 per night with a $600 cleaning fee to avoid paying commission), so it’s probably better to remove things like that and just build it into your price. Guests don’t like those extras anyway.
Does that help?
1 Like
So you’re saying take the offer and the guest will not see any difference?
I don’t know what they’re offering you, but it’s easy to figure out for yourself.
@Rolf - Right now, the guest sees your cost plus the AirBnB as a total. So if your rate is $100 and AirBnB charges $15 (15%) service charge to the guest, the guest sees $115 and you get $97 (AirBnB takes 3% of your rate). If the guest ever sees the breakdown between your $100 and AirBnB’s $15, it’s only during checkout.
On Sept 15, AirBnB is going to stop adding their service fee on top of your rate and start taking 15.5% from your rate, whether you opt in or not. You can opt in earlier and raise your rates using their tool (up to the $115) to continue to get $97, or wait until Sep 15th and raise rates manually to $115 to keep getting the $97. Or, you can leave your rate at $100 but only get $84.50.
Don’t forget they’ll take 15.5% from all your fees, too (cleaning, extra-person, etc)
Thank you so much for your courteous response. So the guest will see a different daily rate if I change to the new opt in. If I wait until or very close to September’s deadline, hopefully I will be the lost in the crowd of everybody raising their rates and not be seen as an outlier?
1 Like
No, because AirBnB combines your rate and their fee now and that is what the guest is shown. With the numbers I used, the guest will see $115 a night whether or not you opt in. The difference is that, on/after Sep 15, if you do NOT opt in or change your rate, the guest will see $100 as your rate and YOU will have to pay the 15.5% service fee.
Switch to travelling and look at your listing as a guest. Choose some dates. You’ll see that AirBnB shows the price as the total of your rent and fees, and their service fee. Even when you click the price details, they just show the average nightly rate that includes their service fee. So if you increase your rate to include the service fee by “opting in” and using their tool, the price should show the same (I’m presuming they do the math correctly".
1 Like
So if I now have cleaning fees separated, do I put those in to my calendar price before Sept 15 as well as another 15% amd that way I’ll stay whole? I’m confused if the 15% is an example or an actual number.
Also, can anyone confirm how state and local taxes are to be considered? (I’m in the US). I don’t really understand how to adjust my prices before sept 15 to ensure I am earning the same including any tax burden I may have on the income.
Sales tax is sales tax. If applicable, it will be charged on both models, split fee or single fee. That doesn’t change.
Income tax is income tax. It will be charged on income. Not everything the guest pays is income. Airbnb gets 15.5%. that’s Airbnb’s income, not yours. You should not pay income tax on it.
And you have other operating expenses: taxes, insurance, cleaning, laundry, electricity, water… None of those things are your income. It is the income of others. You can deduct them from your income taxes because it’s not your income.
If you are unaware of these tax deductions, then you really should get an accountant to sort it for you. By the way, their fees are also tax deductible because it’s their income, not yours.
Does that help?
People shouldn’t be raising their published rates. Maybe some will, but they will be the outlier, not you.
Besides, it’s never a good idea to compete solely on the basis of price. The most problematic guests predictably seek whatever is cheapest to begin with.
I don’t understand this. Starting on September 15th, the split-fee option (host pays 3%, guests pay about 15%) is going away. AirBnB will take a 15.5% service fee from hosts instead. If a host doesn’t raise their rate to cover that, they’ll get less money than they do today. So why is a host that raises their rate going to be an outlier? Do you think most hosts will happily keep their same rate and simply hand AirBnB another 12.5% of our current rate?
AirBnB will start taking 15.5% from your nightly rate and other fees starting September 15th. If you raise your rate and other fees by 15%, you’ll take home about the same amount of money. Those are real numbers. The 15% is the closest round number that keeps your take-home amount the same as now after they increase the service fee to 15.5%.
Let’s say your nightly rate is $100 US and your cleaning fee is $125. For a four-night stay, the total is $525, but AirBnB keeps $15.75 and only sends you $509.25. That’s your taxable income (before subtracting other expenses). You can report it as $525 and deduct the $15.75 as an expense, or report it as $509.25 and not deduct the $15.75 as an expense. (I do the second way as it matches the cash sent to my account from AirBnB).
If you raise the prices 15% to cover the higher AirBnB service fee, the math changes: $603.75 instead of $525; $510.17 as what you get after AirBnB’s $93.58 (15.5%) service fee. But the process for taxes is the same.
Yes of course they need to raise their rates to maintain the same price.
On other forums, hosts are saying they will need to raise their rates as much as 50% above what guests currently pay.
I suspect they just don’t understand how it works. I find that hard to believe be suse it’s not complimplicated at all.
1 Like