AirBnb is constantly pushing me to reduce my rates because we are in the slow season. Suggested rates are beyond ridiculous, at €40 my nightly rate is currently at its lowest and Air keeps sending me messages that other properties have been booked for €35 less. I would like to ask, once you deduct fees, expenses and taxes, what percentage of your nightly rate is profit? Also, do you count your labour as expense as well?
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Not sure how an analysis of my finances would help you at all. Surely you need to work out what your profits are and if the time you put in makes it worthwhile for you. This would include both an actual assessment of how much you need the $, even if it’s just $10 a night, for some that might mean enough money to buy their kids presents for Xmas. So it’s worth it. For others, who don’t need any money at all, it might not be worth their effort unless they are making $100 a night. Other people just love $ so they’ll do anything to make more and that’s their choice if it’s what they value over relaxation time or time with family they can otherwise do.
Stop worrying about what other people are making and what Airbnb is telling you to do and do what works for you. Of course, this might change over time.
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You need to add in your time as well - interacting with guests and cleaning and preparing your property, plus maintenance and updates to your property.
I agree with Emily what we do is irrelevant.
I have worked out that on one night bookings I wouldn’t make any profit. So I don’t do them.
Put together a budget with your one off and ongoing costs including your time. Then work out what rate you need to charge to make it a profitable business for you and taking into account what the local market charges for comparable properties.
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Yep – YOU have to do the analysis for your own situation. BTW, taxes are charged and collected separately, they do not show up as part of your per night earnings. Neither are cleaning fees; they are also charged on top of the nightly fee. What other fees do you have? Expenses, yes – electricity, water, food if you supply any, miniscule amounts of soap and shampoo, toilet paper.
Nowhere is it written that you have to follow AirBNbs pricing guidelines. I do expense labor at a minimal amount. Not the labor of turning the place over, as that is covered in my cleaning fee. I expense the meet & greet and chatting up part, and the cooking a full breakfast part.
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This must be working.
The drumbeat from AirBNB to lower my prices either by simply lowering them or by offering a discount has been very persistent this fall. My area BNB’s have been falling for it. You can now rent a one-bedroom apartment, in an area where one-bedrooms rent for no less than $1,800 for beat up space per month and for as much as $4,000/month for a good location/condition, for $47 a night! No one is making money when the market slides that far down.
I have decided not to play in that pool.
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I ignore any messaging from Airbnb around this, I set a minimum rate based on my market research. I know my market and what I want/need to charge much better than they do.
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Airbnb suggests nightly rates about $100 less than what they’re actually going for in my market. Take them with a huge grain of salt.
I think we do well to create our own “lowest rate” based on what we think our time and space is worth. Hosting at rates below this leaves us feeling resentful.
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I agree with others that everyone is different. I consider about 80% of my nightly rate to be “profit.” But my calculation and the way I value my time is completely different from others. I have IB, saved messages, use smartbnb.io, and have a private entrance so I don’t have to stick around or stay up to meet anyone. The time I spend cleaning the room is time I would spend doing nothing otherwise. As the much missed @jaquo used to point out, it saves me a gym membership fee.
I ignore Airbnb’s advice 95% of the time. I experimented a couple of times this fall with dropping my price or implementing their discount notice. I didn’t see an improvement. I did get a booking on one of my “discount” nights with a subpar guest who couldn’t even be bothered to leave me a review.
Also I’m not a tourist destination so I don’t have a slow season like others. In fact January is usually busy with college students who are moving or road tripping.
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My rough estimate is approx. 70%. As I continue to build my business, I believe this will go up. I also ignore the Air price advice…I would rather it sit empty than go below the current 70% profit rate.
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Airbnb gets a lot of criticism from hosts on this issue. They are addressing it apparently with more sophisticated algorithms. I’ve noticed recently that the Smart pricing has gone up substantially for us although I still don’t use it. I know my market better than they do. There will always be lowballers out there. I don’t worry about them. Eventually they will realize they aren’t making any money and will either raise rates or get out.
In most businesses, it’s the rule of thirds. Take your total sales; of that, one third is overhead, one third is cost of goods and one third profit. This is typical and acceptable in many industries. So a 30% profit in general is the standard. Of course there are exceptions to this.
I think many forget to include things that are deductible and think they are making more than they really are. Be sure to take into account everything. For example; Food & drink for guests, Airbnb fees, Beds, Mattresses, sheets, towels, toiletries, Depreciation, room construction and set up costs, Insurance, a/c’s, heaters, tv’s, Repairs & maintenance, cleaning and office supplies, computers or smartphones, utilities including internet, electricity, oil or gas, and water, Taxes & licenses, Legal & professional services, property taxes, snow & trash removal, lawn care etc. When you really start adding it all up, it’s not as lucrative as many people think it is.
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Why do you think that? Have you had extensive experiences with people who own businesses and can’t figure out their profit margins?
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I completely ignore all Air’s suggestions - their low price guides are ridiculous & instant book would of lost us a lot of money had we turned it on. Air looks after 1 person and 1 person only in this relationship, and thats Air! All they are interested in is filling rooms. They dont care if hosts are making money, they are just interested in getting their cut. And a small cut is better than no cut to them. Their business model is to avoid empty rooms at all costs, they do not take the ‘human factor’ into consideration ie our time. It may well be their downfall one day. Annoy the hosts too much and we’ll quickly jump on the next new platform that comes along, and there will be one sooner or later, as ebay has discovered since facebook marketplace hit the scene.
I make a minimum 64% profit on my property, more if there are extra adults staying. I do not include my time in that. I see the 64% as my salary for cleaning and greeting and admin etc. I have mostly medium-term guests though ie 2 weeks+ and Im not seasonal, so this is what works for me. As Ive said before, I dont overprice so I have 100% occupancy. Id rather charge a fair price and be full. Thats my philosophy 
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As a professional photographer, I’ve seen many. You can tell just by what they are charging. It’s the same with Airbnb. If they have a ridiculously low rate, then you know they aren’t making anything.
The amount of money I make is miserable by Western standards, but at least most of it is profit. My expenses are negligible, provided I don’t count
a) Airbnb’s cut
b) Indian taxes, charged by Airbnb and paid by them on my hehalf. This is now the new GST system.
c) The cost of my time.
Electricity rates in India are sky high, but fortunately the guests don’t seem to consume much electricity. Probably because of a few contributing factors:
a) Guests don’t actually spend much time in there
b) The room is fairly well closed off. My main purpose was soundproofing, but I suppose well-insulated is a natural corollary.
c) I’m now proactive about reminding guests about turning things off. I also installed a meter on the line that goes to the guest room to help me monitor things.
Other costs are the (currently two) internet lines going into the room. I’m debating whether it’s worth having two, though. They are cable (Hathway), DSL (MTNL). MTNL is govt, and they are lunatics. I have the same setup for myself, and my MTNL line has become ridiculously unreliable. I’m not sure how reliable the guest MTNL line is, because I don’t sit and look at it all day.
Regardless, the lines aren’t that expensive. Hathway is around USD 15 a month, and MTNL is USD 10.
Other than that, a bit of money on food, and a little on soap/shampoo. And maintenance costs, which aren’t massive. I’ve spent a lot of money in the past year doing home maintenance, much of it in the areas which the guests have access to. But I don’t really think that counts towards costs for the rental. This building has been very neglected - everyone connected with it has been insanely stupid and neglectful.
As others have said, ignore Airbnb’s recommendations. This really should be a no-brainer.
I’d like to know more about how you are using smartbnb.io - what features do you use and have you found it helpful and valuable? I’ve considered trying it.
I agree with Mike. How many hosts here actually correctly calculate start up costs, ongoing costs including their time to manage the listing, buy items for it, food, toiletries, linens, towels, repairs and maintenance, cleaning etc, factor in utilities, insurance, taxes and depreciation.
Not many I bet.
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And just received this email this morning. Air asking hosts to reduce their rates, so Air can get more of their cut. I had to remove the rate table part of the email, but not really important.
"Are you considering service fees? On some sites, hosts pay the entire service fee—but on Airbnb, guests and hosts share the fees.
This means that if you list your space on multiple sites and use the same price for both listings, the final price guests see on Airbnb might be higher than you think. And while you’ll earn more per night from Airbnb, you could also be losing out on bookings because of a less competitive price.
Because of this, we recommend taking the 5-15% Airbnb guest service fee into account when you set your nightly rate on Airbnb. You can see a full price breakdown by opening your calendar from a computer and selecting a date or date range, then clicking What do guests pay?".
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Interesting. I track every penny for my entire household, and the AirBNB stuff is completely separated into its own fund. At this point, I can see my income statement for any period of time, and run regular reports to ensure that my profitability is meeting my seasonal goals.
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I’m an accountant and based on my experience there are many people who don’t know whether their net income is positive or negative, and confuse cash inflow with profit. It’s great if you are financially skilled or sophisticated like Tucker, but that may not be your talent, you could be a fabulous dancer, an outstanding healer, or a charmer in the hospitality arena and financially not so adept. Also people like to feel they are successful and there can be some self-delusion about and time and effort, and even hard dollar costs, for sole practitioners & home businesses. My opinion is that it is rare to find the human being who is a totally rational creature around business and financial choices.
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