Airbnb's New Fee Structure: What Hosts Need to Know

Renting out a home on Airbnb can be a lucrative way to supplement income, but a recent shift in fee policy highlights the dynamic nature of short-term rental economics.

As of September 15th, Airbnb is transitioning all U.S. hosts to a new fee structure. Previously, hosts typically paid a 3% service fee on the booking subtotal, while guests were charged a separate fee ranging from 14.1% to 16.5%. Under the updated system, hosts will now bear a consolidated 15.5% service fee, with no additional service fee applied to guests at checkout.

This alteration is likely to prompt some hosts to increase their listed prices to maintain their earnings. Following a similar transition for a previous group of hosts last year, approximately 30% raised their prices sufficiently to fully compensate for the increased fee, and another 30% partially offset it, according to an analysis by short-term rental data firm AirDNA.

The change has generated dissatisfaction among hosts on various online forums, with some considering leaving the platform or shifting to long-term rentals. However, other hosts are adapting by adjusting their pricing to preserve their revenue, while acknowledging the new fee's transparency.

Chris Dickey, a communications professional who has been renting out a home in Moab, Utah, since 2021, stated, "I feel like the new 15.5% is more transparent." He increased his listed prices to accommodate the fee, aiming to keep the total guest cost consistent. Dickey also noted a recent slowdown in bookings, suggesting that the market may still be adjusting to the new fee structure.

Airbnb has indicated that this change is intended to provide guests with clearer upfront pricing, which they believe could stimulate demand and ultimately benefit hosts.

Beyond fee adjustments, short-term rental owners must navigate a range of factors influencing profitability, including fluctuating demand, operating expenses, and local regulations.

Sébastien Long, founder and CEO of furnished rental operator Lodgeur, emphasizes the intensity of managing short-term rentals: "Short-term rentals are 'not an easy way to make money. Far from it. It's very intense.' You kind of have to be a little bit of a masochist to go into this."

Whether managing a single room or a large portfolio, short-term rental hosting demands active oversight of pricing, expenses, guest interactions, and property maintenance, consuming a significant portion of an owner's time. Long asserts, "Hospitality shouldn't be a hobby. It's quite a serious undertaking to host people in a home." Dickey agrees, describing his self-managed three-bedroom rental as "definitely a small business."

Jason Baxter, founder of short-term rental revenue management firm Marketics, advises, "If you're looking for 'passive income and not active income, don't touch it.' If you don't like hospitality, don't touch it."

Hosts and operators interviewed by CNBC highlighted four key determinants of a rental's success:

1. Booking Platforms

Hosts must adapt to evolving fee structures and policies of booking platforms, such as Airbnb's new fee system. As Dickey notes, "Airbnb is the market leader by a long shot and has the largest marketplace of renters. Unfortunately, as an STR owner, you just have to play by their rules." Changes to platform algorithms can also impact listing visibility and booking potential.

2. Pricing and Demand

Avery Carl, who owns and manages ten short-term rentals and runs a real estate brokerage specializing in them, stresses the importance of considering local competition, seasonal demand, and realistic pricing before investing. Location is critical, and Dickey warns against buying in oversaturated markets. Effective pricing requires continuous monitoring and adjustment of nightly rates based on demand and competition, even when using automated tools, as Carl advises, "Systems are great, but you have to manage the systems."

3. Operating Costs

Expenses such as cleaning, maintenance, utilities, and insurance significantly impact net earnings. Carl recommends estimating monthly operating costs in advance and maintaining an emergency fund for unexpected repairs. Cleaning, in particular, can be underestimated; Dickey budgets 2.5 hours for cleaning between guests, but it often takes longer, especially with laundry. While hosts can charge a cleaning fee, excessively high fees may deter bookings. Long refers to the accumulation of smaller expenses like maintenance and software services as "death by 1,000 cuts."

4. Local Regulations

Local ordinances can dictate where short-term rentals are permitted and impose additional costs for permits, licenses, and taxes. Regulations can also change after operations have begun, as seen with New York City's stricter rules for short-term rentals. Carl suggests choosing vacation markets reliant on tourism with established short-term rental industries, where restrictions would negatively impact the local economy and are thus unlikely. Conversely, regulations can benefit existing operators by limiting new competition. Dickey's Moab property benefits from commercial accommodation zoning that restricts new developments. Long advises prospective owners to thoroughly research both current rules and the regulatory history of a market.