Is Airbnb Profitable?
Last Updated: January 11, 2023
Have you heard of Airbnb? Most likely, you’ve even used it by now.
Still, a tiny percentage of people perhaps don’t truly know what Airbnb is or how it works.
That’s why we step into the game — to explain the numerous advantages and services that Airbnb offers. And that doesn’t include us presenting you with the top vacation beach homes in Florida. We’ll leave the pleasure of searching for that to you.
What we’re going to focus on is how much you can earn from Airbnb. Yes, that’s right. Other than being a guest at an Airbnb property, there’s an option of being a host.
So, is Airbnb profitable? Keep reading to find out!
What Is Airbnb?
Airbnb was founded in 2007 by two regular people, Brian and Joe. Looking to raise money for their rent, they welcomed three guests to air mattresses in their apartment in San Francisco. The “Air Bed and Breakfast” idea was born, and against all odds, it has since evolved into a $30 billion business.
Today, Airbnb is the leading online marketplace for lodging. Whether you need a short-let stay for a conference, a vacation home by the sea, or even long-term accommodation, you could have it all with Airbnb.
All you need to do is to create a free account on its online platform. And, just like that, you’ll join the millions of Airbnb hosts and guests from all around the world.
Is Airbnb Profitable for Hosts?
Let’s start with the most interesting aspect of Airbnb — being a host and making money from renting out your property.
For a better image of how Airbnb can be profitable, we’ve prepared the following facts:
- In 2021, the average US Airbnb host’s income was $13,800/year.
- Since 2010, Airbnb hosts from around the world have earned $150 billion in total, whereas $60 billion belonged to US hosts.
- In 2021, new Airbnb hosts earned more than $1.8 billion.
- The average annual income of a new Airbnb host who had welcomed at least one guest was $9,600 in 2021.
What factors affect the Airbnb host’s income?
Several factors determine how much a host can earn. We’ll single out two of them — the location and the time of the year.
The location is the number one important thing that each host should consider. For example, being a US tourist, New York or Miami are probably some of the cities you want to visit. Stockton or Reno have never crossed your mind, right?
According to 2021 Airbnb statistics, these are some of the states that have generated the most income for new hosts:
- California — $270 million
- Florida — $265 million
- Texas — $179 million
- New York — $115 million
- Georgia — $80 million
It’s also important at what time of the year the hosts rent their properties. Why? Most people wait for a public holiday or weekend to go for a road trip. In addition, most people go on vacation in the summer.
Let’s take a look at some of the dates in 2021 that brought the highest income to Airbnb hosts:
- Labor Day weekend — more than $140 million
- Memorial Day weekend — more than $126 million
- Fourth of July — more than $120 million
- Fall Travel (Saturday, October 2) — more than $109 million
- Summer travel (Monday, August 2) — more than $108 million
How Much Can You Make on Airbnb?
Since many factors affect an Airbnb host’s income, there’s no single answer. But you can use an Airbnb profit calculator to get an estimate.
What do you say? Good enough to start making money from Airbnb as a side hustle, right? And who knows, perhaps you could go from side hustle to a full-time business.
But, before you start running your new Airbnb business, you need to consider several things. Fees, insurance, taxes — all of these are important.
Pricing and fees
It’s free to create an Airbnb account. However, using the platform to list a property for rent — doesn’t go for free.
The company takes a percentage from the host’s payout. There are two charging structures that Airbnb uses — split-fee and host-only fee. Let’s see how they work.
The split-fee structure is the most common one. As the name implies, the fee is split between the host and the guest.
The percentages are calculated from the booking subtotal:
[ nightly rate + cleaning fee + additional guest fee (if applicable) ] – Airbnb fees & taxes = chargeable amount
Guests could pay up to 14.2% of the subtotal, where many factors affect the fee size. And the host typically pays 3% of the booking total. But hosts with listings in Italy, Airbnb Plus hosts, and hosts with super strict cancellation policies pay more.
If using this structure, the entire fee will be deducted from the host’s payout. And the fee is between 14% and 16%. But, Airbnb Plus hosts and hosts with super strict cancelation policies pay more.
The host-only fee structure is mandatory for:
- Traditional hospitality listings, such as hotels and serviced apartments.
- Software-connected hosts (with API-synced listings), unless those hosts have most of their listings in the US, Canada, Mexico, the Bahamas, Taiwan, Argentina, or Uruguay.
Types of fees charged by hosts
Enough with how much Airbnb charges. Hosts are also allowed to charge their guests some extra fees other than the nightly rate. Let’s see some of them:
- Cleaning fee
- Extra guest fee
- Security deposit
- Local taxes
Let’s see how insurance work for both — guests and hosts.
Insurance for guests
Airbnb has issued AirCover, which represents a few protection measures for guests. Let’s take a look:
- Booking protection guarantee — if a host cancels its guest’s booking for any reason within 30 days of the check-in, Airbnb will find the guest a place similar or better than the original one or give a refund.
- Check-in guarantee — if the guest can’t access the booked property and can’t get in touch with the host, then Airbnb will find the guest a similar place to stay for the reserved number of nights or give a refund.
- Get-what-you-booked guarantee — if a guest notices that something doesn’t add up with the property or isn’t the same as advertised, then the guest has three days to report it, and Airbnb will find a similar place to stay or will give a refund.
- 24-hour safety line — if a guest doesn’t feel safe at a certain booked property, they are entitled to safety guards from Airbnb.
Also, there is travel insurance for guests, which differs from AirCover. The policy can be purchased into the booking process, calculated as a percentage of the total trip cost.
The insurance covers up to 100% of a trip’s price. So, for example, if a guest cancels a trip due to bad weather, stolen travel documents, or an illness, Airbnb’s partner insurance companies will refund the guest’s payment up to 100% of the total amount.
As of July 2022, travel insurance is available for guests in 10 countries – the US, the UK, Germany, Italy, Spain, Ireland, Belgium, Portugal, Austria, and the Netherlands. But the company plans to expand the service to other countries in the future.
Insurance for hosts
Airbnb also offers AirCover for hosts. This Airbnb insurance helps hosts by covering up to $1 million in damage. Now, let’s take a look at the AirCover programs:
- Host damage protection — if guests cause damage to the host’s place or belongings, Airbnb offers coverage. Additionally, Airbnb covers additional cleaning costs due to bad behavior from the guest.
- Host liability insurance— if guests, co-hosts, and cleaners get hurt accidentally or, their belongings are stolen/damaged during their stay at the host’s property, Airbnb provides coverage. Also, the insurance covers damages made by the guest accidentally somewhere close to the area where the host’s property is.
- Experiences liability insurance — if guests get hurt accidentally, or their belongings are stolen/damaged during an Airbnb Experience, Airbnb provides coverage.
We simply live in a world where taxes are inevitable. So, if you’re a host or guest at Airbnb, you might need to pay taxes.
Taxes for guests
According to some jurisdiction requirements, guests could be charged with taxes. In some places, the tax payment is added to the reservation price, and in others, guests must pay taxes at check-in.
But, a little tip from us, ask your host whenever you book with Airbnb if there are tax liabilities.
Taxes for hosts
As of January 1, 2022, there is a new law from the IRS — it’s essential for each US company that proceed payments to send tax forms to its clients who earn more than $600 per year.
So, Airbnb may request the following hosts to pay taxes if they earn more than $600 profit from Airbnb:
- US hosts
- Non-US hosts who rent US properties
- Each host that’s somehow connected to the US
Is Airbnb More Profitable Than Traditional Renting?
To answer this question, we need to make a comparison. Yes, a short comparison of what are the requirements of running an Airbnb business vs traditional rental.
One, two, three … let’s start!
When using Airbnb to rent out your free place, know that every guest expects to find essential amenities. Also, the platform advises the hosts to always provide the kinds of things that will make the guests as comfortable as possible.
When using the traditional rental, you as a landlord aren’t obliged to do such a thing. Once the agreement between the landlord and the tenant is signed, all essential amenities such as towels, bedding, hygiene products, and more, are costs to the tenant.
Airbnb hosts are obliged to pay for the cleaning of the whole rented property. Some prefer adding cleaning fees to their listings to cover this expense (not to earn extra money, though). But new hosts are advised not to add the extra cleaning fee until they gain some good reviews.
In the traditional rental, the landlord isn’t obliged to hire a cleaning agency. If the landlord wants, they can add the cleaning expenses to their account. Otherwise, all the cleaning is left to the tenant.
When renting a property through Airbnb, the platform lets hosts change their nightly prices whenever they want. For example, if a certain guest finds a place to stay for $100 per night, in a couple of days, the same place could be listed for $130 per night.
But, with the traditional rental, there is always a lodger agreement between a householder and a tenant with a fixed price. For example, both parties have made a tenancy agreement where the price is $700 per month for the next six months.
Airbnb hosts earn most of their income during seasonal periods, such as Christmas, Easter, summer vacation, and more. So, when these favored holidays are arriving, hosts usually know to increase their property prices. And that results in more income.
While at traditional renting, for a regular Tuesday or for New Year’s Eve, the price stays the same as the one written in the lodger agreement.
Traditional rental agreements are usually long-term. So, the process is simple — if you have a free property that is not of use to you, rent it out. Yes, it’s that easy.
But, there is an important thing to know if using Airbnb. Some cities have regulations on short lets. So, maybe you won’t be able to list properties for a short-let stay. Maybe you’ll need to register for that use. And most likely, to pay a certain fee to get permission.
So, the process could be a little complicated. You’ll need to inform yourself about this matter and pay to get a license, which is a cost that probably no host has ever thought about.
As mentioned above, Airbnb offers AirCover for hosts – an insurance policy that covers the damages made by the guests. So, once you become an Airbnb host, the platform offers this policy to you for free.
Most traditional renters are also securing their apartments in case of damage made by their tenants. The difference is that in this case, the homeowner pays to have an insurance policy.
Conclusion: Airbnb vs long-term rental — which one is the winner? After elaborating on these factors, Airbnb is the option that brings more income. But, you have to invest in the Airbnb property, so you can earn some positive reviews from guests. And the income would easily get back to you.
However, if choosing the traditional rental, you’ll also gain a safe and steady income, but not as much as with Airbnb rental.
Renting vs Airbnb: Pros and Cons
Each option has its advantages and drawbacks. Let’s take a look at them.
Here are some of the advantages of owning an Airbnb:
- The AirCover for hosts insurance covers damages up to $1 million. This one includes damages inside the property and damages that guests have made outside the property by accident. So, the good thing is that hosts don’t need to hire legal professionals to solve this kind of problem because Airbnb covers it all.
- The hosts could gain a large amount of money for a short time due to a high number of guests.
- Hosts can choose the price of the listed property all by themselves. The hosts should analyze the local area and set reasonable rates compared to the prices of similar properties. The flexibility of setting their own price could bring good market competition.
- There is no fixed price in the world of Airbnb. For that matter, the hosts can change the nightly prices literally on daily basis. So, there is nothing strange about renting the same property at different prices even in the same month.
- The guest needs a couple of minutes to book an Airbnb place. The process is online and as simple as it can be. There is no such thing as signing a lease agreement. Airbnb has set equal house rules to protect the hosts. As for the guests, they’re obliged to respect those rules.
As for the drawbacks of being an Airbnb host, they’re as follows:
- Airbnb’s rental properties are subject to more damages. Why? When guests book an Airbnb property, it’s usually for a short term. As a result, the guests aren’t that careful with the interior, as they’re looking at the property as their temporary home or a vacation home for parties.
- The gained income from Airbnb isn’t regular. You may be fully booked for the summertime and public holidays. As for the rest of the year, demand could be low.
- Expenses are higher when owning an Airbnb property. The host must clean the property after each check-out, repair if something is broken, continuously stock up on the essentials, and more.
Now, let’s have a look at the advantages of being a landlord of a traditional rental property:
- Traditional rental properties are rented for a long-term period, so they aren’t subject to so much damage. It’s more likely that the tenant will take care of the place and looks at it as their own home.
- In addition to the previous advantage, the landlords usually set insurance policy coverage for the property in case any damage is made accidentally from the guest or if any theft happens.
- The income gained from renting is a regular income for the landlord. Given that traditional renting is usually for a longer period, the landlord is assured that they would have the money from the rent at the end or beginning of each month for as long as the deal lasts.
- Being a landlord of a traditional property is equal to unlimited free time. How? When a lease agreement is made between both parties — a landlord and a tenant, the landlord doesn’t need to check if the property is clean or if any amenities are necessary to be sorted.
Let’s take a look at some of the drawbacks that long-term rental has:
- There is no option to maximize the income when renting a property for the long term. There is a lease agreement with a fixed price, so the tenant must pay only the amount of money established in the agreement.
- The landlord can’t change the price once an agreement is signed. There is no flexibility in changing the price of the property continuously. Meaning, if the agreement is made for a year, then the tenant will pay the same price for the period.
- At long-term rentals, the landlords deal with the same tenant/s for a long time. In some cases, this could work perfectly fine. But the landlords may also need to deal with tenants with bad behavior or financial instability.
Conclusion: Airbnb rentals could bring more income. But, if you want to get to that stage where Airbnb will go from side hustle to a permanent business, you have to work hard and invest more in your property.
How to Increase Your Airbnb Income?
There is no better answer you could get than the one directly from some of the best Airbnb hosts out there. Now, it’s time for tips!
1. List property in a popular location
As Airbnb properties are mostly booked by tourists, you should buy a property that’s located in some of the most visited cities by tourists — near beaches, coastal zones, mountains, urban areas, architectural places, and more.
2. Advertise the property all the time
It’s obvious that Airbnb hosts gain most of their income during public holidays and summer time. But, it’s advised to advertise the property during the whole year. Because, why not pay attention to the guests who look to rent a property off-season? Invest more in your property marketing with quality photos and detailed descriptions, and expect more income in return.
3. Try to provide the popular amenities wanted from the guests
According to a survey conducted by Airbnb, these are the top amenities that guests look for when searching for a short-let stay:
- Swimming pool or jacuzzi
- Pet-friendly space
- Air conditioning or heating
- Hygiene products
- Safety products
- Remote work atmosphere
So, to increase your Airbnb revenue, focus on having these amenities at your property.
4. Work with a real estate agent to purchase the properties that are a perfect match for Airbnb
If you want to gain more income on Airbnb, you need to list more than one property. If buying properties specifically for this purpose, it’s advised to hire a real estate agent to help you find the most suitable ones. A statistic shows that 88% of people buy properties through an agent. So, why don’t you be among them? Hire a real estate agent, find the ideal Airbnb properties, and start making more money.
5. Start low and increase the prices once you’ve gained positive reviews
A tip from Airbnb hosts is to always check what are the prices of other hosts’ properties in your area, especially if you’re a beginner in the Airbnb investment world. You need to charge low, no matter how fully stocked your property is. Once you gain positive reviews from your guests, you can start to increase your prices, but only if you think that your property deserves it.
Airbnb Success Stories
Finally, it’s time to get you “wowed” with stories told by some of the Airbnb hosts. Believe us, we’re also amazed by the success that the hosts were able to make with Airbnb as their business.
Expanding your business with Experiences
Patricia and Oscar are the first hosts in Cuba that started to use Experiences when Airbnb launched it. They teach economics, so that’s how they got the idea — being professors to their guests too!
They host Experiences for their guests that have booked this option, including cultural adventures in Havana, exploring the countryside where the Cuban coffee grows, raising animals, and more.
So, their advice to other hosts is to always share their authentic things (if they have one) with the guests. Not only that the Experiences will bring more money to the hosts, but they will bring more joy by sharing them with different people.
Start with one house, be persistent, and finish with five more
For this person, Darrel from Jamaica, everything started literally from zero. He spent the first year of his life barefoot. But, when the opportunity occurred, and his family moved out to a better place, he got a chance to attend different schools. Now, Darrel has three degrees which he has used to build a house.
This host has built five houses and a treehouse. He’s a Superhost, entrepreneur and basically can write a book on how to make more money through Airbnb.
(Image source: Airbnb)
Be creative as much as you can
Let’s present to you a couple, Ignacio and Alejandra, architects from Mexico. By running their own architectural firm, they got the idea to build something interesting, fun, and creative in their backyard. That’s how the Bubble hotel was created in 2017.
At first, they didn’t know how to fill it with guests. But, after consulting with an agent, the idea of Airbnb was worth the effort. They started with three bubble suits and finished with eleven in total.
Their advice is if someone has the opportunity to build something creative, just realize it no matter what. According to the wife, to be a host and own the Bubble hotel is the best thing that ever happened to them.
(Image source: Airbnb)
Communication with the guest before check-in is one of the keys to success
The two brothers, Ryan and Evan, together with their sister Lisa, have built a tropical hotel on the Caribbean coast. The jungle, the national park, and the sugary beaches were some of the adventures that the guests could explore.
But, there is one crucial thing — the location is far off the radar. Luckily, Airbnb has amazing communicational tools that the hosts use to reach out to their guests early before their arrival. The three hosts help the guests in organizing their travel routes just to arrive safely at one of the 1,400 islands offered on Airbnb.
So, their tip to other hosts is to open up to the guests and see them as friends, not only as a business. Try to establish personal and friendly relationships, give them an idea of how much their total vacation costs would be and more. All of this would bring you more positive reviews, hence more income.
(Image source: Airbnb)
So, what have we learned so far? Is Airbnb profitable?
When comparing the pros and cons of owning an Airbnb vs traditional rental, Airbnb allows you to earn more income.
However, the costs of owning an Airbnb property could be higher. But the more you invest in your Airbnb property, the more positive reviews you will get.
And what do we say about the positive reviews? They’re equal to more income.
Overall, with Airbnb, you can start as a home host only and finish as a hotel/s owner.