How Airbnb Works for Hosts, Guests, and the Company Itself

Airbnb was established in 2007 when its founders invited paying guests to sleep on an air mattress in their living room. The company expanded on this first success with an online platform that allows property owners to rent accommodations to guests who don’t want to pay sky-high hotel bills while traveling.

Since then, the service has become increasingly convenient and widely known. Here’s how Airbnb works for guests—and how the company and hosts make money.

How Airbnb Makes Money

Airbnb (ABNB) is part of the sharing economy and has a very profitable business model. The company makes money by facilitating the rental of properties.

In particular, Airbnb takes a percentage of a booking subtotal when a property is rented. This subtotal includes the rental price and any additional fees charged by the host, such as a cleaning or pet fee.

The fees Airbnb charges allow it to pay for its platform and associated costs, as well as for its customer service.

The company offers two fee options, the split-fee and the host-only fee.

Split-Fee

The split fee is the most common option. When it applies, the host and the guest split the charge.

• Host-Fee: This is about 3%. Hosts in certain locations, such as Italy, pay a higher percentage. This fee is calculated from the booking subtotal, which excludes taxes and the guest service fee. Airbnb automatically deducts this fee from the host’s payout.
• Guest Service Fee: This amount depends on different factors, including the type of property rented. Fees range from 14.1% to 16.5% of the booking subtotal.

For example, if Airbnb charges the host 3% and the guest 15% (18% total), the company would earn $117 on a four-night booking totaling $650 ($500 for the stay plus a $150 cleaning fee).

Host-Only Fee

The host-only fee, also known as simplified pricing, is the less common structure and is usually reserved for traditional properties like hotels and apartment buildings. It’s required when hosts use a property management software or channel manager software to list their properties on Airbnb.

This fee ranges between 14% and 16% for most properties and is paid entirely by the host. The rate may change based on the host type and the stay length.

This means that at a rate of 14%, the company earns about $147 on a seven-night rental of $1,045 ($895 for the rental and a cleaning fee of $150).

How Airbnb Hosts Make Money

Hosts make money by establishing a profile on the Airbnb platform and renting their spaces to guests.

This could be a spare room or an entire house. How much a host earns depends on the property type and location, the travel season, and local regulations.

Earnings

How much hosts earn can differ a lot based on things like where the property is, what kind of place it is, how often it gets booked, the time of year, and local rules. Some people rent out a spare room now and then to make extra money, while others run short-term rentals as a full-time business, which usually means higher costs but more regular bookings.

Hosting comes with regular costs like maintenance, cleaning, taxes, platform fees, and the time you spend. This means your income can go up and down each month. Before you list your property, think about both how much you could earn and what it will cost to run your rental the right way.

How It Works

The host keeps whatever is left after Airbnb’s fees are deducted. Let’s say you rent your condo for $200 per night and charge your guest a cleaning fee of $150. If a guest books a four-night stay, they’ll pay $950.

If the host uses the split-fee option, 18% of the booking subtotal goes to Airbnb. The host would earn $779 ($950 × 0.82). Airbnb handles virtually everything. That includes providing security features and support to hosts and guests.

According to Nonales, who is a Superhost (a host who provides superior service and is recognized on the site with a badge), the platform is very easy to use. “I feel like anyone can ramp up to this,” he said.

The company pays hosts through various channels, including deposits to a bank account, Fast Pay, PayPal, and Western Union. Depending on the method selected by the host, payment times range from 30 minutes to seven business days.

How Guests Can Use Airbnb

Set Up an Account

To rent a property using Airbnb, guests must create an account on the website or app. They must provide their name and email address and create a secure password. They can also sign in using an Apple or Google account.

In addition, the company may require personal details such as a legal name, an address, a phone number, and (in some cases) a profile picture.

You may also be asked to verify your identity by providing government-issued identification.

Start Searching for a Rental

After setting up your account, you can search for listings based on location, price, and travel times. Once you find one, input your rental dates and number of guests. Then, press the Reserve button. You’ll get one of two options:

1. Confirm and pay: This means you book the property immediately by providing your payment information. You can pay using a credit card, debit card, Apple Pay, Google Pay, or PayPal. Gift cards and coupons can also be used. Once you provide your payment information, your booking is confirmed. The host normally responds to your booking within 24 hours.
2. Request to book: With this option, the host has 24 hours to respond to approve your booking. If you don’t hear back from the host, you aren’t charged, and your booking request is canceled.

After your stay, you can leave a review of the property and host. This can help future guests when they search for their rentals.

Before You Sign Up: Rules and Regulations

Rules and local regulations play a big part in who can use Airbnb. For instance, the company only allows people over 18 to create accounts. This applies to hosts and guests.

Hosts must provide accurate information about their properties. The company also prohibits any activity that “endorses or promotes illegal or harmful activity, or that is sexually explicit, violent, graphic, threatening, or harassing.”

Local regulations bind hosts. This means they cannot rent their properties if Airbnb is not permitted in their jurisdiction. For example:

• The service is legal in New Jersey, but some townships forbid short-term rentals.
• Zoning restrictions may bind hosts in cities like New York and have caps on the number of guests per property.
• San Francisco hosts must pay a tax of 14% on reservations of less than 30 days.

The Bottom Line

Airbnb has changed how people travel by helping property owners rent their spaces, and visitors find places to stay. If you want to become a host, Dwayne Nonales suggests investing in high-quality, long-lasting furniture when you begin. Focus on getting five-star ratings that can help get you noticed.

Importantly, be sure that you understand all that’s required, including local regulations. The service may not be allowed in your jurisdiction and is illegal in certain countries, including Iran, Syria, Crimea, and North Korea.