As a property manager, you always look for ways to maximize profits and minimize expenses. One area that can eat into your profits is property management fees for short-term rentals like Airbnb.
Airbnb has seen impressive growth recently, with revenues increasing significantly year-over-year. According to data from Airbnb, the company's revenue for the twelve months ending September 30, 2022, was $8.030B, representing a 50.97% increase from the previous year. This is bouncing off of Airbnb's annual revenue for 2021, which was $5.992B, a 77.37% increase from 2020.
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These numbers suggest that the short-term rental market is rapidly expanding, and Airbnb is a leader in this space. By investing in the company, you could potentially benefit from its continued growth and success.
Of course, it's essential to keep in mind that investing in any company carries risk, and it's always a good idea to do thorough research. So, let’s explore the costs associated with Airbnb property management and the steps you can take to minimize this amount.
Why It’s Important To Minimize Airbnb Management Fees
There are a number of reasons why a property manager will want to save on Airbnb management fees. Some possible reasons include:
By reducing the amount of money spent on management fees, a property manager can potentially increase the overall profitability of their business.
Be more Competitive
If a property manager can reduce their management fees, they may be able to offer more competitive rates to Airbnb homeowners and attract more business.
Invest in Other Areas
A property manager might want to save on Airbnb management fees to reinvest the money into other areas of their business, such as marketing, advertising, or improving the quality of the properties they manage.
Offer Lower Rates to Renters
By saving on management fees, a property manager may be able to offer lower rates to renters, which can make their locations more appealing.
Negotiate Better Terms with Airbnb
A property manager may be able to negotiate better terms with Airbnb if they can demonstrate that they can effectively manage properties without relying on the company's management services.
So let's dive in and take a closer look at how much you can expect to pay in Airbnb property management fees and why.
How Much are Airbnb Property Management Fees?
You can generally expect to pay anywhere from 20% to 50% of your rental income in management fees. The average property management fee in the United States is 28% of total revenue.
Managing an Airbnb property can be somewhat different from managing other types of rentals, as Airbnb properties are often used for short-term stays.
This can require a different approach to property management which can impact property management fees, including:
Frequent Cleaning and Maintenance
Airbnb properties, may need to be cleaned and prepared for new guests more frequently than traditional rentals, as they may have a higher turnover rate. This can also lead to more wear and tear on the property.
The rate at which an Airbnb property is rented may need to be adjusted more frequently than a traditional rental, as demand for vacation rentals can vary greatly depending on the season and local events.
Airbnb guests may have different expectations for amenities and services than traditional renters, and property managers may need to be prepared to accommodate these expectations.
There may be different legal considerations when managing an Airbnb property, such as zoning laws and homeowner association rules.
Overall, managing an Airbnb property can also be more time-intensive than managing a traditional rental, as it may require more frequent cleaning and maintenance and a more dynamic pricing strategy to maximize occupancy and revenue. However, it can also be a lucrative and rewarding venture for those well-suited to the unique challenges of short-term vacation rentals.
What are the Different Types of Airbnb Management Fees?
Property managers may experience more fees for Airbnb properties than for traditional rentals. But as discussed earlier, this can vary depending on the specific services they offer and the property's needs.
Some standard fees for Airbnb property management fees include:
Listing & Marketing
This can include creating and optimizing the listing on Airbnb, taking professional photographs of the property, and marketing the property to potential guests.
Airbnb Managers can provide cleaning services for guests to ensure the property is always in top condition.
Typically, a property manager will handle any maintenance issues that arise at the property, such as fixing broken appliances or addressing plumbing problems.
Concierge & Inventory
Airbnb Managers can act as a concierge for guests, answering questions and providing recommendations for things to do and see in the area. They may also manage the inventory of supplies at the property, ensuring that there are enough towels, linens, and other essentials for guests.
Some property managers charge a fee for managing your property when it is not occupied, such as handling inquiries from potential guests and maintaining the property.
Every Airbnb must maintain a strict booking policy. Property managers can assist with this or offer full services.
How Much of Airbnb Property Management Fees are Passed onto the Customer?
The amount of Airbnb property management fees passed onto the customer can vary depending on the specific terms of the property management agreement and the services being provided.
Airbnb property management fees can be passed onto the customer:
As a percentage of the rental rate
Property managers may charge a percentage of the rental rate as a management fee. For example, a property manager may charge a 15% fee on top of the rental rate for an Airbnb property.
As a flat fee
Property managers may charge a flat fee for their services, regardless of the rental rate for the property. This can be a set amount or a fee based on the stay's length.
As a combination of percentage and flat fee
Property managers may charge a combination of a percentage of the rental rate and a flat fee for their services.
As a separate line item on the bill
Property management fees may be itemized as a separate line item on the bill so that customers can see the specific fees they are being charged.
If property management fees are reduced, it can save the customer money by reducing the overall cost of the rental. For example, if a property manager charges a 15% management fee on top of the rental rate, reducing this fee to 10% could result in a lower overall cost for the customer.
On the other hand, an increase in property management fees can cost the customer more money by raising the overall cost of the rental. For example, if a property manager charges a 10% management fee on top of the rental rate and increases this fee to 15%, the overall cost for the customer will be higher.
What Effect do Airbnb Fees Have on Bookings?
There is a growing body of research on the effects of Airbnb fees on bookings. Some studies have found that Airbnb fees can negatively impact bookings, particularly for hosts who are new to the platform or competing in crowded or highly competitive markets.
One study published in the Journal of Tourism Management found that Airbnb fees had a "negative and statistically significant impact on the booking probability" of hosts in Paris. Similarly, a study also found that Airbnb fees were “negatively associated” with bookings for hosts in New York City.
Other studies have found that Airbnb fees have a smaller or more mixed impact on bookings. For example, a study found that Airbnb fees had a "small negative impact" on bookings for hosts in Sydney, Australia, but no significant impact on bookings for hosts in London.
Overall, it appears that Airbnb fees can harm bookings for some hosts, particularly in markets with high competition or low demand. However, the specific impact of fees on bookings can vary depending on various factors, including the local market conditions and the host's pricing and marketing strategies.
In December 2022, Airbnb made a change to its pricing display. Under this change, Airbnb began displaying the total price of a booking to guests in certain countries, including all fees before taxes.
The total price is shown in search results and on the map, filter, and listing page. Before confirming their booking, guests can view a full price breakdown showing Airbnb's service fee, discounts, and applicable taxes.
This change was likely implemented to provide increased transparency to guests and help them understand the total cost of their booking before they complete their reservation.
How to Minimize Airbnb Property Management Fees
Since properties with higher management fees tend to experience lower bookings, it’s vital to reduce these costs. Here are some strategies you can use to minimize your Airbnb property management fees:
One way to reduce your property management costs is to streamline your operations and minimize the time and effort required to manage your property. This can involve using tools and technologies to automate tasks, such as using a property management platform like Xenia to manage cleaning, maintenance, inspections, and inventory restocking.
Collect better data
Another way to reduce property management costs is to collect better data on your costs and use this information to optimize your pricing and operations.
Some platforms may be willing to negotiate the fees they charge property managers. It may be worth reaching out to the platform to see if you can negotiate a lower fee or more favorable terms.
Offer additional services
Some platforms may allow property managers to charge additional fees for specific services, such as concierge services or tour bookings. Offering these types of services can help to offset the cost of platform fees.
Improve your occupancy rate
The more bookings you can secure through the platform, the less the platform fees will represent as a percentage of your overall rental income. Improving your occupancy rate can help to minimize the impact of platform fees.
Use a property management platform
Some platforms, such as Airbnb's own Host Assist service, offer property management services at a lower cost than traditional property managers. These platforms can be a good option for hosts who need support but don't want to pay for full-service management. Just be sure to carefully research and compare different platforms to find one that meets your needs and budget.