It’s been three years since Airbnb instituted its split-fee and simplified service fee structure. For any new STR hosts, here’s what that looks like:
Split-fee pricing TRADITIONAL
Hosts pay 3% of the total payout (unless they have listings in Italy or have super strict cancellation policies – in which case they pay more) and guests are charged a service fee between 13-20%.
Simplified pricing NEWER
No service fee is visible to the guest, and the host pays 15% of the total payout.
How do you decide which fee structure to use?
Well, not everyone has a choice! Simplified pricing has been mandatory since December 7th, 2020, for hosts connected to third-party software, such as Guesty, within certain categories. However, if the majority of your listings are in one of the countries below, or you’re not connected to software, you can still choose which structure you prefer to use by going to your Airbnb account.
- United States
Who has mandatory simplified pricing?
Simplified pricing is mandatory for software-connected hosts with the majority of listings outside of the above-listed countries. It’s also mandatory for hosts with at least one traditional hospitality listing (aparthotel, hostel, serviced apartment, etc.), regardless of location or whether they are connected to third-party software.
When you connect your Airbnb account to Guesty, you’re automatically switched to the simplified pricing host-only fee. You won’t have the option to change it to split-fee while connected.
It’s important to be aware of this change and to adjust your rates accordingly to maintain parity by increasing your base price or adding a fee.
Read more about simplified pricing from Airbnb here.
As this setting is kind of hidden on the Airbnb website, you can use this direct link to reach your settings page. Before deciding about the fee structure, let’s make some calculations to see how these two structures affect how much a guest and host pay for a reservation.
How much do my guests pay to stay at my place?
Many hosts, at one time, were able to name their price for a property, and Airbnb would put a service fee on top of that. The hosts would never know how much the guest actually paid to stay at their place. Airbnb’s guest fees vary between 10-20%, probably determined by multiple factors like length of stay, traveler’s country, and more.
With the new simplified pricing structure, the host has full control over what the guest pays in total and there’s no guest fee added on top of the final rate. This structure has been used by Booking.com for years.
This is how it looks when you switch to simplified pricing. The guest will see $0 service fee and an explanation when they click to learn more.
Let’s compare how much a guest pays and how much a host makes under several scenarios for the traditional split fee and the newer simplified pricing.
We compared a three-night stay with a nightly rate of $100, searched the property from two different locations and the service fee for guests was around 16-17%.
When you look at the numbers in the table above, you can see that you’d need to raise your rates and cleaning fee by 14% to keep earning the same amount.
Alternatively, by taking advantage of simplified pricing, you could raise your rates by 15%, which means you’d earn 1% more while the guest pays the same. It’s your business decision to use the new structure as a competitive advantage against similar listings like yours or simply give a small boost to your revenue.
Another item to note is that we added a calculation where some occupancy taxes apply (Florida, USA). When your accommodation fee increases, the tax your guest needs to pay does too. However, there is still a margin to cover that with simplified pricing’s lower service fee. If your country does not charge extra taxes, you have an extra margin of 1% to use for your benefit or competitive price advantage.
For those hosting longer stays (28 days+), Airbnb’s service fee drops roughly to 10% in the current structure. In this case, switching to simplified pricing might be disadvantageous for you as the host service see is fixed at 15% for the newer pricing structure.
Which is better?
Airbnb states that during the test phase of Simplified Pricing, the listings with the new price structure secured up to 17% more bookings compared to the listings with the traditional service fee.
Some of the other advantages of simplified pricing include:
- Full control of what your guests pay to stay at your place
- No extra service fee price item from the guest’s side
- Similar price structure to platforms such as Booking.com
- Increase your payout while guests pay the same amount
On the other hand, you need to be aware of the fact that:
- Your nightly rate will look higher than your competition
- Guest expectations may increase with the visible nightly rate
- The host fee may end up being more for longer-duration stays
Considering all of these facts, you need to choose the best option for your business and adapt to the changes. As Airbnb strongly recommends simplified pricing, there are reasons to believe that you may get more exposure in the search results after switching to the new structure.
How to adapt to simplified pricing
If you decide to switch to simplified pricing, or you’re obliged to use it, you definitely need to increase your rates 14-15% to keep your final payout on the same level. Keep in mind that the service fee applies both on the accommodation and cleaning fee, so you obviously need to adjust your cleaning fee as well.
Guesty’s automated system lets you adjust everything according to your strategy. You can do it immediately after switching your settings in Airbnb or schedule the change for a future date.
Keep in mind that if you adjust your Airbnb rates, you need to edit your markup settings on different channels to reflect the correct rates for your listing. Guesty will automatically calculate your daily rates and adjust your calendar on other platforms like Booking.com and Vrbo.