How to make Airbnb profitable?

Airbnb profitability is a key financial metric for hosts and property owners who offer accommodation through the platform.

Airbnb can be a very profitable platform for accommodation providers because, since its inception in 2007, it has managed to almost monopolise the market for independent, boutique accommodation, particularly that offered by private property owners – although the platform can also be valuable for hoteliers too.

In this guide we’ll let you know how to make money on your Airbnb listing, how to make your Airbnb successful, and how much can an Airbnb actually make.

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Understanding how Airbnb makes money  

Airbnb isn’t a charity. So how does Airbnb make money? And does Airbnb make a profit?

Like almost all OTAs and booking platforms, Airbnb takes a cut of whatever bookings it facilitates. It does this through a few different fees, which can vary from booking to booking. Airbnb runs two types of fee structure:

  • Split fee: Airbnb hosts are charged 3% of the booking value (sometimes slightly more), while guests are charged up to 14.2% of the booking value (or up to 16.5% for cross-currency transactions). This fee structure is used for smaller, private hosts.
  • Host-only fee: The entire fee is deducted from the host’s payout, and is usually in the range of 14–16%. This fee structure is mandatory for hotels and other traditional accommodation providers.

Ultimately this means that hoteliers need to set their rates with this 14-16% fee in mind, whereas the owner of a vacation rental or investment property only has to consider the rather negligible 3% fee that will be deducted from their payout.

Make money with Airbnb: Avoid these common mistakes

Now that we understand how Airbnb makes money, it’s time to learn how to make money out of using Airbnb.

The first step is to avoid the common mistakes that many hosts make, particularly when they initially offer their property through Airbnb. Examples include:

Overpricing or underpricing your listing

Underpricing earns you bookings, but minimises profit by leaving money on the table. Overpricing can see you miss out on bookings altogether. Research what other hosts are charging for similar listings and use those insights to inform your pricing. You may need to be willing to offer a lower rate initially, in order to build up some good reviews and ratings.

Ignoring guest experience & reviews

Speaking of reviews, they are absolutely critical on a community-centric platform like Airbnb. A 4.8 star rating is generally seen as the standard of excellence on this platform, a far higher number than other booking channels. This makes ratings and reviews critical – you should actively solicit reviews from happy guests, and learn from any feedback you receive.

Not optimising for seasonal demand

You should implement dynamic pricing that changes in response to demand throughout the year, and ensures you maximise profitability. Failing to do so can have a huge impact on peak season profits.

Failing to automate key tasks

Time is money, and you only have so many hours of your day to devote to Airbnb. You should use yours wisely by automating low value tasks, so you can focus on high value tasks. More on this later in the guide.

Ignoring Airbnb regulations & taxes

You need to understand the local laws, regulatory and financial obligations of accepting bookings through Airbnb in your area: VAT, occupancy taxes, health and safety regulations and more. If you don’t, you risk fines or worse.

how to make money on airbnb

Making money on Airbnb: Factors that affect profitability

When you’re thinking about how to make money through Airbnb, there are a few key factors that you should keep in mind. Some you don’t have much power over, while others are entirely within your control.

Location

Location matters. If you don’t yet have a property, it’s wise to establish your Airbnb in a high-demand area. A unique location may also present an opportunity to create your own demand, it’s just a little more difficult to do.

Property type & features

Investing in your Airbnb property can ultimately make it more profitable, through alluring renovations, occupancy-increasing extensions, and the addition of premium amenities – pools, bars, gardens, day spas – that attract guests.

Seasonality & demand trends

You should adjust your pricing in real-time based on demand. Airbnb’s Smart Pricing tool is a good option, but unbiased third-party tools, like Little Hotelier Insights, are even better.

Guest experience & reviews

Ratings and reviews are more critical on Airbnb than almost any other booking platform. Enhance yours by providing an incredible guest experience, actively soliciting reviews from happy guests, and responding to disappointed guests in a calm, open and understanding manner.

Operational efficiency

The more efficiently you work, the less you spend on hired help like Airbnb cleaning services and property managers, and the more time you have to focus on high value tasks, like pricing strategy and marketing. A tool like Little Hotelier can help you optimise the way you manage cleaning, maintenance, guest communication and other operations.

Pricing & competition

Hospitality is a particularly local industry where you primarily compete against neighbours for the bookings of visitors. You should therefore keep tabs on how your local competitors are pricing comparable rooms, to ensure you’re always offering a compelling deal – something that the Little Hotelier Insights tool is built to do.

Marketing & visibility

Use a compelling heading and description, professional Airbnb photography and a guest guidebook to enhance the visibility of your listing and improve your Airbnb performance. Our Airbnb marketing guide tells you all you need to know.

How to make more money from Airbnb: Automate your business

Making more money on Airbnb is about earning more bookings, and optimising the pricing of those bookings. It’s also about minimising the effort that an Airbnb listing can demand, to save both time and money.

Smart tools can help with both of these challenges. Case in point: Little Hotelier.

Little Hotelier Insights can tell you what up to 10 competitors are charging at any given moment. It can also give you guidance on how to maximise profitability in peak periods, and earn valuable bookings in low season.

As an all-in-one property management platform, Little Hotelier also brings a wealth of automation to the table, to save you up to 35 minutes on every booking. You can automate a range of guest communications, and you can manage 450+ booking channels, including Airbnb, through a single, simple screen.

Start making money on Airbnb with Little Hotelier

Little Hotelier can quite literally turn you into an Airbnb superhost, helping you to dominate the platform while maximising bookings, revenue and profitability. It has all the features you need to manage your property, including:

  • Front desk software: Control all your operations in one place. Save time and hassle by easily taking care of check-ins, room allocation, guest communications, payments, housekeeping and more, all in one centralised calendar.
  • Channel manager: Sit back and watch as your inventory is automatically updated in real-time across Airbnb and all your other channels. Sell your rooms in more places without the risk of double bookings.
  • Booking engine: Why rely on Airbnb? Take commission-free bookings directly from your own website, which you can easily build yourself. Gain greater control over the guest relationship, and increase loyalty by personalising (and automating) your communications.
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By Dean Elphick

Dean is the Senior Content Marketing Specialist of Little Hotelier, the all-in-one software solution purpose-built to make the lives of small accommodation providers easier. Dean has made writing and creating content his passion for the entirety of his professional life, which includes more than six years at Little Hotelier. Through content, Dean aims to provide education, inspiration, assistance, and, ultimately, value for small accommodation businesses looking to improve the way they run their operations (and live their life).