How to Start a Profitable Airbnb Business

An Airbnb Business Can Be a Great Source of Extra Income

Almost everyone has heard of or used Airbnb—the online property rental marketplace that enables hosts to rent out unused short-term private accommodations ranging from single rooms to entire houses. Airbnb began in 2007 and has rapidly grown to include listings for over three million available properties in more than 65,000 cities around the world. If you have available rental space and are looking for extra income here is how to start a profitable Airbnb business.

1
How Does an Airbnb Business Work?

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The first step is to become an Airbnb host and register your property by submitting photos and descriptions of the space for rent. Once a property is listed with Airbnb it can be viewed by travellers looking for accommodation in the host area. Guests can search the Airbnb listings using a variety of criteria such as:

  • destination
  • dates of availability
  • price
  • number of rooms, bedrooms, and washrooms
  • amenities such as breakfast, hot tub, pets allowed, etc.
  • host language
  • facilities such as parking, air conditioning, etc.

Before booking a chosen accommodation through Airbnb the guest can contact the host directly for further information via the Airbnb messaging service. 

Access

As well as browser access, Airbnb has mobile apps for Apple IOS and Android devices.

Security

For security purposes hosts must provide acceptable identification to Airbnb. To build a trusted community, travelers can post reviews of accommodations (and hosts can review guests). Reviews are not anonymous.

Guest Services

For guest peace of mind Airbnb provides a secure payment platform and payments to hosts are withheld until 24 hours after guest arrival. Airbnb has a 24 hour guest hotline in case any issues are encountered during the rental period. 

Fees

The host sets the price for the lodging and Airbnb charges the following fees:

  • Host: 3 percent payment transaction fee
  • Guest: 6-12 percent booking fee 

Hosts may require a security deposit and may also charge a cleaning fee.

Taxes

Depending on the jurisdiction, Airbnb may apply state, provincial, or city taxes to guest bookings.

2
Travelers Prefer Airbnb Rentals

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One of the great things about running an Airbnb business is that travelers prefer Airbnb to hotels, motels, or hostels for many reasons:

  1. Cost: An Airbnb rental is typically much cheaper than a comparable hotel room. Depending on the location, in some cases an entire house can be rented via Airbnb for the cost of a single hotel suite.
  2. Living Locally: According to statistics one of the main attractions of an Airbnb stay is to "live like a local". Rather than renting a generic hotel room most Airbnb guests prefer to stay in a neighborhood and experience the destination the way locals do. 
  3. Privacy: Airbnb users are not constantly surrounded by hotel guests and staff.
  4. Peace and Quiet: Airbnb rentals are typically more secluded and don't suffer from noisy hotel activity such as early morning guest departures, maid service, young children, and traffic.
  5. See What You Are Getting in Advance: Unlike a hotel where at best you may see an image of a similar room on their website with Airbnb you get detailed photos and descriptions of the actual premises.
  6. Diversity: Airbnb has an enormous diversity of available accomodations, from boathouses and yachts to lighthouses and castles.
  7. The Comforts of Home: Rather than generic hotel rooms Airbnb listings have the homey feel of an actual living space (some even have resident pets). Kitchens allow guests who wish to save money on dining out or have dietary problems to prepare their own food.
  8. Space for Family or Friends: With Airbnb you can save a lot of money by renting an entire house/apartment/condo for family and friends rather than multiple hotel rooms.  

3
Is Renting Your Space Permissible or Advisable?

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Before you decide to start an Airbnb business, make sure you are legally allowed to become an Airbnb host in your jurisdiction, and you are prepared to follow local laws and regulations!

Local laws regarding the hosting of paying guests can vary greatly depending on your city/state or provincial laws—in some locations they are prohibited altogether while in others they are subject to an occupancy tax. For more information see the Airbnb Legal and Regulatory Issues and Responsible Hosting web pages.

If your space is an apartment or condominium, check to see if you are allowed to sublet the premises. Apartment landlords and condominium associations often have rules in place to prevent owners from renting out their units as Airbnb spaces. Renting out your apartment without your landlord's knowledge can get you evicted.

Relations with the neighbors are also a major consideration. A few noisy or inconsiderate Airbnb guests can quickly turn you into a pariah in the neighborhood. 

Assuming none of these issues are insurmountable, becoming an Airbnb host can be an excellent home-based business opportunity.

4
Are You Committed to Becoming a Host and What Are Your Financial Expectations?

Empty hotel bed room with balcony overlooking wine country at a luxury resort in Napa Valley, California
How to Start a Profitable Airbnb Business. Trinette Reed / Getty Images

Before making a final decision to host on Airbnb there are a number of additional issues to consider:

  1. Do You Want to Start a Business? Starting an Airbnb business is like starting any business—you need desire, entrepreneurial spirit, and the willingness to put in the effort required, starting with doing the necessary background research and making a business plan.
  2. Do You Have the Time? Being a landlord can take a great deal of time, particularly for short term rentals. You will need to: 
    • manage your bookings and respond to communications with potential renters
    • arrange to meet guests to hand out or collect keys
    • make sure that the property is thoroughly cleaned and prepared for guest arrival, including fresh linens, breakfast supplies (if applicable)
    • handle any property maintenance issues such as pest control and plumbing, electrical, and appliance repairs
    • be available to your guests on a 24x7 basis in case any issues arise with the property
  3. What Are Your Financial Goals? Are you looking to make a little money on the side or generate steady income? The financial section of your business plan should reflect the research on the target market and realistic estimates of the potential revenue from renting your property. Income from an Airbnb rental depends on:

    • Demand: Tourist demand is the determining factor in the popularity and price of rental accommodation. The highest rental return locations are:
      • in sought-after visitor destinations where hotel prices are high (popular neighborhoods rank higher on Airbnb searches)  
      • centrally located, close to tourist sites, shops, and public transit
      • feature scenic views and amenities such as balconies, parking, etc.
    • Seasonality: In a northern climate demand for your property will likely fall off dramatically in winter (unless you are renting a ski chalet). Conversely, demand for rental accommodation in warmer southern locations (such as Arizona) drops off heavily in summer.
    Before you entertain thoughts of quitting your job and making a living by running an Airbnb business make sure you carefully research the income potential of your property by looking at the rental rates and booking frequency for comparable Airbnb listings in your area.
  4. Additional Costs: Aside from the booking fees that Airbnb charges there are additional costs associated with hosting on Airbnb, including:

    • Insurance: Normal homeowner's insurance policies do not cover use of the premises for business purposes, which includes renting on Airbnb. In the U.S., Canada, U.K. and several other countries Airbnb provides a free Host Protection Insurance program which provides up to $1 million coverage against bodily injury or property damage. If your locale is not covered by Airbnb insurance contact an insurance agent to see about proper coverage. For more information see How to Get Affordable Airbnb or Home-Sharing Host Insurance.
    • Business Licenses: More and more cities are requiring Airbnb hosts to hold a business license.
    • Cleaning and Repair: To keep your Airbnb host rating at a high level you need to maintain your rental property in top shape at all times, which means thorough cleaning between guest visits and regular maintenance. If you need to subcontract cleaning and maintenance tasks the costs will add to your expenses.

5
Listing and Pricing Your Property on Airbnb

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Describe Your Rental Space Accurately but Make It Stand Out

Remember that Airbnb is an online marketplace and in order to maximize guest interest in your property you need to think like a realtor and make your listing stand out from the competition

Start by researching similar Airbnb listings in your area and note the listed features/amenities and prices. (Make a spreadsheet if this helps.)

Your listing description must be accurate, detailed, complete, and emphasize what makes it unique. Thoroughly outline the amenities and features of your space as well as any rules or expectations of guests. 

It is extremely important to provide high-quality images of your space. If you are unable to do this yourself, Airbnb has a professional photography service available in some areas. The fees are deducted from your initial booking.

Remember that your guest rankings will be partly based on the accuracy of your listing description—you do not want guests to be disappointed because the space is not as described or you have exaggerated the amenities.  

Price Your Listing Competitively 

Your research of similar listings should also give you an idea of how to price your listing. To keep your property continuously booked (and maximize profits) it must be competitively priced.

6
Improving Your Host Ranking

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Airbnb rankings are like internet search rankings—the higher your property appears in the rankings the more likely it is to be selected by guests, so getting high Airbnb rankings is key to the success of your Airbnb business. You can improve your rankings by building trust and providing a great experience for your guests.

Building Trust

The Airbnb community is built on trust, so guests will be looking for hosts that have verified contact information, references, and positive reviews.

Provide Great Customer Service

As any entrepreneur will tell you, customer service is the backbone of any successful business and being an Airbnb host is no different. Airbnb hosts who provide the best guest experience are rewarded with positive reviews, higher search rankings, and more bookings. The most successful hosts are:

  • Responsive: Hosts who can't be bothered to respond to inquiries in a timely fashion (or at all) are a major turnoff to guests. In fact, Airbnb keeps track of your responses to guests and rates them accordingly. Hosts who have the best response ratings are rewarded with higher search rankings and increased bookings. The Airbnb mobile app can help keep you connected at all times. Be available by phone at all times when guests are present and follow up with them during extended stays to see if there is anything else you can do to improve the service.
  • Update Their Calendars Regularly: As well as improving the guest experience, keeping your calendar updated improves your Airbnb search rankings.
  • Fix All Problems ASAP: When a guest reports a problem such as a leaky tap or burnt out light bulb get it fixed right away and apologize to the guest. Providing five-star service is a sure way to improve your guest rankings.
  • Act on Their Reviews: If a guest posts a negative review correct the problem and learn from your mistakes. Respond to complaints in a professional manner at all times. 

Wish Lists

The Airbnb wish list facility allows you to keep track of your favorite listings and share them with fellow travelers. Being added to as many wish lists as possible will improve your Airbnb search rankings. You can ask guests to add you to their wish lists.