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Airbnb Pricing Explained: How to price your short-term rental

Becoming an Airbnb host is an exciting time full of potential. However, both new as well as experienced hosts, face that one million dollar question – How should I price my Airbnb? In this article, we’ll discuss how to price your short-term rental and the factors involved in it.

Determine your overhead costs

Firstly, you have calculate all of your overhead costs per month with your property.

  • Mortgage
  • Bills
  • Supplies and amenities
  • Cleaning
  • Property management fees
  • Marketing costs
  • Contingency budget
  • Insurance

You need to know how much it takes to maintain your rented property so that your price accounts for these costs and you can earn a profit. 

Calculate the costs of using Airbnb

Before settling on a price, make sure you understand all of the additional fees the Airbnb website charges you as the host. This will prevent unexpected fees, damaging your profits. These fees are:

  • The host-only fee, or split fee
  • Airbnb service and experience fees

Split fees are when the guest and host share the fee that Airbnb charges for the booking. The host pays about 3% while the guest pays about 14%. The host-only fee has the host pay between 14%-16% while the guest pays 0%. The latter is usually mandatory since 2020.

An experience fee of about 20% is also charged to the host’s payout to cover the products and services of Airbnb, such as Airbnb’s insurance for host properties. This fee will vary based on the host-only or split fee, dynamic or long-term pricing, local taxes, etc. 

Airbnb Pricing explained

See how Airbnb breaks down its prices

When you see other listings on Airbnb the site neatly itemizes the fees a guest can expect to pay. The total cost is broken down as

  • The base rate per night (as determined by you, the host) is multiplied by the number of nights stayed. This price is usually increased based on how many guests will be staying.
  • One-time cleaning charge
  • Service fees charged by Airbnb

Determine your preferred pricing method

Approximately 60% of your profit will come from your property’s value, its location, and the amenities and facilities it includes. The remaining 40% of the profit will be dependent on how dynamic your pricing strategy is.

The most common pricing methods are:

  • Price per night
  • Derived pricing
  • Length of stay
  • Discounts and special offers

Regardless of which you choose, renters won’t see your property worth the same value all year round. A dynamic pricing strategy allows you to raise and lower the price of renting based on the times of the year when going one way or the other is the most advantageous for you. 

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