The Strategy behind Setting Airbnb Fees | Cleaning, Pet, Etc

In operating a successful Airbnb, you will be able to earn additional income, but you will also incur expenses, including certain service fees such as cleaning, pet accommodation, and additional guest fees. As a property manager, you need to be clear that whilst there are opportunities to earn extra income with an Airbnb, there are also expenses to consider, such as these service fees.

Maintaining healthy Airbnb service fees is crucial to operating a profitable Airbnb business.

The topic of today's blog will cover what these fees are, and how to offset them. The purpose of this guide is to explain Airbnb service fees so you can keep your guests happy and your business running smoothly.

Renting your Airbnb property successfully requires understanding how to set Airbnb fees strategically. To meet guest expectations, as a host you should strive to strike a balance between covering your hosting costs at the same time offering the best value to your guests.

Understanding Airbnb Guests' Service Fees

There are several service fees that Airbnb property managers are allowed to charge guests. The more you get them right, the more consistent your bookings and profits are likely to be. It is important not to overcharge your Airbnb listing or you may lose bookings/reservations. To make sure you set the fees correctly, you need to determine the correct strategy.

Developing a savvy pricing strategy is key to hosting success. As the host of your Airbnb property, you are free to adjust your price in accordance with seasonality, holidays, and other circumstances. You can design a pricing strategy that suits and sets you up to be a successful Airbnb host using the information provided below.

Here are a few simple ways to explore the service fees you can charge your guests and how to set the right strategy for each service.

1. Cleaning Fee

As a rule of thumb, guests love to be in an environment that is clean and tidy. But, Cleaning fees are often the largest fees charged to guests because of the extensive provisioning and labor involved.

However, charging a cleaning fee enables hosts to pay for cleaning supplies, a housekeeper, or a professional cleaner.

In setting your cleaning fee strategy, consider the following factors,

• Remember that when you add in the cleaning fee your total nightly rate will increase. Mainly for short stays, the fee makes up a greater part of the total price than for longer stays.

• In order to keep your bookings rolling in, make sure your nightly rate stays competitive even when you key in the cleaning fee to the equation.

• Experiment with prices using the dynamic pricing tool, to see how much your listing will cost based on different dates and types of stays. Guests may not book your space if you charge a high cleaning fee.

Consider these tips:

• Irrespective of the length of stay, charge a standard cleaning fee.

• If you are hosting a short stay of one or two nights, you can charge a lower cleaning fee. The amount can vary depending on your situation. For instance, if the guest check in late evening and check-out is the following morning a nominal charge or half rate can be applied.

• If you are hosting a longer stay, you can stick to your standard cleaning fee.

• To remain competitive, factor part of your cleaning costs into your nightly rate.

Pro Tip: When you start out, keep the price slightly below your competitors' median rate. Your cleaning fees can be adjusted higher as your listing gains momentum and as you gain a competitive advantage over your competition.

You can also, customize your Airbnb cleaning fees,

Previously, cleaning costs could only be set at one fixed rate, but that has changed on Airbnb. Airbnb pricing tools enable you the flexibility to customize your cleaning fee. What this allows you is,

• You can offer a lower fee to guests who stay for shorter stays of 1 or 2 nights.
• For longer stays, your regular cleaning fee remains the same unless you change it. You have the option to change this.
• Your cleaning fee generally should cover the housekeeping you expect to do after hosting guests.
• The AirCover policy offers damage protection up to $1 million USD for unexpected cleaning expenses, such as odor removal and such.

Are Cleaning Fees Refundable?

Any cancellation made before check-in time will always result in a full refund of the guest's cleaning fee. Unless the host decides otherwise, the cleaning cost will not be reimbursed if a guest cancels during their stay.

Maintaining your Airbnb property in pristine condition while keeping guests pleased is a straightforward process if you include a cleaning fee. The best practice is to keep your target guest in mind when deciding how much to charge for cleaning services.

2. Extra Guest Fee

An extra guest fee is applied when the number of guests staying at the Airbnb premise exceeds the standard guest occupancy. Hosts can charge for extra guests if they have an extra mattress, a sofa bed, or even a pull-out bed. But it needs to be clearly disclosed to the guest what type of accommodation is available to additional guests.

As a host, does it always come down to the question of how much you should charge for extra guests? Depending on the sitaution, the amount charged can differ greatly, mainly due to space and how many guests could be comfortably accomodated inside the rental.

Consider these factors when setting an extra guest fee for your Airbnb listing:

• To avoid getting a bad review, determine how many guests can comfortably fit inside your Airbnb. If you say you can accommodate extra guests, but when they arrive there is actually limited space or your place is too small to accommodate everyone, that's something you don't want to do and may affect your reviews and ranking.

• Calculate your additional expenses when hosting more guests. You can set a fee that is fair to both you and your guests by keeping track of the increased use of utilities and basic supplies.

• Make a comparison between the extra charge your competitors in your city/neighborhood charge for extra guests. Find out what the norms are in your area by contacting hosts in your area or checking similar listings in your area. Or simply inquire from Airbnb forums, Facebook groups, etc.

• It is vital to maintain that your additional guest cost is not excessive in comparison to your competitors.

• If you discover your competitors are not charging additional guest fees at all, then you should follow suit too. This is common when you are renting out your entire property.

• Once you have decided you are willing to accommodate more guests than your normal limit, you can charge an additional fee. For instance, if your Airbnb listing states you accommodate 6 guests, then the additional charges will be applied from the 7th guest onward.

• It may also be necessary to have a maximum limit - if you can only accommodate one or two extra guests, please specify this in your listing and your house manual.

How to add an extra guest fee to your listing:

• Go to Listings and select the listing you want
• Click Pricing and Availability and go to Fees
• Next to Extra Guest Fee, click Edit
• Enter the amount per extra guest
• Click Save

Your new fee only applies to future reservations. If you want to add an extra guest fee to a confirmed reservation, you’ll need to send your guest a trip change to adjust the price.

3. Pet Fees

During the first half of 2022, about 25 percent of the pet-friendly nights booked included stays of 28 days or longer, according to Airbnb. Guests are now traveling with their domestic pets for longer periods due to post-pandemic trends and digital nomad lifestyles. Because these types of bookings are usually for longer stays, this is good news for Airbnb hosts who allow pets.

Hosting pets also means additional income since you are allowed to charge a pet fee. Since November 2021, Airbnb has confirmed that over 3 million pets have stayed at Airbnb properties - whether they stayed overnight, for a weekend getaway, or for longer periods.

If you are a host who is happy to accommodate fur guests at your Airbnb, consider these factors when setting up your pet fee

• Pet fees should generally be divided equally over the stay and shown both in the nightly rate and in the total price.

• You as a Host can review how many pets (0–5) guests plan to bring.

• Your listing will be changed to “Pets allowed” if you previously selected “No pets allowed.”

• In your welcome book and house rules, be sure to state that pets are welcome, but there is a pet fee that will be added to the final bill.

• When setting up Pet Fees - note that it cannot be more than your nightly base rate. Your charges for hosting a pet/s, should either be a flat fee that covers multiple pets, or a fee per fur guest.

• After accepting a booking, you no longer need to request a pet fee through AirbnbResolution Center.

• Pet fees should only be used for cleaning costs after hosting fur guests.

• The exception to the rules would be when it is service animals. Service animals always stay free and cannot be charged a pet fee.

Side Note: You can still request payment under AirCover if a service animal damages your property. Read the Airbnb Accessibility Policy for more information about service animals, emotional support animals, and fees.

If you are worried that having fur guests over will damage your possessions, AirCover also covers you in this instance. You can also be proactive by removing any breakable/valuable items from the premises for safety precautions.

4. Damage Deposit Fee (Security Deposit)

Inadvertently items can disappear from your Airbnb property whether it is intentional or not. It is possible for a guest to walk away with the toaster or to leave burn marks on the ironing board, or for a pet to scratch the door or worse, pee on the couch. The cost of cleaning or replacing all of these is high. It is therefore recommended to keep a damage deposit.

Airbnb allows hosts to set a security deposit amount as a way to protect themselves from guest theft or bad guest behavior. How it works is, instead of a cash or credit deposit, it's more like a credit hold on the credit card as guests aren’t charged the value of the fee at booking, it is only a deposit fee put on hold for 14 days on the credit card. Guests agree to place a hold on their credit card for the security deposit amount until the hold is released. After a guest checks out, the hold is usually released 14 days later if no damage is done to the property.

Security Deposits: Why Should you Charge it?

1. The majority of hosts charge a security deposit. Unless the amount is exorbitant, guests won't be put off booking if a fee is charged, as the damage deposit is a common fee associated when staying in an Airbnb.

2. It is an added layer of protection. It is improbable that you will have to claim the damage deposit, you will likely need to do so at some point. At some point in your hosting journey, you are quite likely to encounter a bad guest.

3. In the event of property damage, having a damage deposit on hand makes the process go more smoothly when compared to making an insurance claim or filing a claim through Aircover to receive payment.

How to Calculate the Security Deposit

Your security deposit fee should be set strategically in a way that doesn't cause a potential guest to hesitate before confirming a booking with you.

Here again, look at what your competitors are charging. Take a look at a few similar listings in your vicinity and take note of what their security deposits are. Take an average and set out at a median rate that would be appropriate.

If you do not have enough comparable listings, use the 25 percent rule to determine your security deposit. Don't exceed 25 percent of your average total booking for your security deposit.

Eg : If your listing averages 5 nights at $200 per night, then 25% of $1000 is $250.

In Conclusion,

Having guests stay at your Airbnb doesn't have to be difficult, and it won't be if you use all the Airbnb tools at your disposal. Transparency with your guests is essential from the booking confirmation stage onwards to make sure there are no misconceptions. Make sure you have a clear set of house rules mentioned in your listing as well as in your welcome house manual. Whether it is the cleaning fee, pet fee, or the option to add extra guests and the security deposit, being upfront about it in your listing can prevent uncomfortable confrontations or even bad reviews for your Airbnb.

In light of the advice we have provided, we are confident that you will be able to place your strategy behind setting Airbnb fees in the best possible structure while pocketing a healthy profit. We at Hostaway strive to ensure you're taking every step you need to succeed in your business!

If you would like to learn more about how Hostaway can help you in setting up your fees and automate your Airbnb business. Find out how Hostaway can fit your Airbnb business and help you grow by scheduling a demo call at your preferred time with one of our product experts.