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The Airbnb creative cockroach may lift your fees

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Creative cockroach?

The Airbnb founders were from design school where they learned to be creative.  Their early inspiration to make money from hiring airbeds soon morphed into creative ways for home sharing.  When they were failing, they used their creativity to make enough money from funky breakfast cereal to survive, leading a startup advisor to say they were like cockroaches – ‘nothing will kill you guys’. It was a compliment!

This illustrated the theme of creative change they used over and over to survive – free photos, owner reviews of guests and a ridiculously easy website to make bookings. When facing shut down by community lawmakers they came up with creative changes and compromises to continue operating.

They became the ultimate unkillable creative cockroach!

Vacation rental fee increase?

This continuing creativity struggle may well affect vacation rental owners this year too, with a fee increase driven by changing models.

Creative struggle for growth

So are Airbnb struggling now?  They announced that they will raise money with a public share issue in 2019, and its success will be built on growth prospects.  The problem is their growth flatlined in 2018, so the struggle is  – how to get growth? They decided in recent times to add hotels, China, ‘experiences’ and new tools for property managers.

Foray into new models

The most relevant to us VR owners is the foray into hotels and property managers, and they are creative there too, with lots of experiments.

They have partnered with boutique hotels, they have had special apartment buildings built by partners to be marketed via Airbnb.  They have partnered with hotels and property managers to list on Airbnb, and this is where it gets interesting.

The growth will add supply and this may mean more internal competition.  It will also probably mean extra host fees.

Changing host fee model

A few weeks ago (May 2019), news emerged via Skift that Airbnb are experimenting with some hotels and property managers with a simple host-only fee.  Of course the fee for hosts jumps from 3% to around 14% to compensate Airbnb for the loss in guest fee.  It is very close to the booking.com model.  Some data shows this simple model is preferred by guests.

So now Airbnb has a hybrid model.  Some hosts pay the old 3% commission with about 11% paid by the guest, and some hotels and property managers pay a host only-fee of  around 14%.

Presumably, it will all feed into extra listings and extra Airbnb revenue. The creative cockroach will be well placed to go public with its public share offering this year.

Your Airbnb fees will probably increase dramatically

If data emerges that there is strong guest preference for the host-only fee, expect that Airbnb will progressively introduce a high host-only fee for most owners.  Expect your host fee to rise from 3% to 14%!

The net revenue to you need not change, because you can increase the base price to compensate for the change in fee structure. It can mean the same total fee for the guest, and the same net revenue for the host. That is complicated, but doable.  The big point here is to expect a fee hike!

There has been no official announcement yet, but don’t be surprised when it happens!

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My name is Rex Brown. I live in Australia, on the Great Ocean Road in Victoria. I run two of my holiday rentals here on the coast, and another in inner Melbourne . They are all quite different, but they all run at high occupancy. They are the sandpit that I play in, running constant experiments about what works and what doesn’t.

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