You spend hours adjusting your photos, spying on others’ listings, checking your Airbnb app over and over again as if you have OCD… We all know hosting on Airbnb ain’t an easy job no more. Every single year the total listing number in Australia is soaring at a rate of over 20%. We, as the Airbnb hosts, are facing a competition pressure like never before. With the new ranking algorithm and smart pricing system, the Airbnb god has spoken：lower your nightly rate, and welcome more guests… I know this is not cool, but before you give them the finger which they can’t see anyway, let’s take a break and think about the true question: How much did you actually make from hosting Airbnb? Is it still worth investing in?
Do The Calculation
Nothing is better than a data-driven analysis, a.k.a, knowing the numbers. Airbnb provides an easy and quick income calculator. If you haven’t checked it, do it now.
Some data extracted for Australian hosts:
Sydney (1 guest): entire place $784/wk, private room: $466/wk
Melbourne (1 guest): entire place: $703/wk, private room: $408/wk
Sounds pretty weird? Especially for Sydney, as the average long term rental in Sydney is way more than Airbnb’s figure ($750+/wk for 1 bed).
Apparently, Airbnb’s data mixes all bedroom types together. So, to deliver a more accurate and detailed result, we made Hubo, the chatbot that tells you how much you can earn from renting your property on Airbnb. (Yes, it’s a cheeky plug-in, please click!)
We figured out that on average, the rate for an 1 bedroom entire place listing in Sydney CBD is $132, 2 bedroom is $193, 3 bedroom or more is $465. In Melbourne, 1 bedroom for $134, 2 bedroom for $199, 3 bedroom for $227. To add some spice, we’ve also included data for renting car space on Parkhound. If you are interested, check it out.
Here we’ve made a few assumptions: First, all listing types are with a 70% occupancy rate. Second, a natural calendar year is 365 days. Third, no discount is given for longer term rental, and the average stay is 3 days.
Based on these assumptions, the annual revenue is as below:
This is a common mistake. Many hosts are happy to see money flowing into their accounts, but just like any other rental forms, it comes with expenses. These include:
- Explicit costs: Airbnb service fee, fittings and furniture, strata management fees (for owners), cleaning fees + linen service fees (if applicable)
- Hidden costs: Long-term market rental opportunity cost, other opportunity costs, wear-and-tear
Among these, Airbnb service fee is unavoidable, furniture costs can be treated as a depreciable asset, and cleaning fees can be passed on to guests. Although in reality, many hosts are reluctant to pass on the full fees of cleaner hire to their guests, here we just assume that the fees are fully reimbursed. So the fomulation is:
Gross Profit = Total Revenue – Fixed Explicit Costs (eg. strata, utilities) – Hidden Costs
The result is as below:
As some data inputs are from inactive listings, the current Gross Profit may be a bit lower.
Worthy or Not?
Any money is good money. In a traditional investment logic, if you are still making a profit, even just by a little bit more, you should keep it going. However, Airbnb requires more than just a home, it requires YOU, too. You have to commit your own time, so being a host is a good JOB, not an INVESTMENT unless you are hosting 100% hands-off. As for a job, we do need to talk about your hourly rate and see if Airbnb is a good ’employer’.
Hosting is time-consuming. According to Trish Clark, an experienced Melbourne host and also an Airbnb service manager, the average monthly time spent on hosting a single property is about 20 hours. The number can be many times bigger if there is any waiting time for guest check-ins, or for a high turnover one bedroom place. Take your own time into account, let’s take another look at the profitability in the almost best-case scenario:
Poor Sydney hosts and those who are hosting one bedroom in Melbourne! Really? Airbnb, even Uber guarantees a $30/hr minimum pay!
Really? Even Uber guarantees a $30/hr minimum pay!
What You Can Do?
You can blame Airbnb, blame the greedy capitalism, or blame your fellow hosts who are offering their places cheaper than you…
Just chill, as you’ve just wasted another 10 seconds of your life. If Airbnb doesn’t help you, then help yourself as much as you can:
Get Someone To Help
Why do it yourself if you can get others to help? Get yourself a cleaning contractor who can also do linen changeovers for you. Or, you can get yourself a full Airbnb management concierge, who is able to look after you every step of the way, from listing setup, to communication, key exchange, and cleaning. In the best cases, you will be able to host completely hassle-free. However, the fee is usually 15-20% of your nightly rate, and there might be a risk that you work with someone who simply doesn’t care. So, if you want a referral to a responsible manager in your area, leave us a note by selecting ‘I Wanna Chat!’
Hosting like a pro. Hotels and real estate agencies use management tools to help to arrange their booking dates, and channels, so can you! For every single step of both online and offline hosting process, you can borrow tech powers to get things together. Get a Google calendar to synchronise your Airbnb booking dates, use Beyond Pricing to get the best rate, and buy a Bluetooth noise detector to prevent doggy guests from turning your place into a party house. Alternatively, you can consolidate all your online hosting tasks by getting a property management tool like Hostaways.
Yet the most broken hosting process is check-in and key exchange, which can take over 50% of your total hosting time because of guests’ flexible arrival time. If you are in a residential building where it’s not safe to use lockboxes or mailboxes, you can drop off your key at a nearby KeyHub kiosk. You are able to manage your key remotely from your phone, while your guests self pick up the key and get welcomed by local businesses.
Airbnb Is Not Your Only Option
We love hosting and meeting amazing people through Airbnb, but sometimes we just need to wear our investor’s hat. Expand your channel by listing on different platforms is the real deal during quiet seasons or when you are abandoned by Airbnb’s ranking for no reason. Stayz, Booking.com, Tripadvisor are the most common options. There are some not so commonly known ones but can really help you: Tujia.com and Zhubaijia.com, China’s Airbnb, which are dominating the Chinese market over Airbnb itself. Every year they bring millions of Chinese tourists to stay at short term rental homes overseas. They handle the communication with guests on your behalf, while English speaking account managers keep you updated on the booking details. Leave us a message if you are interested, we can help you.
So, my tips…
Don’t be tied up to your listing, you shouldn’t be the cheap labour of Airbnb! Get some help, leverage on host assisting technologies, and list your place on multiple platforms.