How to Start a Profitable Airbnb Business

Tips on Becoming a Successful Airbnb Host

Female host handing keys to a young couple in a bedroom.
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The popular short-term home rental site Airbnb provides unique opportunities for both hosts and guests. The company, which began in 2007, has since expanded to include nearly every country. As of September 2020 the platform encompassed more than 4 million hosts, 5.6 million active listings, and more than 800 million guest stays.

The site acts as an online marketplace for accommodation, allowing hosts to list rental space ranging from private rooms to entire houses. If you have available space, Airbnb could be an opportunity for you to bring in some extra income, or even turn it into a full-time business.

The Popularity of Airbnb

The diverse lodging options, competitive rates, and easy-to-use platform all contribute to the company’s success—apparent through its rapid growth. According to Airbnb, there are 100,000 cities with active listings, located in more than 220 countries and regions (as of September 2020). Interest in short-term rentals and home-sharing also increased in 2020 with the need for working from home and more people becoming “digital nomads” while many offices were shut.

Airbnb allows travelers the opportunity to experience an area as a local, and often grants more privacy than hotels can offer. Many guests are drawn to the unique accommodations available, such as tiny houses, boats, castles, yurts, and treehouses. Airbnb is often a budget-friendly option, as housing costs can be split among groups, and kitchen access can help cut dining expenses.

The Opportunity of Airbnb Hosting

According to data from Airbnb, hosts have earned a total of more than $110 billion through the platform, as of October 2020. The company estimates average annual earnings for a host to be $7,900.

Data from lending company Earnest placed the average monthly income for an Airbnb host at $924, and the median monthly income at $440. The company reported a broad range of host earnings, with some bringing in more than $10,000 a month, and others less than $200.

Hosting with Airbnb can open up other opportunities as well, such as encouraging more travel of your own through the connections you make with guests, or the ability to buy and rent more properties.

Get an estimate of how much you could earn with Airbnb’s earnings potential calculator.

How Airbnb Hosting Works

Creating a listing is the first step to getting started on Airbnb. We’ll go into more detail later about how to make your listing stand out, but you’ll want to include all basic information, have great, well-lit photos that showcase the space, and emphasize what makes your spot unique.

You decide how much to charge for your listing, and can vary your rates based on the day of the week, or time of year. The platform offers an optional Smart Pricing tool that automatically adjusts your listing’s rates based on demand in your area, seasonality, and other factors. While posting a listing on Airbnb is free, once a reservation is made, the company charges hosts a 3-5% service fee. 

Airbnb offers a Host Guarantee that may provide up to $1 million in property damage protection, as well as Host Protection Insurance—a liability insurance program that may provide up to $1 million in liability coverage. Some countries and programs are exempt from coverage. You may want to purchase additional insurance. 

Home insurers have various rules regarding short-term rentals, and what they will or won’t cover. Some insurers offer specialized policies for short-term rentals. Check with your insurance company before hosting to make sure you understand your policy.

Gauge Your Commitment to an Airbnb Business

Before signing up as a host with Airbnb, familiarize yourself with the challenges that can accompany hosting. There are logistical issues to consider, as well as the time commitment required to provide great customer service for your guests. 

Do You Have Time to Host?

Creating a successful Airbnb hosting business takes effort: In addition to responding quickly to booking inquiries, you’ll need to be available to answer any questions guests might have during their stay. Cleaning the space in between reservations, and making any necessary repairs can also be time-consuming.           

You can always subcontract cleaning and maintenance duties if the extra cost is worth it to you to alleviate some of your hosting duties.

Be Sure You Can Rent Your Space

From municipal laws to lease limitations and neighborhood expectations, make sure that you clear any potential hosting hurdles before you start listing on Airbnb.

Depending on where you live, there might be requirements at the country, state, city, or property level. Registration, permits, or licenses, as well as safety certifications and additional insurance might be needed. Airbnb provides resources to help hosts learn about location-specific regulations, and encourages host clubs in an effort to connect local hosts who can share information.

Have You Counted All the Costs?

Make sure to approach your hosting with a business mindset. Create a business plan before you begin, and set realistic financial projections and expectations. Decide in advance how much time and energy you want to invest in the business. 

You’ll want to consider additional costs, such as the uptick in utilities, extra laundry, and any welcoming touches you provide, such as coffee or snacks. The price of obtaining a business license, any necessary certifications, or extra insurance, will also add up. Keep track of your hosting expenses with a budget and save receipts for tax time. 

Taxes on Airbnb earnings must be collected from guests in certain areas. What kinds of tax, and how they are collected, depends on the location. It’s advised to include details about any necessary guest taxes in the listing description.

Steps to Starting a Successful Airbnb Business

We’ll discuss what you can do as a host to make your Airbnb business more successful. Having an inviting description, well-staged photos, and a high host rating can all help to make your listing more appealing to potential guests.

Prepare Your Airbnb Listing

A good listing includes accurate descriptions and basic details about all of the space’s important information—how many rooms and bathrooms there are, what amenities will be available to the guest, and what’s nearby the property. 

Give specifics on things that will affect guests like stairs and parking, and be upfront and honest about any quirks your place may have. Think about what it is that sets your listing apart from others and include that in your listing title. Is it walking distance from downtown, or is there a huge yard?

You’ll want high-quality photos of your listing, so make sure that your space is clean before photographing, and include pictures of each area. Try to use natural lighting, or add professional lighting if the space is darker, and take the photos with landscape orientation.

Imagine yourself as a guest in the space and set it up accordingly, recommended Airbnb host Sara Tyndall, in an email with The Balance. She stressed that cleanliness is a must. 

Tyndall has been listing a room in her apartment with Airbnb since 2014, and said that she thoroughly enjoys hosting as a part-time activity. 

Extra touches like providing local snacks or a bottle of wine can help to make a guest feel welcomed. Ask guests in advance if they’re celebrating a special occasion during their stay—hanging up a congratulatory banner can help to set a festive mood. 

Improve Your Host Rating

Positive reviews will improve your host rating as well as your search ranking on the Airbnb site, and can help you to land more bookings in the future. Airbnb cites the following as important factors in getting good reviews: cleanliness, providing essential amenities, accurate listing details, a smooth check-in process, and proactive communication. 

Tyndall said that she lets guests guide the level of interaction they desire, as some will want to engage in conversation, and others prefer to be left on their own.

She said she asks potential guests questions in advance to see if they’re a good fit, and lets them know about her expectations such as no parties, and keeping common areas tidy.

Grow Your Business

Once you become familiar with hosting on Airbnb and find a routine that works with your lifestyle, you can expand your hosting into a full-time venture. Depending on your goals, you could even continue to grow your business by adding more properties, adjusting your hosting approach to cater to each individual listing. 

Hosting with Airbnb provides an opportunity to create additional income on your own terms with space that may otherwise have been sitting empty. The platform allows hosts to customize the situation with conditions that best meet their needs and expectations. It’s up to each host to take the growth of their business into their own hands—keeping it as a part-time hustle, or expanding the venture to earn more income.