Airbnb Risks and Remediation Strategies for Hosts

Short-term rental sites, such as Airbnb or Vrbo, make it easy for homeowners to rent out their properties and earn extra cash. But while the financial benefits of listing your rental property on Airbnb are apparent, certain risks come along with renting your home or apartment to strangers.

In this article, we’ll walk you through common Airbnb risks that short-term rental property owners face and offer suggestions for preventing and overcoming these challenges.

7 Common Airbnb Risks That Hosts Face

Although the risks that Airbnb hosts face are certainly manageable, it is essential to consider them when deciding to rent your property. If you know exactly what you’re facing, you’ll be able to take measures to mitigate the risks.

Frequent local regulation changes

An ever-changing regulatory environment is one of the critical risks for Airbnb hosts. Many cities have enacted laws that are a part of their zoning or administrative codes, restricting short-term rentals. Many cities require property owners to register and get a permit and/or a business license before listing their vacation rentals on OTA websites. In addition, you might owe local taxes on any income you earn from your Airbnb. And in some locations, short-term rental bookings may be prohibited altogether.

Solution

To avoid the risk of penalties for operating an illegal Airbnb business, all Airbnb hosts must understand the laws governing their city. You need to check local laws before listing your vacation rental home on Airbnb and keep up to date with any changes in local regulations that affect vacation rentals. Following relevant vacation rental associations might help keep up after the legislation changes.

Being aware of your city’s regulation changes will help you mitigate this risk and avoid legal troubles. You’ll have peace of mind to focus on providing the perfect experience for your guests and building a good reputation as a host. Automating your daily operations using tools like Hospitable will help you manage your short-term rental more efficiently and grow a successful business faster.

Damage to your rental property

When you accept Airbnb guests, you allow strangers to stay in your home, so you can never know how they will treat your property until they arrive. Besides, accidents happen. That means there’s always a risk that your property may get damaged by the guests you have staying over. This could be something small, like broken plates or stains from wine on the carpet, or even broken mirrors, furniture, or destroyed floorboards.

Any damage to your property and belongings means financial losses, as you’ll need money to repair or replace the item. Besides, until you repair the damage to your rental space, you can’t welcome the next guest, so you’ll have to cancel the booking and lose potential income as well.

Solution

Airbnb offers a program called AirCover for Hosts, which provides coverage for both property damage and liability. This Airbnb insurance policy automatically protects all hosts who list their properties on the platform, so you don’t have to register for it. However, since damage protection in this program has some limitations and exclusions, you may opt for Airbnb homeowners insurance with comprehensive coverage that meets your needs for your rental property.

You should also inform your guests how they are expected to treat your vacation rental property in your Airbnb house rules. If you clearly communicate your expectations, your guests will be more likely to treat your property with respect.

Potential for wear and tear

Furniture in short-term rental properties wears out more quickly than in regular homes due to the constant stream of incoming visitors and frequent turnovers. Even if your guests treat your rental space with the utmost care, furniture in Airbnb will require regular replacement over time. Maintenance and repair costs in vacation rentals are higher, impacting the overall profitability.

Solution

Always consider the durability and lifespan before purchasing any furniture and decor, and invest in practical, durable items, because they can save you money in the long run—factor in potential maintenance costs when setting your nightly rates.

You need to consider many factors when setting up your short-term rental space. Download our free guide to find tips on how to balance durability and style when preparing your property for Airbnb to reduce operational costs.

Guest injuries

Hosting Airbnb guests comes with the responsibility to ensure your STR property is safe. However, unfortunately, accidents can happen, and if guests are injured on your property, you, as the host, may be found liable for the injuries. Liability is the most costly risk you face as a short-term rental owner.

Solution

Airbnb’s AirCover for Hosts includes primary liability coverage up to $1 million per occurrence. Still, it has gaps, so make sure you have the right short-term rental insurance to cover injuries or legal issues. It’s also essential to take measures to minimize the risk of guest injury when they are staying on your property.

Take steps to prevent slip and fall accidents, ensure your furniture and fixtures are stable, and provide clear instructions for using appliances and equipment. Install fire alarms and ensure easy access to fire extinguishers and emergency exits.

Renting to squatters

Many hosts may worry about the risk of renting their homes to squatters, who can be very difficult to evict. In most states, laws protect squatters’ rights, leading to lengthy eviction processes that can be costly in terms of legal fees. And in the meantime, you also lose out on opportunities to rent your property to new Airbnb guests.

Solution

You’ll minimize your risk of dealing with dishonest guests with a proper screening process. Accept bookings only from verified Airbnb guests, and do your homework. Check out reviews of your potential guests written by other hosts and search for additional info about them online; for example, look for their social media accounts. You should also avoid long-term rentals on Airbnb unless your guests sign a rental agreement that clearly states all the terms and conditions of the stay.

You can add an extra layer of protection by requesting an additional guest screening. Hospitable users can request ad-hoc guest verification thanks to our collaboration with Autohost.

Getting your guests to sign a rental agreement won’t be a problem if you automate the process with Hospitable. You can create an agreement template, and our system will automatically generate a rental agreement for each new booking, populating the template with guest and booking data, and then send it to your guest for signature. This functionality also works for additional guest services, such as equipment rentals.

Canceled bookings

Airbnb prioritizes customer satisfaction, so if a guest complains, Airbnb may decide to cancel their booking even after the check-in date and refund the entire amount to the guest. That can happen regardless of your cancellation policy. In addition, they won’t even contact you first to discuss the cancellation. In worst-case scenarios, a booking can be canceled even after the guest has already checked out, which means you won’t get any payment.

Solution

Canceled bookings like this are generally rare, but sometimes unavoidable. That’s why you should account for unforeseen cancellations that mean lost income in your Airbnb management strategy. You should also prepare a risk fund to meet potential losses.

To minimize your risk of sudden cancellations, you should strive to provide excellent service to your guests and ensure a positive customer experience. Satisfied guests are less likely to complain and are more likely to give you 5-star reviews, which can lead to increased bookings. And since communication is a crucial aspect of guest reviews, it’s essential to get it right.

Writing great messages to each guest can be time-consuming, but you can make your life easier with short-term rental software like Hospitable. With Hospitable, you can automate conversations with your guests from inquiry to review.

Hospitable uses AI to help you respond quicker to guests’ questions. Our AI can detect questions on more than 20 common topics in guest messages and will automatically answer them on your behalf using your pre-written templates. You can also utilize AI tools in your Hospitable Inbox when messaging guests manually. Suggest with AI and Improve with AI allow you to quickly draft and correct detailed, personalized responses.

Uncertain source of income

Perhaps it’s one of the most apparent Airbnb risks. Although Airbnb is a great way to make extra money, your income can’t be stable or predictable. The seasonality of travelers’ demand plays a significant role in determining the number of bookings you receive and the income you earn from renting out your property.

While occupancy is high during peak season, the high vacancy rate will threaten your savings for the remainder of the year when demand for stays is low. That means you need to attract more travelers to mitigate the risk of vacancy.

Solution

You need to ensure that your Airbnb listing stands out from similar listings in your area, and how you market your property is vital to this. Make your listing appealing to travelers. Create a catchy name for it and include a compelling description that highlights your property’s unique features and amenities. Add fabulous photos that show off the best of your property. Potential guests browsing Airbnb listings are more likely to stop and review yours when they see a place that looks neat, clean, bright, and open.

Don’t rely on one channel. The more channels you use, the more exposure you gain and the higher your chances of securing an additional booking. Managing your listings on several channels manually takes A LOT of time and requires undivided attention to avoid double-bookings. A channel manager is a must if you take this route.

Final Thought

Whether you’re a seasoned host or just looking to start a vacation rental business, it’s essential to know the risks of being a short-term rental host. Hopefully, our article will help you understand the Airbnb risks hosts face when using the platform to run a vacation rental business. Being prepared to deal with risks will enable you to develop effective strategies to mitigate them and minimize your losses.