How Does Airbnb Work?

Founded in 2008, Airbnb is an online peer-to-peer marketplace that, according to the latest data, has more than 8 million active listings in over 100,000 cities and towns across 220 countries worldwide.

Travelers choose Airbnb because it offers them a homey place to stay with more character and often at a lower price than hotels. Hosts who use this platform get an opportunity to offer their rentals to millions of people worldwide.

But how does Airbnb work? Should you consider renting out your property there to make extra money? In this article, we’ll try to answer these questions.

Wondering which website is better for listing your rental? You may want to check out the articles comparing Vrbo vs. Airbnb and helping to get started with hosting on Booking.com.

How Does Airbnb Work?

Airbnb’s business model is straightforward. It started as a service connecting people who want to rent out their homes with travelers looking for accommodations in specific locations. With the 2025 Summer release, Airbnb relaunched its Experiences program (where local experts can host activities) with enhanced social features. The company also launched Airbnb Services, featuring vetted professional service providers in 260 cities worldwide, to make guests’ stays more special.

So, how does Airbnb work? Here are key facts that you need to know:

• Airbnb operates as a peer-to-peer platform and makes the bulk of its revenue by charging a service fee for each confirmed The service fee covers the cost of operating the platform and providing round-the-clock customer support to both hosts and guests.
• Airbnb classifies rental properties in over 60 categories based on their style, location, proximity to a travel activity, and other factors, and offers a variety of filters that help travelers find the right listing.
• The platform has a secure chat system that connects Airbnb hosts to guests directly.
• Airbnb also handles secure payments through the site and verifies personal profiles and listings. You may check our articles to learn more about identity verification.
• Airbnb is a part of the sharing economy, so it’s a community based on trust. Both guests and hosts are asked to review each other. This allows for creating a rating system for all listings, which, in most cases, ensures that everyone has a good experience.

How Does Airbnb Work for Owners?

Airbnb has different hosting options. You can rent out the extra space in your home or your entire home, and you can host experiences in your area.

In this article, we will just scratch the surface. Download our free in-depth guide that will boost your revenue and save you from beginners' mistakes.

So, how does Airbnb work for owners who want to rent out their property? Airbnb allows you to list not just homes but all accommodations, including houseboats, tents, single rooms, RVs, and treehouses. It caters to all types of travelers, so you can also find some of the most expensive properties that attract guests looking for luxury experiences.

After your listing is published, you manage the property and handle tasks like cleaning, maintenance, check-ins, check-outs, guest messaging, etc., and Airbnb manages the platform (bookings, payments, reviews).

What you need to get started

To become an Airbnb host, you need to create a free account on the platform. However, first, check your local laws and regulations to ensure that short-term rentals are legal and that there are no Airbnb restrictions in your area.

In many cities, you must register, get a permit, or obtain a license before listing your property or accepting guests. And certain types of short-term bookings may be prohibited altogether. You should also be aware of the vacation rental tax rules in your location.

Airbnb offers resources to help hosts learn about the short-term rental regulations and taxes in their region. This information is available in the Airbnb Help Center. And if you’re thinking about running a vacation rental in the US, you may want to check out our article to learn about Airbnb regulations by state.

List your space

If you click on Become a Host in the upper right corner of the Airbnb page, you can create a listing for your rental space. Hosts don’t have to pay to list their properties. A host service fee is only charged upon confirmed bookings.

The listing will include a written description of your rental, photos, a list of amenities, and information about the local area. Remember that your listing is a lot like a profile page for the space you want to host. And just like a social media profile, the better your listing page looks, the more attention it will attract. So you should make your rental look as nice as possible and take flattering Airbnb pictures of the space with good lighting.

You also need to provide information about your house rules and cancellation policy to set clear expectations for your guests and minimize misunderstandings. Your house rules should address check-in and check-out time, smoking and pet policies, quiet hours, and other specific guidelines that your guests are expected to follow.

Set your prices and availability

You need to mark your calendar for when your property is available for bookings and set minimum stay lengths, as well as your nightly rates. With Airbnb, you have complete control over your pricing, and it’s up to you to decide how much you want to charge for your vacation rental property. However, it’s essential to ensure that your rates are competitive, cover your operational expenses, and enable you to generate a profit.

Airbnb offers hosts a free Smart Pricing tool to automatically adjust your rates based on demand in your local area, so you don’t have to monitor it constantly. But it may not be the best option to optimize nightly rates for your properties and maximize your revenue.

Airbnb Smart Pricing prioritizes bookings over host income because the platform charges commission for each reservation. The pricing algorithm may lower rates to attract more guests and maximize occupancy, which means you may earn less per booking.  

A better alternative is to use Hospitable’s built-in Dynamic Pricing solution, which is included in Host, Professional, and Mogul subscription plans at no extra cost. Our Dynamic Pricing will automatically adjust your nightly rates based on market demand, seasonality, and other factors to help you maintain optimal occupancy and maximize your revenue.

The best thing is that Hospitable’s Dynamic Pricing works for all your connected booking channels, including Airbnb, Booking.com, Vrbo, Agoda, and your Direct booking website.

What protection does Airbnb offer to hosts?

Once you set up your listing, Airbnb provides various services for hosts, including 24/7 support to help resolve issues with rebooking assistance, refunds, and reimbursements. It also offers AirCover for Hosts (previously known as Airbnb Host Guarantee), providing comprehensive protection against damage, liability, loss of income, and unexpected cleaning costs.

The AirCover for Hosts program includes identity verification, reservation screening, $3 million Host Damage Protection, $1 million Host Liability Insurance, and a 24-hour safety line. This protection is available to all Airbnb hosts and comes at no extra cost, although it doesn’t cover everything. You may want to consider purchasing additional insurance.

How much money can you make?

Your income as a host may vary depending on the location of your property and the existing demand for Airbnb travel. The hosts who typically earn more have an entrepreneurial mindset and treat their rental as a business.

That requires an ongoing time commitment to ensure perfect communication with guests. You should be responsive and reply to inquiries and your guests’ questions as soon as possible to ensure their satisfaction. Then, you’re more likely to get 5-star reviews, increase your Airbnb rating, and get more bookings. You may also opt to hire professional cleaners and gather a team to help you with maintenance.

Luckily, you can streamline most of your operations with Hospitable. Our STR super app can help you automate personalized conversations with guests, assign tasks to your team, sync availability and pricing on multiple channels, manage guests’ reviews, and more.

Payment process

Airbnb handles all payments between guests and hosts. All payments are processed securely through Airbnb’s online payment system. Guests are charged when a reservation is made, and hosts are paid 24 hours after check-in.

If your guest stays at your rental for 28 nights or more, you’ll receive your monthly payout for their reservation. If you have multiple Airbnb listings with check-ins on the same day, your funds will usually be deposited as a single payout. If you set a minimum payout amount, your payout won’t be released until that amount is met.

Depending on the country, payment options vary, but how you collect payment is up to you. You can choose direct deposit, PayPal, Western Union, or several other options.

Bottom Line

There are numerous benefits to becoming an Airbnb host. If you have available space, you can use this platform to generate extra income or even turn hosting on Airbnb into a full-time business.

However, it’s essential to remember that to do it right, you need to invest some time and possibly some money in making your rental space appealing to travelers and providing excellent customer service to your guests. A good idea is to use short-term rental software, such as Hospitable, to automate routine tasks and save time.

Ready to start hosting on Airbnb? Download our free guide to set your business for success and avoid rookie mistakes.