How Does Airbnb Work?

Founded in 2008, Airbnb is an online peer-to-peer marketplace that, according to the latest data, has more than 6 million active listings in more than 100,000 cities and towns and 220-plus countries worldwide.

Travelers choose Airbnb because it can offer them a homey place to stay with more character and often for 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’s a service that connects people who want to rent out their homes with travelers looking for accommodations in specific locations. It makes the bulk of its revenue by charging a service fee for each booking. The service fee covers the cost of running the platform and providing support.

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. It has a 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 creating a rating system for all listings that, in most cases, ensures 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.

To become an Airbnb host, you need to create a free account on the platform. But first, you should check your local laws and regulations to ensure that short-term rentals are legal and 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 provides resources for hosts to help them 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.

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 (commission of 3%) is only charged upon confirmed bookings.

The listing will include a written description of your rental, photos, and a list of amenities, as well as information about the local area. You also need to provide information about your house rules, cancellation policy and set your pricing. It’s up to you to decide how much you want to charge for your vacation rental property. 

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.

Once you set up your listing, Airbnb provides various services for hosts, including 24/7 support to help make things right with rebooking assistance, refunds, and reimbursements. It also offers AirCover for Hosts (previously Airbnb Host Guarantee), a top-to-bottom 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. So you may want to purchase additional insurance.

Your income as a host may vary depending on your property location 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 make them happy. Then, you’re more likely to get 5-star reviews, increase your 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 tool 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.

How Does Airbnb Payment Work?

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, 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.

For most countries, Airbnb takes a 3% commission from hosts (the rate can be higher for Airbnb Plus hosts). This fee is calculated from the booking subtotal (the nightly rate plus the cleaning fee) and is automatically taken from a host’s payout.

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 a lot of benefits to becoming an Airbnb host. So if you have available space, you could use this platform to bring in some extra income or even turn hosting on Airbnb into a full-time business.

But it’s important to remember that to do it right, you need to invest some time and perhaps some money in making your rental space appealing to travelers and providing excellent customer service to your guests. The good idea is to use short-term rental software like 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.