Share the ways you are coping with increased expenses

[Don_Michelle0]

We are right now dealing with the shock of our Airbnb hosting life! Our energy monthly costs have soared to more than double and approaching triple what they were just one year ago.  We are pre-booked with guests through this November.  I just closed all of February/March/April off our booking calendar until we can get this figured out.  We used to 'clear' as our net income approximately $900 a month (after paying for the guest house's related expenses) which was a big enough help to covering our own side of personal expenses to make full time hosting 'worth it'.  Right now we are approaching a break even net income and as I mentioned we are booked solid until November.

Here's what I've done for the moment:

1.  I've blocked our calendar for the highest energy consumption months of Jan/Feb/March  (we are in Bellingham Wa where winter is coldest and wettest during these months).

2. Question:  How would you handle a very expensive to operate hot tub? Our operating cost has jumped from roughly $6 day to keep it mid-way to temp up to $10 day when guest use it daily all the way up to now being $10 day to keep it mid way to temp and almost $30 day propane costs when guests are using it daily.   -- Any thoughts or ideas on how to reduce this or???

3. Our rates for our location and amenities appears to be maxed out -- we are $68 night Sun-Wed $70 night Thurs and $75 night Fri & Sat (we have a 3-night minimum)  - We removed the discount completely for week+ stays because they cost us more now   and we've reduced our monthly stay discount down from 28% to 23% and honestly I think I'm about to disallow any longer stays than 31 nights because we have seen guests become more and more difficult after this period of time (they start behaving differently it's a strange dynamic) and and of course losing over 20% of the income we would have made from shorter stays is hard to reason right now.

4. Question:  How many do not offer 'cable / local tv'? (it's a shared tv service we have so we'd only be saving the $15 box rental fee - but any saving at this point would be helpful)  We have wifi that solely belongs to the farmhouse/guesthouse so it's a totally separate bill that too has increased over 50% from just under $75 a month DSL to $112 (for the same level of service) but there's nothing we can do about that we're live in a rural area and only have one provider.  

5.  We're considering not allowing 'work from home' guests anymore.  They use the most energy obviously and as I right now look back over this year so far that has been the majority of our guests -- so... Question:  Disallow work from home guests? or Increase cost for work from home guests?

Well that's about the top of the list of questions I'd love to hear other hosts thoughts or experiences on...

Michelle & Don
Mace Meadows Inn

[Mike-And-Jane0]

@Don_Michelle0 I wonder if you could make the hot tub a payable extra for future bookings. Clearly it would need some sort of lock if you go down that route.

Secondly I know you think you are maxed out on price BUT with cost pressures affecting everyone surely you can remain competitive by increasing your price slightly.

[Don_Michelle0]

Mike&Jane,

Thank you so much for your reply, it's sometimes just so nice to hear from other hosts -- I forget that our community is so supportive. We're really racking our brain about that hot tub - but reading over Robin's reply below is a gift of rational thinking and amazing business sense -- I think we can all get some amazing ideas from him!!

Best wishes from the PNW across the pond!

~Michelle & Don

[Emilia42]

@Don_Michelle0 Personally, the way I see it, if you are already booked all the way out to November, your price is NOT maxed out. You are too cheap and guests are jumping on the deal. Make some simple interior upgrades to your cute space, and raise your rates!

[Don_Michelle0]

I think we're just figuring that out -- this is our fourth (5th?lol it's been a blur) year hosting and we foolishly believed that being booked 'way out' (and two years ago we were booking out more than six months in advance) -- meant we were doing it right - and pre-pandemic and now pre-inflation gave us a sense of assurance of the income.  But I agree - at this point especially if we're looking at potentially 'not booking' some dates due to cost then it makes complete sense to raise rates and see what happens!  Thank you so much for your time and reply -- as I mentioned above it is truly wonderful to interact with other hosts and hear their ideas and support!!! 

Take care and wishing you much success!

Michelle & Don

[John5097]

@Don_Michelle0 

You only mentioned the hot tub, but for that even $10 a day is $300 a month so consider an additional charge for that or remove it. 

I looked through your listing and it looks amazing, with beautiful outdoor area. So if you remove it you may think why didn't I do that sooner? 

Not really sure where in WA you are located. If its along the coast perhaps heat pump would be something to consider. It looks like your cabin would be well suited for the ductless mini spits that are much more cost effective. 

For cable you can just use a streaming service if your wifi is fast enough. Sling has $30 blue option that includes all the channels except ESPN, Disney, that allows up to 3 people to use it. Most are like that. 

Your rates do seem low but I'm not in that area. I also have lower rates but my guest have been so good its worked out. 

With the cost of everything going up with higher cost of fuel everyone will need to make adjustments. Thankfully I opted for heat pumps that do well in my area, and many homes have solar power panels. 

[Don_Michelle0]

John,

I've immediately passed on the heat pump idea over to my husband that sounds super interesting (and you're in my boot camp locale 🙂 I went to Ft. Jackson back in the mid 80's!) Thank you so much for your info also about the Sling account because honestly if we cut the tv portion of our cable service for both us (main house) and the guest house that could be a

relieving cost reduction that would more than pay for the add-on channel's subscription!

All of the wonderful feedback here is giving us some truly helpful ideas that we're discussing right now to put into action!  It seems that solar might also be something we need to get more serious about - we've been interested in it but feeling a little uneducated in how to do it (and costs unknowns but it appears to be time we get informed so we can make a good decision!)

Lol... with the overrun of water we've had so far this year (breaking 75+ year old records) maybe a waterwheel would be a solution too! 🙂

Thank you again for your time, we're both truly appreciative and wish you all the best and success with your own endeavors!

Michelle & Don

[John5097]

@Don_Michelle0  I’ve been using a heat pump for 14 years. For 2200 sf house that includes apartment rental with its own mini split, kitchen, WD, over 20 lights, etc my bill is about $120 average per month for electric and gas, for both main house and apartment The highest is $150 a month and South Carolina is one of the energy demanding states. The mini split heat pump is so efficient that it only uses a singe 110 circuit, less amps than a toaster or hair dryer, and heats and cools 750 sf really well. 

I know it rains a lot in that area so not sure about solar. I have installed solar panels that only heated water. Those were more popular about 7 years ago but the cost of solar panels came down.,

Those are major upgrades usually on 10 year replacement cycles. 

The only gas I use is for tankless water heater. It’s only on when in use so more efficient than tank heater. 

I’ll likely switch over to solar in coming years. I could get hit by hurricane any time so have to save up to afford replacing. 

Both my internet and streaming service is $125 a month. Guest do use both. ATT just installed fiber optic which is blazing fast 300 bps for $55 a month, and I prefer DTV even though it’s about $70 a month, and NEtflix. 

I used to not even have a tv and now look at screens far too much everyday but those are things guest use. The ABB I stayed at didn’t have Internet or tv so to each their own. 🙂

[Clara116]

@Don_Michelle0  your place is nice. And you are the cheapest anywhere in your area and offer loads.....so  when booking months ahead that = too cheap, according to my teacher. So I'd raise prices until folks are booking about 3 weeks out...then you are close to fair price. That's what I would say. Don't struggle so much by thinking you must give it all away... Happy hosting and peace ✌️

[Don_Michelle0]

Clara,

I think you've absolutely nailed it on the pricing issue! I mentioned in another reply above that once upon a time, we believed that being so solidly booked out in advance meant we were doing it right. But I've had a complete conversion on that line of thinking now for sure! Also, I suspect that not only would we make what we need to in order to get back to the income margin that we need, but we'd have less cancellations as well! (we've noticed an odd dynamic ever since the pandemic happened of people sitting on dates well into the future and then cancelling right at the refund deadline they must put it on their calendar or something) which in most cases has worked out fine it's just something I'd rather not have happen -- so we did just recently stop accepting a bookings a year or more out -- it's super rare that those actually follow through).

Thank you so much for your time and input - it's well taken!!!

Best wishes 🙂

[Robin4]

@Don_Michelle0 

Don and Michelle, you have a lovely property and from my point of view should not be in a headlong rush to the bottom where your rates are concerned to secure reservations.

I have found every time I have increased my nightly listing amount my bookings have increased.

Firstly, do yourself a proper profit and loss statement to ascertain just what you need to charge to make a reasonable profit from your listing. 

My property is less substantial than yours, but my bottom line where profit is concerned is considerable greater than yours because I know where I am going.

Here is the profit and loss I use for my listing cottage......

This profit and loss establishes what you need to charge, don't be influenced by material you will receive from Airbnb telling you that lower prices with bring you better returns.....they won't. It's better to have an empty property than go broke hosting at a loss!

My average gross from my cottage is $2,400 per month and the average amount I get to put in my pocket is about $1,800. Now my power costs are minimal because I have 7.5 Kws of rooftop solar and I have shopping agreements with local supermarkets that keep restock costs down to an average of $7.50 pr guest stay. Most of the cleaning is done by ourselves so this enables us to set a minimal cleaning figure of $15.

Secondly do not offer upfront discounts! Upfront discounts are open to abuse if alterations are made to the scheduled stay.

I do not offer upfront discounts!

That is not to say I don't discount for length of stay or return visits....I do, but I do it at the end of the stay in the form of a refund when I can asses what discount might be appropriate and still see me in the black. If a guest is not going to book because they are not getting a substantial discount you don't want them as guests, trust me! You are much better off with shorter length stays where you don't have to give away your profit.......Don't chase long term business, it's not profitable!

OK, you asked about how you can make this pay with your ever rising costs. Firstly all of America is feeling the pinch with inflation and rising costs at the moment so I would introduce in your listing description a pay for use with your hot tub. If they are reasonable they won't mind.....if they do mind, you don't want them as guests!

You can't disallow guests who might want to work from home but you can stop them from being wasteful. I have set a 4c temperature band on my cottage air conditioning. it won't heat above 24c and it won't cool below 20c. If a guest wants to be warmer than 75f in the winter time or cooler than 68f in the summer they won't do it at my expense. This is an easy alteration for a qualified mechanical services contractor to perform and no guest has complained about the limitation.

There is lots more I could suggest but I hope some of this can help you Don & Michelle.

Cheers.........Rob

[Don_Michelle0]

Rob,

WOW!! Thank you so much for this incredibly helpful information that you've shared I'm sure that many who come here will benefit from it.  Your cost breakdown is exactly what we need to set up in order to examine our 'real' expenses - you know like 'a real business' -- this is inspiring! And my husband said that should we ever be fortunate enough to visit Australia we only have one destination in mind and that's straight to your lovely place!   (especially if you can entice an Koala to visit lol... I think he's obsessed with them 🙂

Okay well, I'm going to work on a excel sheet to start really breaking down and examining our costs - your ratios seem spot on and I suspect they are going to correlate very closely to our actual costs.  And everyone's, including yours, suggestion to simply let go of the 'fear' of not being booked out and raise the price to where we need to be to get back to truly appreciating this income opportunity! 

The one thing we haven't done since starting our rental is take a break. I suspect we're experiencing a bit of host fatigue on top of everything else so I need to see how we might be able to build some breaks into our calendar.

I LOVE the idea of rewarding/refunding extended stay guests (versus and upfront discount) - because there are as you apparently know, guests that you definitely want and hope to return. To date we have a few of those and they feel the same appreciation and connection for us and the property. And what a great impact it would be to give them the discount to show our sincere appreciation for them.

I really can't thank you enough for this detailed information - you've inspired both of us to take a calmer look at the situation, get the real information/expenses together, and make changes and a plan!!!

Wishing you both health, happiness, & success! And should you ever find yourself in the PNW (we're locating is what is called 'the fourth corner' of the US - you'll have to look us up!!

Michelle & Don
Mace Meadows Inn - Bellingham Wa

[Robin4]

@Don_Michelle0 

Hi Michelle, thanks for those lovely comments, our door is always open to you.

I do have a bit to do with other hosts in my area and I have come across a number of hosts who have not realised they were actually losing money by hosting because they had been enticed into setting an improbably low listing price. Airbnb don't care whether you make money or lose it.....they just want the booking and it's related service fee.

Do your homework and you will make money!

I think the greatest thing I have discovered about giving refunds rather than up front discounts is a very subtle thing Michelle. 

Don't get stiffed into giving your profit away on something that was not deserved or appreciated!

If you offer a discount upfront it gets quickly forgotten once they get into the stay. If the guests last impression they get of you, is a refund, they are over the moon, they got some money back they might not have been expecting, and I can tell you now, you are absolutely guaranteed a 5 star review....even if there may have been a rocky patch in the middle!

Last impressions are lasting impressions so make it a good one, something they will remember! They will pat you on the back for it Michelle!

All the best.

Cheers........Rob

[Don_Michelle0]

Thank you so much for sharing your very wise knowledge with us! It is incredibly valuable and helpful. We've already set several changes into place and strategizing a way forward that puts us back into a healthier hosting position and attitude 🙂

[Robin4]

@Don_Michelle0 

Further to Don's Koala comment, we had a couple from Shanghai visit here for a few days. They live on the 18th floor of an apartment building in Shanghai and do not have access to a garden of any sort. 

One morning he was sitting out in our rear garden in one of our outdoor areas.......

I went over to him and sat and, talking for a while and he said...."I wish I could grow something"! This had a profound affect on me! We just take our garden for granted, sure we love putting the effort in but I could never imagine that it wouldn't just be here and that I would have to live without it.

I took him into the potting shed and for an hour or so we we took cuttings out of the garden  and struck them in pots for the next spring season....he was in 7th heaven. We went back and sat in those red chairs in our 'Tribal Council Area' and his wife came up and said...."While we are here we want to see,  Koala".

I said to her they were in the area but I wouldn't expect one to walk up the pathway, maybe they should plan a trip to one of the local wildlife parks where they could have a hands on experience.

I had no sooner said it and this guttural growling came out of the tree behind us and there low and behold was.......a Koala.

I am sure they thought is was a plastic version carefully placed in the tree by me and I was blue-toothing it on my phone to respond. But once it moved up the tree to another branch they both squealed with delight!

They got their wish........ He got to work in a garden, and she got to see a Koala!

This Michelle is the joys of hosting.......but you won't get to see that promoted on any of Airbnb's new 2022 Summer search option boxes. We are traditional hosts and we offer a traditional Airbnb experience.....one from our hearts!

Cheers........Rob

@Catherine-Powell