Fees too high prices too low the nonsense that is smart pricing...

Cormac0
Level 10
Kraków, Poland

Fees too high prices too low the nonsense that is smart pricing...

Hi Folks

 

Here's hard data to make my point 

 

13.53 Laundry 

09.60 Consumerables 

64.39 House Keeping that includes the cost of cleaning.

36.70 Utilities Gas, Electricty, Water

Contributions:

11.84 Over head common area expences

72.00 Mortgage 

 

208.06 Total

(262.92) Host fee 

 

54.86 Profit before tax

 

Airbnb fee's

46 Guest (the Guest showed me the fee he was charged by Airbnb)

10 Host (take for the fee advice note)

 

56 Airbnb's profit before expences and Tax

 

So in fact Airbnb made more money then I did on this two day trip. 

 

And they want me to lower my prices to stimulate demand Marginal Pricing works for Airbnb it does not work for 80% of Hosts.

 

Regards

 

Cormac

The Explorer's Club Krakow III

8 Replies 8
Kimberly54
Level 10
San Diego, CA

Hello @Cormac0,  Couple of things:  AirBnB has a very straightforward contract with you.  1) they provide the platform for you to present your property in any way you like, and with as much detail as you like; 2) they allow you to use their brand, 3) they handle the finances.  They charge a fee for this, which is not only low, but there is no way you could possibly do this yourself for anywhere near that figure. 

 

You are responsible for your expenses; hence your profit.

 

I might point out, though, that your way of expensing is somewhat unusual. Utilities, mortgage, common area expenses would exist whether you had a guest or not, correct?  That's just overhead, oh, and at least here in the US, we can write some portion of that off of our taxes.   In my humble experience of nearly 40 years in businesses, we present the best product at a 'reasonable' market price (this can really vary depending upon how unique it might be), deduct the direct expenses, measure in how much fun it was, and then look at the bank balance. 

 

The decision to lower prices to get more business is both personal and philosophical.  I've seen a good number of guests attract 'low-life guests' because of super low prices. 

 

Hope this makes you feel a bit better!

 

Best,

Kim

@Kimberly54

 

Thank you Kimberly, no matter how you slice the lemon, the fact is Airbnb is making more money on this transaction then I am with ZERO risk, Zero risk! yes your correct that some expenses can be offset against income tax, this still does not excuse the HIGH fee's being charged by Airbnb and belies the facts that the fee are low.

 

You point about Airbnb's Brand identity, it does not make sense to me, since Airbnb would not have a Brand without the acquiescence and hard work of its Hosts and the trillion of dollars of property put at Airbnb disposal by the self same hosts, Airbnb neither own or lease this property, inaddition to this the reward for building a brand is it market capitalistion which is currently Thirty billion dollars not bad for 9 years work i'd say.

 

The fee's are two high and need to be lowered and smart priceing needs a serious overhaul. 

 

I think I read somewhere that the  cost base of these internet companies is typically 20% of turnover!

 

Regards

 

Cormac

The Explorer's Club Krakow III

They have insurance that protects the hosts in case of issues. Stealing, fire, squatting, etc. I would never rent out rooms in my house without a company like this. You don't have to go with smart pricing - it is a suggestion, and I don't do it. No company is perfect, and I usaully hate "big business" , but I am very happy with the backing of AirBnB. Try putting your place on other sites and see how it goes.

Kim,

 

Sorry but I completely disagree with you.  I use to book only AirBNB as hotel prices were too high.  It is now a common practice that the fees total more than the location we are booking.  For example, I tried booking a place that was $99 per night, after fees it is a total of $210.  How is this even possible, why would your site be not be honest and just state $210 per night?  Such a unethical practice, you should be ashamed to work for any company with no integrity.  This has led me to no longer use AirBNB and go back to hotels.  At least, they are honest in their prices, not like the deceitfulness practices of AirBNB.....

Marzena4
Level 10
Kraków, Poland

@Cormac0 @Kimberly54 Booking.com's commision is 15%. And you can set a deposit you collect upon guests' arrival, which makes at least me feel safer when handing them the keys.

// "The only person you can trust is yourself"
Fred13
Level 10
Placencia, Belize

@Cormac0The majority of your costs are 'fixed' costs; meaning costs that you will incur whether you have guests or not.

You seem to be stuck in the thought that booking through Airbnb is a loosing proposition, in part because of what Airbnb is making.  And that they are 'evil' enough to suggest for you to lower your price, something you do not have to do. Do what is best for you, Airbnb is not your employer. Smart Pricing is a hint, in many cases not to be taken seriously. To me, what they make is none of my business.

What I am at a total loss on, what is your main objective? To enlighten others to make a wiser decision and not offer their place through Airbnb because they are indeed a rip off? People (millions) wouldn't be with them if they were.

If those costs are really your reality then you are quite correct, you shouldn't be booking via Airbnb because is not working for you. So try other platforms, this one is certainly not happening. One thing however, they can't guarantee success for everyone, which is life in a capitalist (aka competitive) world.

@Fred

 

I must confess it had to take lecture from Host charging circa $500 a night even if their neighbours are charging thousands of Dollars more and when their fixed and variable costs are minuscule compared to their turnover so let get back to the real world.

 

I never used emotive language like "evil" so stop putting your words in my mouth.

 

I ask Airbnb to lower their fee's and radically improve their smart pricing algorithm.

 

In addition to this they could weed out a considerable number of Hosts that have no entitlement to sublet the apartments they rent, and are doing so without the landlord's consent, endangering their guests, and obviously not paying any income tax to boot, this must be distorting the market and driving down prices. I don't hold with this notion there doing it to pay the rent, there doing to improve their disposable income like everybody else except their doing under the counter and of course can charge less, sure after all the landlord can pick up the cost of wear and tear.

 

My last guest who is doing extracurricular activity at weekend uses Airbnb regular he told me, and I quote "of the last seven Airbnb places I've stayed in, five of them were not clean" which does not surprise me in the least considering the following,

What goes on over hear is one set of friends let out their apartment and stay with another set of friends and then they split the profit between themselves so there earning income off assets they don't own or maintain and without consent of their landlords, mind you I can't see that happening on a mini island in Belize where everybody knows everybody else's business.

 

Fred this is tough love, I like Airbnb system its efficient in so many ways, but it has considerable short comings that need to be addressed so every host can enjoy the bountiful harvest you enjoy long may it last.

 

Regards

 

Cormac 

 

 

We are totally different in outlook and perpective, that is for sure.

As to 'Smart Pricing', I think it is a grand idea, but hard to do well for many reasons. Besides, I do not need Airbnb to tell me what I should charge, all I have to do is look around me, and pay close attention what my competition are charging for what they are offering. No algorithm is a substitude for the human brain. No algorithm could take into consideration risk, as in a tropical island subject to yearly hurricanes, which is my particular case.

Their low host fee of 3%-5% is a fantastic deal. It is all relative. And no, those rates will not last forever, they certainly won't go down.

You want them to do more, I wish they did less, so those fees stay the same. They send me 'leads' (aka inquiries), thank you, I will take it from there.