As new hosts, my wife and I decided to calculate how much it actually costs us to provide our space for a single night, in the hope that it would help us with pricing, so we wondered if anyone else had calculated their cost per night lately?
We were taking a leaf out of Alex Polizzi's book, since we quite enjoy watching the Hotel Inspector. Having watched a recent episode, we learned that we had fallen for Alex's biggest gotcha - running an accomodation based business without calculating the bare minimum we need to charge in order to break even. We were operating on the assumption that if money comes in, we must be making a profit somewhere. Terrible planning, now that I think about it.
I thought it would be hard to whip up a calculation, given that we don't yet have 1 years worth of profit & loss to look back at, but after about 30 minutes we managed to come up with a very good picture of what our direct costs are likely to be (the costs that would no longer incur if we stopped renting our space) and what our indirect costs are likley to be (the costs we attribute to our Airbnb business for tax purposes, but we would incur anyway if we ended the business tomorrow).
Here's a close example of what we ended up with:
|Cost of 1 night in my Airbnb|
|Income per night|
|Base price (average)||$147.12|
|Cleaning fee (average)||$13.81|
|Airbnb 3% service fee||$4.83|
|Cleaning costs (average)||$19.73|
|Linens & laundry||$5.43|
|Toiletries & consumables||$1.01|
|Batteries & lightbulbs||$0.27|
|Gas & Electricity||$6.16|
|Advertising & promotion||$0.10|
|Maintenance & Depreciation||$6.47|
|GROSS PROFIT PER NIGHT||$83.41||52%|
|Telephone and internet||$1.64|
|TOTAL COST PER NIGHT||$146.58|
|NET PROFIT PER NIGHT||$14.35||9%|
The key assumptions that we found changed the numbers (particularly indirect costs) were the occupancy rate and floor area for attributing overheads. Even so, it was helpful to see what both the gross profit and net profit were likely to be.
We're not experts so I'd be interested in what examples other people have!
@Ben551 Thanks so much! Guys love that cabin. It was so much fun to do using all the furniture I had in storage from my house in Brooklyn. I told everyone working on it, "Remember, millennials are going to use this and although they love to be in nature, they want all their devices charged and they want to record it all on Instagram!" We put in USB ports as you did. It's been really popular!
@Ann72 oh that's the stuff! Yeah we did the same with adding USB sockets all over the place. Next to the bed is the best location for those, because people like to charge as they sleep and be near their device (especially when travelling). The thing I love about your place is that it looks like... staying inside a posh tool shed. I get a warm fuzzy feeling about tool sheds. It's where the creativity happens 🙂
I found this one of my best aquisitions Ben. We host a lot of Asian travellers and they manage to travel with every electronic device known to mankind....cameras, phones, iPads, readers, translators, iRiver media players and these days, even USB torches........I even struck one who pulled a USB can fridge out of his back pack.....no kiddin'
Although portable charging access is fast improving the sticking point is you can only charge one or possibly two devices at a time.
Guests just love this charging station I have set up......
It will accept up to 6 devices covering almost every format and charge everything simultaneously. In 30 minutes they can have every device they travel with fully charged without having to get out a charging cord.
Also as you can just see on the left of shot all the powerpoints have USB access as well.
We live in a portable power age and as hosts we have to cater for them as best we can....
oh, and here is that USB can fridge Ben!
@Robin4 hahahahaha omg that can fridge!! That's actually so mental I love it.
Wow, the charging station. That's fantastic! I think we need to get one of those at some point. You're dead right, people are coming with the full stack of devices these days... so far we just have these dotted around, which cost about $14
now compare what Airbnb made on the transaction (the combined guest and host fee) and you'll see the average host is being taken for a ride, and as most of them don't come from a financial background they don't realise it.
It gets worse, I see you have not put any charge in for your time and as any host knows this can be considerable depending on the Guests.
Occupancy levels are the key to success with Airbnb, this is evidenced by the number of parasites that rent multiple units for the sole purpose of short term rental, in prime locations, and if they don’t work they just break the lease.
There is a small coterie of people making a small fortune on Airbnb charging well in excess of $100 per night but most people aren't and they confuse cash flow with profit.
In my case, the profit for a four-day stay was wiped out by the fact that a guest destroyed a coffee pot and hid the evidence.
So in conclusion, if your nightly charge is low and you have low occupancy levels, get out of Airbnb fast and consider long term rental.
Hey @Mariann4 , I though I would answer your earlier question at the end of the thread since I think it’s a good one for people to read. I think your question is something a lot of other people will be trying to work out for themselves.
As for my question the cleaning fee was just used as a measurement towards the cost. @Ben551 and you list up different indirect costs such as "telephone/internet" and "vehichle mileage" broken down pr night. Then all other costs should be included, no? Cleaning is time consuming. Time is money/cost. Even if you do it yourself. It is "stealing" time you could have spent for example with Meals on wheels or in your dungeon/man-cave listening to music... So it would still be a cost in your budgets? I'm down to technicalities here. Since that is the topic: what does it ACTUALLY cost to host one night?
The first part of yoir question is whether to bother trying to convert your indirect costs into a daily rate, and if so how. To decide whether to do this is depends largely on your individual circumstances. I made an earlier post with a picture that describes the most common two categories people are in. I recommend reading this over to decide what is relevant for you.
Here is that picture again:
Hint: The answer to “what is the real cost per night” when you are doing the cleaning yourself is entirely dependent on how you view the value of your own time. Could you be doing some other higher paid work instead of cleaning? If yes, cost your time. You may find it makes more business sense to hire a cleaner so you can get back to your higher paid work.
Now, in terms of “the maths” you need to do, to convert an annual or monthly indirect cost into a “cost per night” ... this depends on two other pieces of information: (a) the portion of the indirect cost that can be applied to your Airbnb, and (bj the occupancy rate of your listing.
Here is a very basic example:
- you expect to have paying guests under your roof for 200 days per year.
- you are using 40% of the floor area of your home as an Airbnb listing.
- you consider your annual internet charges an indirect cost because you are on an unlimited bandwidth plan and incur no additional charges from having guests stay in your home.
- your internet costs are $1,000 per year
$1,000 Annual Cost x 40% Floor Area ÷ 200 Guest days per year = $2 per night.
The above is very basic as an example so I’m sure others will have a preference. But again, before thinking you need to do all this maths on your indirect costs, it all comes back to whether you consider them part of your business.
Like with anything, everyone is diffent...and doing Airbnb for completely different reasons. Some are in it for the pure enjoyment of it, so couldn’t give a fig about the numbers. It’s all good, so happy number crunching to those who find this useful... if not, I have milk and sugar in my tea thanks 🙂
Thank you for this thread @Ben551 and everyone who's contributed.
I'm so inspired by and proud of the transformations of space and "win-win's" everyone's created doing something we love, and I DO focus on my gratitude for the opportunity every day. The space I've turned into a peaceful refuge was once an office/storage space for the previous residents---it took weeks to clear it out and clean it up and make it "pretty and shiny" with inspired changes along the way.
I'd done versions of this breakdown before, but the added conversation about the different situations, level of host involvement, and styles really helped me hone in on the nuts and bolts of my investment of time as well, and how the changes I've implemented have been working, aside from the emotional aspect that I love doing this and the angst involved in booking platform frustrations. In 99.9% of my bookings, I'm not sure who's been more pleased...me or my guests, and that's the best form of payment ever!
...and...we do need to keep the lights on...
I was averaging about $38/night profit in the beginning, just trying to build up reviews and get bookings (often giving into the pressure of those constant airbnb "suggestions" that did not result in increased profits in this market). That's not even a living wage for cleaning time, much less the other time and various costs involved.
I'm excited that in less than a year, I've more than tripled my profit and am now averaging $115/night (for a seperate 1 BR cottage space with outdoor seating/yard/view) after refining my approach and raising my prices to attract the kind of guest who vibes with the kind of hospitality/amenities/setting I offer....often in response to the wisdom found in this community. Much Love and many virtual hugs to more than I can name, many of whom are participating in this thread : )
It's also been a process of personal evolution and business strategy, which for me is ultimately about expressing something that's intangible and priceless; applied inspiration, creativity, and caring/heart that comes from a deeper place than just "running a business." My guests seek and find an EXPERIENCE here...some actually find themselves and each other here, so it is something more than "just a place to stay" It integrates who I Am, what I love offering, and what I've spent my life doing in other ways...and I'm so excited that in just a few months it's yielding a satisfactory steady, dependable supplementary income stream as well.
I live on site, and do everything myself (except hard core pumbing/electric/construction). I charge a living wage for my cleaning time, have figured in all of my costs, and averaged in everything plus the experience of doing this and the feedback and dialogue and words/poems/art created in my guest book (after years in corporate life, I call them my "treasured daily performance reviews") and a "guest satisfaction survey" I offered to all of my guests in the 1st 3 months.
My guests have shared in detail what they love about staying here, in this space I created, validating my instincts, intentions, and my aesthetic sensibilities as I've found ways to uplevel my amenities at less cost and focus my narrative, house rules, manual, and listing photos directly on those I want to continue to attract, and in addition, those willing to pay a rate that makes it worthwhile for my sense of self respect/value as well as my balance sheet.
The ONLY aspect I've struggled with is the angst over airbnb's lack of support in areas other platforms DO offer it, as is customary for the hosptiality profession, specifically:
1- FRONT END: dealing with safety, scammers, stalkers, fake profiles, confirming valid ID/payment/photo info before booking
2- BACK END: safety, scammers, security deposits/damages
3- FEES: I did a micro research project of properties listed on airbnb and 3 other platforms. Guests pay higher fees to book with airbnb, and hosts pay about the same. (This might explain why airbnb appears to be biased in favor of guests)
4- RISK: The valid personal and property safety issues is higher with airbnb. The policy and terms of service loopholes put us at greater risk of unsupported/unreimbursed and/or repeated damage/loss that DOES impact our profits, loyalty and sense of being valued and protected within customary protocols, and forces us to decide if it's worth the risk/disrespect of trusting what is often our greates asset to a platform that doesn;t meet indusry standards for this area.
We WILL have to "eat" these costs (if we haven't already), and they DO significantly effect onot just our profits, but with significant damage, our ability to BE in business.
I love that we can offer our reviews of guests here (also wishing we were not intimidated into leaving false positives) and the former zeitgiest has attracted billions of guests and hosts. The factual areas of lack regarding the risk we face accepting bookings from airbnb every day is so large, it will backfire on each of us at some point regarless of how discerning we are with screening and prevention.
No system is perfect, but the lack of commonplace RISK protections with this platform is a significant issue for me and many others. I hope they will be satisfactorily addressed swiftly, before I encounter something I can't afford to absorb by building in the elements noted above, because otherwise, using this platform is unsustainable for me (and many other independent hosts), undoing the very mission and vibe airbnb still claims on almost every page of this website, shatting my joy, and that of the guests, many of whom return knowing they will find something worth more than money: peace in an often insane world.
@Ben551, this is brilliant! And I share a lot of the same costs for my Airbnb listings as well. One thing that is missing (and I highly recommend to include this in your calculations) is the cost of your time to operate the business, regardless of whether you're actually paying out a salary to yourself or not. Now, this may not be pertinent if you never plan to grow the operations, or you never plan to hire someone to help manage your current listing(s) - which if this were the case, it would be necessary. Either way, it's still gives you a better perspective as to whether your business is profitable or not with your time baked in as opposed to the opportunity cost of running another business or taking employment elsewhere.
Again, great breakdown! And thanks for your post!
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