What happens with the money in the interim between guest payment and host payout?

Katie201
Level 4
Salt Lake City, UT

What happens with the money in the interim between guest payment and host payout?

There has been an Airbnb practice that seems to never be discussed and, while it has always bothered me a little, I never really felt it was worth making much of a fuss over because it wasn't really directly impacting my experience or success as a host. But then I read a thread tonight about another host's realization that by Airbnb taking money from the host in the event of a natural disaster, or a guest's health emergency, etc. to refund the guest, Airbnb has effectively made it's hosts the travel insurance for their guests (instead of requiring that guests rely on privately purchased travel insurance like hotels and airlines do). Now, I am not a heartless monster and I definitely think that guests who have to cancel due to health emergencies, natural disasters, or the like should be granted a refund. But that refund should come from Airbnb (if the guest did not purchase travel insurance), not the host. And the reason why is because of the Airbnb practice that seems to never be discussed.

 

The practice is Airbnb debiting the guest's bank at the time of booking but not crediting the host until the day after the guest has arrived. Airbnb is making an INCREDIBLE amount of money off of all of this money that is held in transit from guest to host, yet the website only mentions the service fees as the place where Airbnb makes their money. Not only are they making money on just the interest alone (think of the billions of dollars sitting in their bank as it waits to be paid out to the host!), but it would stand to reason that they are also investing most of that money. Why else would they employ this practice of withholding the money from the host until after the guest checks in? And why isn't this talked about more? Does no one else question why they withold the guests money from the host? 

 

Honestly, I wouldn't have an issue with them witholding my money so they can earn that interest and invest it for awhile. But they shouldn't then ALSO take my money when a guest cancels. And I definitely have an issue with the fact that they only mention the service fees as their means of income. I am no accountant or ecomomist, but it seems like the interest and investments would make Airbnb WAY more money than the service fees. Shouldn't they be honest and upfront about that? And shouldn't they grant hosts the courtesy of paying back the guests who cancel with extenuating circumstances from the billions upon billions that we allow them to make with our money rather than forcing us to pay the refund?

 

I needed to finally bring this up because, 1) I am baffled as to why no one ever discusses why Aibnb holds the money nor the implications of this practice and I am dying to get others' take on it. And 2) Whenever I read horror stories of terrible guests it makes me upset for that host but I also feel like it helps prepare me for when I get that inevitable terrible guest so I can either ensure that I get compensated or I can learn to let it go and chalk it up to the realities of the sharing economy. But this is a whole different beast because there is nothing a host can do to prevent money being taken from them when a guest cancels with extenuating circumstances. This didn't initially bother me, just like the money being held didn't initially bother me, until I realized it meant we were the guest's travel insurance. And this becomes an even bigger offence when combined with the fact that if Airbnb really wanted to provide travel insurance to guests then they could use the billions they're making off interest and investments to pay it or just require the guest to get their own travel insurance.

 

At the end of all of this I will say, though, that if anyone knows for sure that Airbnb does NOT invest our money nor make money off the interest while withholding our money after the guest has paid, then I would honestly love to hear it because this has made me so upset and I really don't want to be because I do love hosting and still intend to do it for as long as I can. So please, if you know for sure that I am wrong or have misunderstood something then please (kindly) clarify things for me. I want to keep loving and supporting Airbnb!

19 Replies 19
Mary419
Level 10
Savannah, GA

@Katie201 I know this is an old post but today the topic was on my mind after reading this 

 

https://www.fool.com/investing/2022/10/29/why-airbnb-can-benefit-from-higher-interest-rates/

 

Sidestepping the question of greed or fairness I just want to point out that I have seen MANY posts on here and even financial commentary editorials which reference the advanced payments being held "in escrow".

 

This means over the years lots of users and observers assume these guest payments are held safe and treated as "other people's money" while waiting for the host's payout date hence the term ESCROW being used freely and often as an assumption which is dead wrong.

 

Funds held in escrow have a strict legal definition and have to be treated a certain way. The money cannot earn interest for the holder. Those funds also cannot be spent by the holder EVER. That is the part that should perk us all up. This money is absolutely not in escrow. The guest payments in this case actually can be spent by Airbnb on anything they want and it does not have to be held safely for the future (hopeful) recipient whose listing generated the income. 

 

 

Laura2592
Level 10
Frederick, MD

All of you who own ABB stock can find this out directly if you ask questions during a stockholder's meeting 🙂  I am curious about this practice as well. I have a business on Etsy which pays out the next day after a sale is made so that they can take out their fees. Its somewhat normal for big online platforms. But I agree that charging the guests and then holding the funds for an inordinate period before paying out needs additional transparency around why this is going on. 

Pretty simple really, if you all don't like the process don't use the product!

You all know the answers so why whine. 

It's not a charity site 😊

Eric666
Level 2
Seattle, WA

Its funny to me that everyone is pointing the finger at Airbnb for being "greedy", because they hold money for a short amount of time while earning some interest on it.  I think you are the ones who are being greedy by complaining about it.  Do you expect Airbnb to provide their service for free?  Do you realize that they incur alot of expenses and have to employ alot of people to run their platform and deal with all the issues that arise from the bookings we all get?  Not all of the money they make is profit.  They need to cover expenses, and once expenses are covered, they need to generate a profit in order for their business model to be worthwhile to investors.

 

Be grateful for the amount of money you make because of the amazing service that they provide.  A 3% service fee is tiny compared to their competitors, who charge 10-15% or higher.  Airbnb would be out of business if the 3% service fee was their only source of income.  The only reason Airbnb can provide us hosts with 97% of the income from bookings, is because they have developed a crafty business model that generates income for themselves in other ways (interest on the money that they hold for a short time).  Be grateful that they found a crafty way to make the money they need, without having to take more out of your pocket.  For people who think they "need" their money immediately, I would suggest taking a finance class, learning to budget your own money, and stop living paycheck to paycheck.  This would benefit your life alot more than complaining about Airbnb holding your funds for a short amount of time while making some profit for themselves, which is the entire point of running a business.

Carlos3455
Level 1
México D.F., Mexico

Short time it's ok. But 60, 90 days?  Is a global system, they earn lots of money, they don't really need  to hold the payouts for more than 7 days as they claim in their payments rules. Airbnb is a great model but is now perverted by their greed. Enough of that attitude, that's killing the world and societies. Is not ethical and is unfair.   

Sarah977
Level 10
Sayulita, Mexico

@Eric666  Airbnb's host service fee is a very small part of the service fees they charge. The guest service fee is anywhere from 11-25%. And while they may only hold some payments for a short amount of time, some hosts get bookings up to a year in advance of the booked dates, so they are actually holding onto hundreds of thousands or even millions for up to a year.

It wouldn't be so irritating if they used those funds to well-train their customer service personnel so that issues were handled in a consistent, informed and supportive manner, but that isn't the case- while we sometimes are fortunate enough to deal with a CS rep who is efficient and aware of Airbnb TOS and policies, more often than not one gets a rep who has to be referred to the policies, because the rep is clueless. Then, if it gets escalated to someone who is actually helpful and knowledgable, we are often told that the original rep was wrong or handled the case incorrectly. 

When Airbnb starts spending their profits on decent customer service, and fixing all the on-going glitches on their platform, instead of tech teams that are tasked with constantly fiddling with the site for no good reason, and glossy PR which portrays them to be something they are not, I won't be so critical of their greed.

Sally221
Level 10
Berkeley, CA

I too have mentioned the Airbnb "float"- remember the country wide hold up in Australia a while back? That sort of shenanigans, turning a profit on a f*ck up- that's what really, really bothers me. There are people on this forum, at this minute, worrying about delayed payments, there have been guests who showed up at non existent listings who had to wait days for their funds to come back from Airbnb. The rotten truth is that there is an incentive to do a slow pay. The whole system needs an overhaul & that's why I'm sloping off at the end of September. My listing is messed about every day, my city taxes are being collected but properly docketed? I love hosting but I don't like constantly worrying about the  incompetence of "management".  It's a shame, but who ever is the CEO &CFO- by not taking ownership of these issues, they are creating a business model that can only work as long as they have a monopoly. Good luck with the IPO, guys, it may not go as planned, Sally

Kate195
Level 2
Victoria, Canada

they are crooks, in my opinion.

Julia315
Level 2
Falmouth, United Kingdom

I admire your faith in human nature but when you wrote, "No, they're not getting rich by hanging on to anyone's money.  Things take time," I must admit, I nearly choked on my tea. Why do you think they hang on to our money? To look after it for us? There is no reason for them not to give us at least a percentage of the money up front (like other holiday let companies do...) apart from the fact that... they ARE, of course, getting rich by hanging on to our money! Well done, Katie for bringing this up. It is verging on corrupt--very very clever and business savvy, but verging on corrupt. I only recently set up my little holiday place and am in debt because of upgrades I felt were essential and definitley desirable. It worked becasue I have been lucky enough to get lots of bookings. So people have loved the look of my cottage enough to want to pay me to stay there and have dutifully paid the booking fee, but... not to me, not even 10% of it, not even 1% of it. The thousands of pounds which I have earned and which would bring me great relief and much needed income today... is sitting in someone else's bank account! Unlike Fred, I do 'worry' about what 'the other' is getting. Not out of greed, but because it is deeply unjust and call me naive but I'm into justice. Thank God we don't all just lie back and accept the greedy giants who try to control us. Yes it's a business and Airbnb deserve to make loads of money... if they meet the clients' needs... But I sometimes feel we're all being exploited here as if our voices are just too quiet.  Indeed some folk sound like they don't mind being exploited. Oh well, I'll still stand up for them.

Jim22
Level 3
New York, NY

I read that AB&B uses Braintrain to process payments and that Braintree gets the float. Anyone know?

Jim

Sarah977
Level 10
Sayulita, Mexico

@Katie201   I have mentioned this in previous posts. Not only do they make a a lot of interest by holding onto the funds (and in some cases the bookings are made for 6 months or more out), they even hold onto funds that they should be paying out immediately- I had a guest who was overcharged by almost double- when she saw what she had been charged, she right away messaged me, saying she maybe read the price wrong, and that if it was correct, she'd have to cancel. But 5 minutes before she messaged me, I saw that my payout was also double what it should have been and contacted Airbnb. They told me it was a glitch in their system and many guests had been overcharged that day, not to worry, they would be re-imbursing the guest. They told her that she'd get a reimbursement in 15 days! That's absurd- this wasn't a matter of a host or guest cancelling a confirmed reservation- it was their error. There was no reason they couldn't have done an immediate credit to her credit card. I was overcharged by an airline, and the credit was posted to my account the same day.

 

And don't get me started on their bogus "currency conversion" charges.

 

In any case, that is how it is set up, and if we want to use Airbnb, we just have to swallow it.

Marty49
Level 1
South Portland, ME

I think you are raising a very important issue Katie. Surprised you haven't gotten more comments. Will bookmark this page and if you know of any other online places this has/is being discussed or researched, please post here. Thanks. Marty 

Kimberly54
Level 10
San Diego, CA

@Katie201,  Hello!

 

I would agree with everything @Fred13 wrote, and I'll add one more thing:  Business is business... and it takes time.  They really aren't earning billions of dollars by holding your money inbetween payouts, and their fee is so very small--especially for the service they are providing us, and our guests.

 

Business to business, paying within 30 days is standard practice.  Businesses are generally considered more reliable than regular consumers, so they can often grant something like 30/60/90 days before anyone starts getting grumpy (and it does not effect a credit score.)  AirBnB, their little 3% is doing a lot, for everyone.  No, they're not getting rich by hanging on to anyone's money.  Things take time.

 

As for Natural Disasters and health emergencies, we just have to be understanding, right?  Someone is suddenly in serious trouble and we were paid for something we didn't provide?  Even last minute and an inconvenience, that doesn't seem quite...

 

Kim
Julia315
Level 2
Falmouth, United Kingdom

I admire your faith in human nature but when you wrote, "No, they're not getting rich by hanging on to anyone's money.  Things take time," I must admit, I nearly choked on my tea. Why do you think they hang on to our money? To look after it for us? There is no reason for them not to give us at least a percentage of the money up front (like other holiday let companies do...) apart from the fact that... they ARE, of course, getting rich by hanging on to our money! Well done, Katie for bringing this up. It is verging on corrupt--very very clever and business savvy, but verging on corrupt. I only recently set up my little holiday place and am in debt because of upgrades I felt were essential and definitley desirable. It worked becasue I have been lucky enough to get lots of bookings. So people have loved the look of my cottage enough to want to pay me to stay there and have dutifully paid the booking fee, but... not to me, not even 10% of it, not even 1% of it. The thousands of pounds which I have earned and which would bring me great relief and much needed income today... is sitting in someone else's bank account! Unlike Fred, I do 'worry' about what 'the other' is getting. Not out of greed, but because it is deeply unjust and call me naive but I'm into justice. Thank God we don't all just lie back and accept the greedy giants who try to control us. Yes it's a business and Airbnb deserve to make loads of money... if they meet the clients' needs... But I sometimes feel we're all being exploited here as if our voices are just too quiet.  Indeed some folk sound like they don't mind being exploited. Oh well, I'll still stand up for them.

Robin4
Level 10
Mount Barker, Australia

@Julia315  @Katie201 

Julia and Katie, it might interest you to know that on any given night (according to Forbes) Airbnb holds $84 million in unreleased hosting payouts! Now some nights that may be more, on some nights it may be less.....but it is fair to say, three quarters of that ($63,000,000) is the pool of money that Airbnb are earning interest on 365 days a year.

Fairness in anyones language says, that should be reflected in the service fees charged..... wouldn't you agree?

 

Cheers.....Rob

LuxuryVacationHomesFortL0
Level 1
Fort Lauderdale, FL

Exactly.....so many things about they make money off us really annoys me.....they should transfer the funds at least 24hrs after the guest checks in....constantly having to check to ensure it hits!.

Julia315
Level 2
Falmouth, United Kingdom

Utterly agree, @Robin4 ,

 

Thank you thank you for this - just the data I needed! I can hardly take in those figures... and their entire stash, 'money for old rope'... I feel a pang in my heart when I think about what's going on in the world, this climate of greed and ruthlessness, and barefaced exploitation, and then read, on this short thread, of people (actually victims) who don't care at all, nay, try to turn it round and make out the person who's putting their hand up to  make a totally honest and valid point is to blame, that THEY are the selfish ones with their annoying pointless whining. Our world now is swollen with manipulators who take take take and blame the victim. When you're the dominant one, you can get away with anything... Or can you? I feel it's also a time when injustice is slowly but surely being exposed, when these smug fat cats are being held to account. And that's due to people like us who refuse to be complacent and dare to speak out.

 

Thanks again, Rob. 

Julia

Robin4
Level 10
Mount Barker, Australia

@Julia315 

Julia, I use this platform because I am making money, I am virtually fully booked with Airbnb these days. I don't automatically agree with, or like what happens here, and I feel annoyed that many hosts rites are being eroded by the company.

The moment I stop making money, Julia, I will be gone, I have already listed on another platform and, that is not my loss, this is Airbnb's loss, those booked nights are no longer available to Airbnb guests.....or Airbnb's coffers.

 

I guess, what I am saying Julia, 'chest beating' is not going to change the way the platform operates! Of course there is going to be greed.....the running of the company is not in the hands of those who founded it....... nor are the ideals! They have been highjacked by middle- management who don't give a sh*t about how Brian, Joe and Nate poured their souls into Airbnb's beginings back there in that Obama convention in Denver a decade ago!

 

I am saying to you, accept that this is the way that Airbnb does business, as long as it makes you money great....the moment it doesn't...... be like me and find an alternative! I have been on this earth for 74 years....I have lost track of the companies who rose, fell and disappeared into obscurity because they lost sight of where they came from!

 

Cheers........Rob

Fred13
Level 10
Placencia, Belize

Airbnb is making a lot of money from you, me and everyone else; and while I would like to tell you (for your sake not mine), that is not the case, I can't,  for it is the case. You want a good example, look at my listing; pre-booked for 2+ years, at such prices; imagine. They set this system up, they came up with a specific certain model, got investors and pulled the whole thing  off, and that is their reward. No one else did it to this succesful level, they did. To also put it in perspective - there isn't another option in 'online renting' (how I think of this 'sharing' economy genre) that even comes close in the amount of people it matches per day, for places in general scattered throughout the world, even in the oddest of places like mine.

It is a phenominal story, thus far practically a unique one, for good reasons. And no one is forced to list with them, it is a choice. They charge US (hosts) is aproximately 3% (what they charge the guest is indeed in line what everyone else charges) and really they won't book via Airbnb if they thought they were getting ripped off. For those 3% host fee they really DO get involved to an incredible degree in the exchanges between of guests and hosts, and in a very 'expectant' culture (the U.S.) that is a tall oder.  I have dealt with Airbnb people personally, I think I would last ~one day~ with the human behavior they put up with every single day.

I have learned long ago, be happy how much you are making, and thus making your life easier, worry less what the other one is getting.

 

P.S. Two criticisms I have of Airbnb: #1 - Do give hosts the choice (like VRBO does) of charging a smaller deposit up front; 100% is asking too much, though it does serve many indirect benefits, no doubt.  #2 - Be more selective of who gets to be a host, but then be more supported of the ones you do end up choosing.

Explore Resource Center articles

Making your home ready for guests
Tips from Airbnb plus hosts: How to add thoughtful touches
Supporting guests during their stay