Airbnb takes a unique approach toward lodging. Part of the “sharing economy,” Airbnb offers you someone’s home as a place to stay instead of a hotel. On Airbnb, you can find places to crash on your backpacking trip through Europe, or you can find a place to stay for a month during your internship in Los Angeles. It’s also a great way to explore a town you’re thinking about moving to, or finding an alternative to traditional hotel options in 2020 if you’re just around for a weekend. If you want to rent out extra space in your own home, you can host through Airbnb and make money for allowing a guest to stay the night.
This all sounds pretty simple, but there’s much more to Airbnb than you might imagine. What is Airbnb exactly? Here’s what you need to know about the popular home-sharing site before you book a stay or become a host.
Airbnb founders Joe Gebbia, Brian Chesky, and Nathan Blecharczyk developed the business in 2008. Initially, Gebbia and Chesky started off using their own place as a bed-and-breakfast to make a few extra bucks to pay rent. With a big design conference coming to the San Francisco area and a city full of sold-out hotels at the time, they saw a potential market for the idea and developed a website called airbedandbreakfast.com. To fund their operation, the guys sold breakfast cereals during the 2008 presidential race — Obama O’s and Cap’n McCains — and the cereals earned them around $30,000.
Airbnb was not an immediate success, though. The startup experienced several ups and downs, and it went through at least three separate launches. A number of investors didn’t take the idea seriously. However, one venture capitalist, Paul Graham, did see a potential lottery ticket in Air Bed & Breakfast. Graham invited the founders to join a program called Y Combinator, which provides a startup with cash and training in exchange for a percentage of their company. In 2009, Air Bed & Breakfast became Airbnb, and that was the company’s turning point.
While Airbnb has lost some value in 2020 (along with other hospitality ventures), the company has filed an IPO to go public after delaying the decision once in 2019.
Here’s how Airbnb works for guests
Airbnb does not own properties. It acts as an intermediary between those who want to rent out space and those who are looking for space to rent. Creating an account on Airbnb is free, and it is relatively simple. To do so, you enter your name, email address, birthday, and a password. Airbnb also asks that you agree to treat everyone equally, regardless of race, religion, sex, or other factors. Once you agree, your account is active. You also have the option to sign up through Facebook or Google.
If you like the listing, you can request to book it. The site prompts you to go through a few more steps, like entering in more of your information. Once you complete those steps, you can complete your request and pay for your room. After your first booking, the process is much quicker and easier.
Before your reservation is final, however, you must wait for approval from the host, unless your listing is an “instant book” listing, as those listings don’t require host approval.
For non-instant book listings, Airbnb also recommends that guests message hosts before booking to double-check availability. If you don’t hear back from the host in a timely manner, you can continue to message other hosts in the area until you find one you like. Under the host information section of each listing, you can see the host’s response rate and response time to get an idea of how quickly a host will respond to your message.
Airbnb is offering a new “tier” of homes called Airbnb Plus, an elite selection of properties that stand out for their excellent ratings. The average price for these is typically higher.
Airbnb hosts and guests do not exchange money in person. Guests pay for everything on the Airbnb site when they make their reservation, even having the option to split costs between friends, and hosts receive pay from Airbnb. Airbnb uses PayPal, direct deposit, and other payment methods.
Here’s how Airbnb works for hosts
To rent out extra space in your home, you must first create a free Airbnb account. Then, you click on “become a host” in the upper right-hand corner of the page. After that, you’ll need to create a listing for your space. A listing is a lot like a profile page for the space you want to host; just like a social media profile, the nicer your page looks, the more attention it will draw. It’s a good idea to make your space look as nice as possible and take flattering pictures of the space. How much should you charge? Airbnb helps you set the pricing by indicating the averages for your area.
You can also make money on Airbnb by hosting an experience. “Airbnb experiences are activities designed and led by inspiring locals. They go beyond typical tours or classes by immersing guests in a host’s unique world,” says the Airbnb site. If you want to host an experience, review Airbnb’s quality standards, which indicate requirements for experiences. Basically, the guest must be gaining access to something, participating in something, and offered an original perspective. After reviewing the quality standards, design your experience and submit it to Airbnb for approval. Once approved, you are ready to publish and host your experience.
Airbnb has hefty fees, but it’s probably cheaper than a hotel stay
In addition to the cost of the room, Airbnb charges a guest service fee that typically maxes out at 14.2%. Hosts also pay a service fee of around 3%, which Airbnb adds to each transaction. Hosts who offer experiences are subject to a 20% service fee.
The price of a room on Airbnb depends on a variety of factors, including location, the quality of the listing, and the amenities. You can find very inexpensive rooms on Airbnb, just as you can find very inexpensive hotels. In cities on the outskirts of major metropolitan areas, you can generally find the best deals. We found a room for $31 in Marietta, which is a city near Atlanta, Georgia.
Average daily rates on Airbnb in 2020 varied between $205 in places like Madison, Wisconsin, to $665 in Key West, Florida, according to the latest Mashvisor data. Because of the great variety in size and types of homes on Airbnb, even a single area can see very low and very high prices for all kinds of budgets.
There have been reports of safety and security issues
You may have heard reports of a guest destroying a host’s home, a host endangering a guest’s safety, or an Airbnb host watching a guest through a hidden camera. Airbnb has taken some actions to help promote safety and security for hosts and guests, such as having users provide identification, improving profile and review systems, and implementing a host guarantee that reimburses eligible hosts for damages up to $1 million. Airbnb may also conduct public records checks, such as of sex offender registries, to see if a user has a past record.
New Airbnb laws
Airbnb isn’t all underwater aquarium rooms. It has invited its share of controversy. Cities from San Francisco to New York to Barcelona to Chicago to Berlin have clashed with the company, and Airbnb has been attempting to find ways to compromise with places that want to see more regulation. Critics have accused Airbnb of exacerbating the housing crisis in San Francisco, and a judge dismissed the company’s lawsuit against the city.
Individuals have also complained about the service, with some people saying they’ve had hosts discriminate against them while trying to find a rental. In response to a review, Airbnb changed some of its policies, such as blocking hosts from accepting guests for a certain date if they’ve already rejected someone else first. Airbnb has also being accused of deleting negative reviews after a guest claimed that the home she arrived in looked completely inferior to the photos of the five-star property she booked.
Note that if you are a host, Airbnb will send you notifications if it has updated its terms of service agreements.
Should you use Airbnb?
One benefit of using Airbnb is the cost, as you can legitimately find a cheap place to stay on the site. Also, you find out a great deal of detailed information about where you’ll be staying beforehand, and you can talk to your host before your stay. If you are comparing Airbnb vs. a traditional hotel, several things to think about are:
- Privacy and access: Hotels are generally located centrally, but Airbnb allows you to pick cabins, cottages, and rooms off the beaten path. These offer more privacy and may be closer to the outdoors, allowing for a very different experience.
- Amenities: Hotels have a variety of guaranteed amenities and food options, but Airbnb rentals do not. Check the details to see if a rental offers Wi-Fi, coffee, and even electricity. If you want to make food while staying there, check for a kitchen as well. If you are visiting a particularly hot or cold area, check for heating and cooling, too.
- Check-ins: Hotel check-ins are universal, but Airbnb hosts can vary a lot in how they check people in.
- Cleaning: Airbnb hosts have a vested interest in keeping things clean, and may even offer cleaning services, but this can vary. Hotels, meanwhile, have strict cleaning schedules.
- Rewards programs: Hotels can offer rewards programs and discounts and may partner with larger companies. These aren’t options with Airbnbs.
- Pets: Pet hair may be an issue in Airbnbs, especially when renting a room that’s part of a larger house. On the plus side, Airbnbs also make it easier to travel with your own beloved pet.
Hosts can find themselves in a legal grey area any time they rent a room in their home without a permit; it’s outright illegal in some areas. Hosts should review local laws and obtain the necessary insurance coverage before renting out space in their homes. In addition to potential legal issues, there are obvious safety concerns involved, too. Make sure to know what you’re getting yourself into by reading the terms and conditions (including the fine print) and reviews.
Guests booking a stay in an Airbnb property should follow Airbnb’s best practices for staying safe. It’s not a bad idea to let a trusted person know the details of your stay, too, just in case.
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