Airbnb is changing its guest service fee policy by April 1, 2024. They will start adding an extra charge to the guest service fee of up to 2% for intercurrency bookings. In this blog we will discuss the details of this change, so you can be prepared as a host. We will also explain how this might impact your search position and give you tips on how to avoid negative effects on your ranking, occupancy and revenue

What is the extra guest fee on Airbnb?

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Starting from April 1,2024, people who book your Airbnb and who use a different currency than the one used on your profile, will be charged up to 2% extra on the booking subtotal. These guests could now face a service fee up to 16.2%

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Does the extra guest fee impact you as a host?

First of all, as the article by Rental Scale-Up explains, only hosts using the split-fee model will be affected by this change. 

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Split-fee model

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As a host on Airbnb you can choose to use 2 kinds of pricing models. The first and most commonly used one is the split-fee model. This model shows your room price together with a separate guest service fee when a traveller is looking at your listing. In this model you as a host pay 3% of the total payout (there are exceptions to this rule, for example listings in Italy or listings with a very strict cancellation policy pay more) and guests are charged a service fee between 5% and 15%. 

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Host-only fee

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The other option is to work with the host-only fee, also known as the simplified pricing model, this model is newer. In this case no service fee is visible to the guest, and the host pays 15% of the total payout as a commission. On the left you can see an example of a listing implementing simplified pricing structure, or host-only fee structure, on the right you can see a listing using split-fee structure.

The 2% additional cost on the booking subtotal for listings using the split-fee model, will be applied to the guests and not be added on the host payouts. But this does mean that international Airbnbs will become more expensive in a lot of cases. Especially hosts who frequently host international travellers should know very well how this update will be implemented, to make sure they don’t lose bookings. Further in this blog we will explain what you can do as a host to prevent any negative impact. 

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Why does Airbnb charge an extra 2% guest fee for intercurrency bookings?

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This update is an important part of the strategy of Airbnb to boost their international growth by penetrating more international markets. Airbnb reported that in the third quarter of 2023 their cross-border night bookings increased by up to 17% compared to the same period in 2022.

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Previously, when a guest paid in their own currency for a rental in another country, Airbnb bore the burden of any currency fluctuations between the time of booking and payment to the host. For example when the booking is done at a moment where the currency of the guest is very high, but by the time they pay the value already dropped, Airbnb might lose money. To mitigate this risk, the platform has now implemented a new fee, shifting some of the currency risk to guests. 

How does Airbnb calculate guest service fees?

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To understand the addition to the guest service fees we need to explain how Airbnb calculates guest service fees and why they exist. 

Simply put, guest service fees are a fee Airbnb charges guests to cover the use of the Airbnb platform, access to the Airbnb Support and all of the other features. These fees vary anywhere from 5% to 15%, but most fees are under 14.2%. There are many factors that determine the exact fee that is added on to your listing, like location, accommodation type, length of stay and overall cost. 

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To make it more clear how these calculations are done, we provide you with a fictional example. 

For a reservation of a private room for 3 days in the city centre that costs 150 euros per night, this is how Airbnb would calculate the guest service fee:

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Before 1 April, 2024

€150 (Reservation Cost) x 3 (Nights) x 0.142 (guest service fee percentage) = €58,5.

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After 1 April, 2024

€150 (Reservation Cost) x 3 (Nights) x 0.162 (Average guest service fee + 2%) = €36 Guest Service Fee: €72,9.

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In this example, the update in the guest service fee policy causes an increase of the fee of €14,4. 

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This is a fictional example, and every listing has its own characteristics influencing the fee structure.

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To find out the guest service fee for your listings, you should go to your Airbnb profile.

1. Go to Transaction history
2. Select the reservation code
3. Go to Payout, look for the Airbnb Service Fee

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How does the 2% extra guest fee impact your ranking? 

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Since Airbnb's November 2022 algorithm update, there has been increased emphasis on average nightly rates in their business model. They are pushing properties with rates who are likely to be sold, so they can make the most of the commission. 

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However as the fee works per percentage it creates a gap between different segments, luring people more towards property segmentation. This might mean your listing will show up less in the search results. 

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How can you prevent a negative impact on your ranking and occupancy due to the new guest service fee structure?

1. Implement a dynamic pricing strategy in combination with a ranking management solution

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The additional fee will lead to higher total costs for international guests using different currencies. To stay competitive and attractive to this target group, it is increasingly important to implement a smart pricing strategy. 

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Dynamic pricing means adjusting room rates based on factors like real-time market conditions and other elements that influence supply and demand. Hotels and vacation rentals use dynamic pricing algorithms to determine the optimal rate for a given time period or booking situation. 

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These algorithms can be tuned for many factors such as temperature, number of flights, etc. This will help you stay ahead of the competition and will also help you increase your ranking on Airbnb. 

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If you combine smart dynamic pricing with a ranking management solution, you will reach the top positions on Airbnb and ensure high occupancy and revenue. A ranking management solution is an algorithm that plays into the elements that determine your position in the search results of an OTA like Airbnb. There is only one company that uses this kind of algorithm and combines it with a dynamic pricing strategy, Otamiser. This solution will also work for host-only fee structure. This unique combination of dynamic pricing and ranking management increases revenue of listings on average by 24%.

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2. Switch to a host-only fee model 

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The new 2% increase of guest service fee for international guests does not apply to the host-only fee model. This pricing model is being pushed by Airbnb, because it creates a feeling of transparency towards the guests. On top of that, the host-only fee increases the guest satisfaction, since people know what they pay for, and don’t feel like they are being tricked with additional fees. 

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Otamiser research states that simplifying your rate structure drastically increases your overall conversion on Airbnb. Additionally Airbnb states that during the test phase of Simplified Pricing, or the host-only fee model, the listings with the new price structure saw up to 17% more bookings compared to the listings with the split-fee structure. 

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Since November 2021 the ranking on Airbnb search results is no longer determined by the night rates of listings, but by the total cost. This means you don’t have to be scared to rank worse if you switch to the host-only fee. You can increase your nightly rates to make up for the extra commissions you will have to pay. As long as the total price of your accommodation stays the same, there will not be a negative impact on your ranking. 

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How to switch: 

1. Go to Account-settings
2. Click on Payments & payouts
3. Select the tab Service-fee
4. Select Host-only fee

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Key take-aways

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Airbnb's upcoming guest service fee update on April 1, 2024, will make bookings more expensive for international guests using different currencies. To address this, hosts can switch to the host-only fee model, ensuring transparency and avoiding the 2% increase for international guests service fees.

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Implementing a dynamic pricing strategy is crucial. By adjusting rates based on real-time market conditions, hosts can stay competitive and appealing to international guests using different currencies.

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For an effective solution, hosts can integrate ranking management solutions. This, coupled with dynamic pricing, optimises search result positions, leading to increased visibility, occupancy, and revenue.

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