What Is Airbnb and How Does It Work?

AirBnB
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Airbnb is a service through which property owners can rent their spaces out to travelers for short periods. It offers a broad array of lodging options for those looking for alternatives to hotels.

Whether you’re planning your next vacation or interested in making money on Airbnb, there are several factors you should consider to help you decide whether the platform is right for you. Here’s a look at how Airbnb works and the pros and cons you should weigh before using it.

About Airbnb

Airbnb dates back to 2007 一 Brian Chesky and Joe Gebbia came up with the idea when they couldn’t afford to pay rent. To make extra money, they decided to rent out their apartment to people who couldn’t find a place to stay. Since then, Airbnb has grown immensely and it now benefits both guests and hosts.

Airbnb boasts roughly 6 million listings all over the world. A wide selection of properties is available on the Airbnb website, including single rooms, apartments, houseboats, cabins and moored yachts, among other options. All these property listings are tailored to meet travelers’ needs.

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How Does Airbnb Work?

Airbnb is an online platform that connects hosts looking to rent out their spaces to guests who need lodging, typically at a lower rate than hotels. Guests can browse the Airbnb website to explore all the available options in their destination.

How It Works for Guests

As a guest, you can use several filters to narrow down your search options. These filters enable you to find your perfect match based on price, location, amenities and property type. You can also make use of keywords to narrow down your search further. 

It’s important to note that hosts have rules for their spaces. For instance, some hosts will allow you to stay at their spaces with pets, but some have a strict no-pets policy. Once you’ve found a suitable place, you can book your stay and communicate with the host through the site.

How It Works for Hosts

If you own a property or an extra space, renting it out can earn you extra money on the side. All you need to do is create a profile with Airbnb and complete a series of verification processes. Once you’re approved, you can list your property. But before doing that, it’s crucial to check out the legality of listing a rental in your area. 

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As a host, Airbnb gives you control to choose how much you want to charge your guests. If you have no idea how to price your space, Airbnb can suggest a rate, but it is ultimately up to you to set the price. 

How To Choose Between an Airbnb and a Hotel

Since they’re both in the hospitality industry, Airbnb shares similarities with hotels in terms of service. Prices generally tend to be lower and more flexible for Airbnb than hotels with fixed fees, depending on the luxury level. 

Airbnb also offers a more personalized stay as you get to choose a place that suits your needs as a guest. However, there are a few factors you may want to consider to help you choose between an Airbnb or a hotel:

Amenities

Hotels offer a wide variety of amenities to their guests, such as rooftop pools and lively bars. Plus, a hotel room often comes with room service, which Airbnb does not guarantee. Some hosts even charge a cleaning fee.

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Authentic Experiences

Airbnb is a better option for people who are visiting an area and are more interested in enjoying authentic experiences hosted by locals. There are several in-city experiences that you can only explore through Airbnb and not a highly priced hotel. Additionally, hosts provide personalized suggestions of some of the best places to visit and activities to partake in.

Traveling With Kids

For those traveling with children, hotels might be the better option because they have extensive security measures and facilities to keep the kids occupied. Hotel accommodations may be a safer and more fun option for anyone traveling with kids.

Safety and Security

It’s understandable to be wary about staying at someone’s space. However, Airbnb has gone the extra mile to ensure the safety of guests and hosts by including an extensive verification process during sign-up.

Airbnb also includes a guarantee of up to $1 million for hosts in case of any damage by guests. However, this is only applicable in eligible countries.

Advantages of Airbnb

Airbnb has seen tremendous growth over the past decade, and it’s easy to see why. Airbnb has risen in popularity because it provides affordable accommodations for travelers. Here’s why many travelers prefer Airbnb.

Wide Variety of Properties

Airbnb lists a broad selection of properties, including studios, apartments, condos, entire houses, houseboats, moored yachts and even castles. Whether you’re looking to go on vacation or take a business trip or road trip, you can rest assured that you’ll find what suits your needs.

Hosts Are in Charge of Pricing

As an Airbnb host, you have the freedom to choose how much to charge your guests. This gives more room for flexibility compared to hotels. Since you determine the pricing, there is bound to be competition. Therefore, hosts try to make their property the most affordable, which benefits the guests.

Free Listings

Unlike many online platforms, Airbnb does not charge its hosts a fee for listing their property. After providing all the information about the property and a bit about themselves, hosts have their property listed for free. This makes the venture even more appealing as it is highly profitable.

Customized Searches

Due to the sheer number of listings available, guests can use several filters to search for a suitable Airbnb based on location, size, affordability and other specifics.

Disadvantages of Airbnb

Like anything else, Airbnb has some downsides.

Lack of Quality Assurance

With hotels, you can generally rest assured that you’ll get what you paid for since the rooms are typically as advertised. With Airbnb, there is room for dishonesty and embellishment since hosts have the freedom to create their listings themselves. Therefore, before booking an Airbnb, you should look at the reviews from previous guests about their experience with the property and the host.

Additional Fees

Airbnb charges guests a service fee that generally comes out to about 14% of the booking subtotal. Hosts, on the other hand, are typically charged a service fee of 3% of the subtotal.

Property Damage

There is some risk of property damage for hosts. A majority of hosts report uneventful stays, but there have been incidents of property being damaged by wild partygoers and guests. Airbnb provides a damage protection program for hosts, which is reassuring, but it only covers specific types of damage and is unavailable in some countries.

Taxes

While Airbnb rentals are not under the same regulation as hotels, hosts are subject to occupancy taxes. Other taxes that can be levied include value-added tax and rental income taxes. These taxes are usually dependent on the location and may differ from place to place. Both hosts and guests should familiarize themselves with the relevant taxing regulations.

Takeaway

Airbnb is an excellent option if you’re looking for a place to stay for lower prices. Based on your needs, you get to choose the most suitable property for you from the Airbnb website. Also, if you have an extra space in your house or have a property sitting around, you can earn extra cash on the side by hosting people.

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About the Author

Lydia Kibet is a freelance writer specializing in personal finance and investing. She's passionate about explaining complex topics in easy-to-understand language. Her work has appeared on GOBankingRates, Investopedia, Business Insider, The Motley Fool and Investor Junkie. She currently writes about investing, banking, insurance, real estate, mortgages, credit cards, loans and more. Connect with her on Twitter or moneycredible.com.
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