Airbnb: An Overview

Airbnb is an online marketplace that connects people who want to rent out their homes with people who are looking for accommodations in that locale. It currently covers more than 81,000 cities and 191 countries worldwide. The company's name comes from "air mattress B&B.”

For hosts, participating in Airbnb is a way to earn some income from their property, but with the risk that the guest might do damage to it. For guests, the advantage can be relatively inexpensive accommodations, but with the risk that the property won't be as appealing as the listing made it seem.

The Advantages of Airbnb

Wide Selection

Airbnb hosts list many different kinds of properties—single rooms, a suite of rooms, apartments, moored yachts, houseboats, entire houses, even a castle—on the Airbnb website.

Free Listings

Hosts don't have to pay to list their properties. Listings can include written descriptions, photographs with captions, and a user profile where potential guests can get to know a bit about the hosts.

Hosts Can Set Their Own Price

It's up to each host to decide how much to charge per night, per week or per month.

Customizable Searches

Guests can search the Airbnb database—not only by date and location, but by price, type of property, amenities, and the language of the host. They can also add keywords (such as "close to the Louvre") to further narrow their search.

Additional Services

In recent years Airbnb has expanded its offerings to include experiences and restaurants. Besides a listing of available accommodations for the dates they plan to travel, people searching by location will see a list of experiences, such as classes and sightseeing, offered by local Airbnb hosts. Restaurant listings also include reviews from Airbnb hosts.

Protections for Guests and Hosts

As a protection for guests, Airbnb holds the guest's payment for 24 hours after check-in before releasing the funds to the host.

For hosts, Airbnb's Host Guarantee program "provides protection for up to $1,000,000 in damages to covered property in the rare event of guest damage, in eligible countries."

The Disadvantages of Airbnb

What You See May Not Be What You Get

Booking accommodations with Airbnb is not like booking a room with a major hotel chain, where you have a reasonable assurance that the property will be as advertised. Individual hosts create their own listings, and some may be more honest than others. However, previous guests often post comments about their experiences, which can provide a more objective view.

Potential Damage

Probably the biggest risk for hosts is that their property will be damaged. While most stays go without incident, there are stories of entire houses being trashed by dozens of party-goers when the Airbnb hosts thought they were renting to a quiet family. Airbnb's Host Guarantee program, described above, provides some assurance, but it may not cover everything, such as cash, rare artwork, jewelry, and pets. Hosts whose homes are damaged may also experience considerable inconvenience.

Added Fees

Airbnb imposes a number of additional fees (as, of course, do hotels and other lodging providers). Guests pay a guest service fee of 0% to 20% on top of the reservation fee, to cover Airbnb's customer support and other services. Prices display in the currency the user selects, provided Airbnb supports it. Banks or credit card issuers may add fees if applicable.

And, while listings are free, Airbnb charges hosts a service fee of at least 3% for each reservation, to cover the cost of processing the transaction.

Taxes

Both hosts and guests from the European Union, Switzerland, and Norway may be subject to a value-added tax (VAT). And depending on their location, hosts may be subject to rental income taxes. To assist with U.S. tax compliance, Airbnb collects taxpayer information from hosts so they can provide an account of their earnings each year via 1099 and 1042 forms.

It Isn't Legal Everywhere

Before listing their properties on Airbnb, would-be hosts need to check their local zoning ordinances to make sure it's legal to rent out their properties. Hosts may also be required to obtain special permits or licenses.

[Important: Check the comments of other guests who have stayed at that Airbnb property to make sure the listing is accurate.]

Key Takeaways:

  • Travelers can often book an Airbnb for less than the cost of a hotel room.
  • The main risk to the traveler is that the property may not live up to its listing.
  • The main risk to hosts is that guests might do serious damage to their property.