Starting Sept 8th, Airbnb has radically altered the payment terms for all hosts. What was in the little change with huge impacts? How does this impact every property owner? Will it still be profitable for owners to use Airbnb? What are the three changes and what should you do?
What “small”changes did Airbnb implement that will have huge impacts?
Without much fanfare or reporting, Airbnb just crammed down some huge changes that will cost property owners thousands and could radically alter the nightly rental game.
- Reserve now, Pay later: Airbnb may make available to Guests the option to book an accommodation and request that the Total Price is due and payable at a later time prior to check-in (“Reserve Now, Pay Later”). If your booking is eligible for Reserve Now, Pay Later, the Airbnb Platform will provide you with this option at checkout. You will not be charged any additional fees for using Reserve Now, Pay Later.
- This is a game changer, it allows guests to book your property with little/nothing down. Essentially it allows guests to tie up your calendar and cancel 3 days prior to booking leaving property owners with a huge hole in their schedule especially during prime times. Furthermore Airbnb will not guarantee that you will be compensated.
- Chargebacks could happen long after the stay: The new terms state that Airbnb can reverse your payout if a guest files a payment dispute, even if the dispute is after the stay is over even if they never reached out to the owner. Essentially, a guest could file a dispute several months after the stay, the funds are taken out of the owners account until the dispute is resolved, even if the guest never said anything and stayed the entire time. There is no timeframe required on resolution. Essentially this could open the door for bad actors to tie up hosts for extended periods with absolutely no notice to the owner until months later.
- Airbnb can now delay/withhold payouts to owners with no explanation: Another clause in the updated terms gives Airbnb broad authority to delay, adjust, or withhold payouts if they detect what they call “risk indicators.” That might include:
- A sudden spike in bookings
- A change in the way you manage listings
- Missing or incomplete documentation
- A dispute or concern raised by a guest
Airbnb does not have to explain why the funds are held, how long they will be held, or pay any interest on the held funds.
Underlying theme from changes is cash flow
The biggest takeaway from above is that owners’ cash flow can be substantially impacted with no notice based on the new rules Airbnb implemented. Also note, none of the rules will have any benefits to owners. Essentially Airbnb is putting more risk on owners to try to goose bookings, which could lead to big financial losses for owners in some cases even if they were not at fault.
What should property owners do because of the Airbnb changes ?
Unfortunately, property owners are stuck with the new rules, but they should take some steps to help mitigate the impact.
- Screen every single booking carefully
- Make sure you have ample cash flow, do not operate paycheck to paycheck as you will get nailed if there is ever an issue
- Develop a strategy to have guests book directly with you. Although it is difficult if you can eliminate the middle man with consistent bookings direct your cash flow and hassle factor will greatly improve.
- Keep immaculate documentation. If there is a dispute, make sure you have all your docs in order.
New Airbnb rules change the profitability of nightly rentals
The new rules should not be a surprise. Take a look at Airbnbs stock chart, they are woefully under-performing the broader market. The new rules are just the beginning of the huge changes to increase Airbnb’s profitability by putting more risks on hosts. It clearly shows that Airbnb is trying to become more like a hotel with flexibility and protections at the expense of property owners.
Although the changes are not a death knell for owners, they will hit some owners cash flow pretty hard. Unfortunately the changes are coming at a terrible time for property owners as international travel to the US is down considerably while at the same time the economy is starting to show cracks.
Furthermore taxes on nightly rentals are going up along with regulations. For example one town in Colorado had proposed a 5k fee/room for a nightly rental license. This will make it increasingly difficult to profitably operate nightly rentals in certain markets.
Additional Reading/Resources:
About the updates to our Payments Terms – Airbnb Help Center
https://coloradohardmoney.com/one-colorado-city-proposes-5k-room-in-short-term-rental-fees/
https://coloradohardmoney.com/category/nightly-rental-real-estate/
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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. I’m not an armchair reporter/writer. We are an actual private lender, lending our own money. We service our own loans and own commercial and residential real estate throughout the country.
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