Do I Have To Pay Commission to Airbnb and Booking?

by | Aug 4, 2020 | Advice, All Articles | 0 comments

When the accommodation is all set up, and the first guests have arrived, stayed and left, one of the biggest shocks in the hospitality industry is the commission invoice from the online travel agent. The big question is: Do I have to pay commission to Airbnb and Booking!? In a nutshell, yes you do have to pay commission to OTAs such as Airbnb and Booking. It doesn’t matter if you are advertising

  • serviced accommodation
  • serviced apartments
  • a furnished holiday let
  • a B&B (bed and breakfast)
  • a hotel
  • or a boat

if you are listed on the Online Travel Agents (OTAs) you will have to pay commission on any bookings that are made by guests through those platforms.

But you don’t have to.

Let’s have a look at a few details first.

Airbnb, Booking, Expedia, and all their subsidiaries companies, provide a platform for guests to find temporary sleeping accommodation.

In 2017, Priceline, who owns, spent $4.3 billion on marketing (TV ads, Google ads, Magazines). This eye-watering amount was dwarfed by Expedia who spent far more at $5.3 billion. 

It makes sense to let these marketing giants spend all that money on attracting guests to your listings, right? Yes! No? Let’s delve a little deeper.

Why do we pay commission to Booking and Airbnb? 

The OTAs make their money by:

  1. advertising their platforms
  2. facilitating guests to book accommodation listed on their platforms
  3. taking a commission from the partner/host for that booking.

Commissions across the OTAs could be as low as a mandatory 3%-15%, to a voluntary (and whopping) 30%.

Some smaller OTAs such as Homeaway will charge a fixed annual listing fee so its good business sense to work out your projected turnover and costs to see if a fixed annual fee would be cheaper than an ongoing 15%.

It’s also worth pointing out that the commission is taken from your top line before all of your operational costs.

Let’s have a look at the two biggest OTAs

Airbnb Commission

Airbnb is the largest vacation rental platform, largely due to its very low commission cost to hosts. Depending on the cancellation policy (lower for more flexibility) the commission is on a sliding scale between 3%-5%. Airbnb made up their income by charging a service charge (around 12%) on top of the accommodation charge that was payable by the guests.

That structure changed in 2019 when Airbnb gave hosts the option to continue paying the 3% or pay all of the charges through a flat 14% fee, meaning no charge at all for the guests. Hosts who chose to pay this rate would benefit from a more attractive and competitive nightly rate, and in theory, an increase in bookings. Commission

Booking have a minimum commission fee of 15% for standard accounts, with an option, if the property qualifies, to join their Preferred Partner Program with 18% commission. The theory is that Preferred Partners are listed higher and so will receive more views that convert into more bookings.

What is not as well know is that a partner (as Booking like to refer to us) can opt in and pay more commission for higher ranking on the searches, up to a huge 30%.

Use the OTAs for what they are: online directories

So why would partners and hosts continue to list on the OTAs if the commissions can be so high?

It all goes back to the marketing budgets of these huge companies. Marketing budgets should be 10-20% of gross turnover depending on who the customer is, and how competitive the industry is. Let’s assume then that $5 billion is only 20% of the largest OTAs gross annual turnover.

Suddenly, you begin to wonder if it is at all possible to try and market your property yourself to get commission-free direct bookings.

Here’s the thing…you can do both!

List on the OTAs for the exposure, but maximise your listings by completing them fully and in such a way that potential guests want to book with you, but the more informed will know that there is a good chance they can get a better deal if they contacti you direct.

Use Google to pay less commission on your bookings

The biggest search engine in the world is Google.

You owe a duty to yourself and your business to ALSO be listed on Google, but not just listed, you have to be searchable so that guests can find you.

Find out how to make your hospitality business available to guests for direct bookings by using SEO.