Home Airbnb Why Airbnb So Expensive Than Hotels?

Why Airbnb So Expensive Than Hotels?

A few days ago, I was making a plan for my upcoming cross country road trip. For staying at different places, I had various options — Hotels, Campgrounds, or Airbnb. Campgrounds are always cheaper unless you are staying at an RV park. However, for a single night stay, I was comparing the price between hotels and Airbnb.  I was in the impression that Airbnb would be cheaper compared to hotels. However, What I found, for short term stay, Airbnb is way more expensive than hotels.  

However, After researching a little bit, I found that Airbnb is not always expensive. It all depends on the number of people in your party, how long you are staying at an Airbnb, and the location of your Airbnb. 

If you stay for a single night with only 2 to 3 people, Airbnb will be very expensive. But, long term stay with a large party at an Airbnb is always cheaper than hotels.

In this article, I’m going to explain from my experience why Airbnb is so expensive in some circumstances.  I found that Airbnb is expensive than hotels for many reasons. Some of these are — Hosts are setting the high Airbnb price, cleaning fees, taxes, Airbnb service charge, and dynamic pricing.

Hosts are setting the price:

Airbnb does not own any property. Privately owned property hosts use the Airbnb platform to rent out their property. As always, house owners overestimate their house prices and rent. Some of them are outright greedy. As there are no guidelines to set the price of a rental property, the hosts set the Airbnb rental price however they like.

Hosts always think that they are doing a lot of work and deserve more money, even though their service is abysmal. Excellent hosts exist but rare. Because of this arbitrary price-setting mechanism, Airbnb is expensive. 

Cleaning Costs:

The hotel never charges a cleaning fee to the guest. The hotel cleans rooms whenever a guest leaves. On the contrary, every Airbnb charges a cleaning fee on top of your nightly rental price. The host sets the amount of this cleaning fee. Most of the time, we found that the cleaning fee is absurdly high. For example, we were searching for Airbnb accommodation in Niagara Falls.  We found an Airbnb that charges a $100 cleaning fee on top of a $150 nightly price. This cleaning fee will make your Airbnb rental very expensive.

$100 cleaning fee on top of $150 nightly rent. Absurd!

Service Fee:

Airbnb charges both the host and guest a service fee. This fee is on top of the nightly rental charge and cleaning fee.  If you book a hotel on booking.com or priceline.com, they will never charge you any extra money. But Airbnb charges the guest 14% service fee.  When you add up nightly price and cleaning fees, Airbnb is already expensive. Now add a 14% service fee on top. This service fee makes Airbnb even more costly.

Taxes:

In some places, You also have to pay taxes for your Airbnb rental. This tax rate depends on locality.  This tax makes the Airbnb even more expensive. 

Dynamic Pricing:

Airbnb uses a pricing technique called dynamic pricing. The price of Airbnb fluctuates depending on demand. The higher the demand for rentals, the higher the rate. If demand subsides, Airbnb rental price will decrease. Depending on the season, location, and event; sometimes, this dynamic pricing makes Airbnb very expensive.

To Weed Out Unwanted Guests:

I found numerous Hosts who ask above market price for their Airbnb rentals. They do this intentionally. Their main logic is that it will weed out those cheap guests that are difficult to handle. 

If Airbnb rental is cheap, a lot of guests will reserve your place. According to them, cheap guests look for cheap Airbnb though exception exists. Cheap Airbnb will attract a lot of guests. This high turnover rate will add a lot of wear and tear to your rental property, and cheap guests are challenging to handle.

However, if the Airbnb rental is expensive, only those who have money and class would book. It makes hosting very easy by weeding out unruly guests. 

Airbnb Hiding Cheaper Rentals:

Airbnb does not show all the listings in a particular area on its website or app while you search.  There have been cases where we found that Airbnb hides cheaper rentals and prefers to show expensive rentals, though it does not always happen.

Airbnb charges both the host and the guest a service fee, a percentage of the rental cost. The higher the rental price, the more money Airbnb makes on this service fee. So, Airbnb has a vested interest in prioritizing expensive rentals compared to a cheap one. That’s why sometimes Airbnb is costly.

No Discounts:

If a customer continuously uses any single booking site, for example, booking.com or priceline.com, they will offer discounts and loyalty points. It makes a hotel stay cheaper. On the other hand, Airbnb does not provide any discounts or loyalty points. Lack of these makes Airbnb expensive compared to hotels.

Conclusion:

I like Airbnb. It’s helping millions of homeowners. But, the price of Airbnb is getting out of hand. Cleaning fees, taxes, and service charge all these making Airbnb more expensive than a hotel.