I used Airbnb for the first time when traveling to northern California this past winter. The sign up process was free, fairly straightforward, and I assumed I would be paying less for decent accommodations than I would otherwise pay at a hotel. After reviewing many places together with the ‘Host’ profiles, I chose a place that also had sixty-five positive (and no negative) reviews.
Within ten minutes of arriving, I decided to leave. Because the place I booked was in the middle of a construction zone operating from 7:30 a.m. to 6:00 p.m., with a condo being built on one side and a two-story home razed on the other. And the place had a putrid odor throughout, as if the owner’s preferred air freshener was Lysol. And the windows didn’t open. And there were giant cans of Raid strategically placed in each room. I took this as a hint that I was sharing residence with a family of monster spiders that regularly consumed other large insects or small rodents.
Okay, listen, complaining isn’t my thing, and I’m sure I would have survived, maybe leaving after one week with a minor respiratory ailment or pounding headache. But I wasn’t there to survive and pop Tylenol like candy. Rather, when I’m on vacation I like to relax, leave my worries behind and, importantly, not be concerned with losing a finger tip to a hungry rat.
So I checked out of Lysol Central and into a comfortable hotel that revealed no obvious signs of endangering my health; a perfectly pleasant non-hostile environment that I have come to associate with the word ‘vacation’. And for this decision I paid a hefty financial price, having forfeited my pre-payment to Airbnb and having to cough up for hotel costs. Oh well. I placed this experience in the ‘live and learn’ category.
Pay Now and Receive Discount, or Pay Later?
When reserving a hotel room, there’s often a choice between the pay now and pay later option. Pay now and receive a small discount on total room price in exchange for your payment being non-refundable. Pay later, forgo the discount, and receive the twin benefits of being able to cancel your reservation within 24-48 hours of reservation date, and not paying for your stay until check-out time.
As a vacationing consumer, I like maximum flexibility when it comes to making payment because you never know what twist or turn life will take. So I typically forgo the room discount.
For me, paying a slightly higher rate and retaining the option to cancel my reservation is like taking out an insurance policy; I’d rather pay a bit more up front than get stuck with paying for a week’s worth of a hotel room that I didn’t use because, for one reason or another, plans changed.
Airbnb’s Awful Refund Policies
Airbnb has six different refund policies. This is ridiculous in itself. One simple policy would surely suffice. Anyway, I digress.
Back to the Lysol experience, I could have contacted Airbnb and complained and asked for my money back. Then Airbnb would have contacted the Host to request their feedback. Based on information received from the Host and myself, Airbnb would then decide whether to issue a full or partial refund.
Did I want to be involved in a drawn out bureaucratic tangle? With me being a first time ‘Guest’ on Airbnb, and the ‘Host’ having sixty-five favorable reviews, I chose to eat the loss and avoid the prolonged nonsense of petitioning for a refund.
And even if I did receive a full refund, Airbnb would keep applicable taxes. What?! That’s right. Let’s say you pay $1,000 for your stay. Taxes are 12%, which works out to $120. So your cost with taxes is $1,120. It’s established that you’re entitled to a refund of $1,000 but Airbnb will keep $120 paid toward taxes because … why???
Because they can. Because they’re a company valued at more than $30 Billion (USD) and their heft and popularity means they can set the terms.
How Airbnb Makes Money
As the facilitator, the middleman, Airbnb occupies a sweet spot, taking money from the Host and Guest.
Guest Fees. When I booked my reservation, the daily cost was $175 @ seven days for a total of $1,225. When I went to the payment page, here’s what I found:
$1,225 + $147 (Airbnb service fee) + $250 (Host cleaning fee) = $1,622. And taxes on top of that. And this is typical, with Guests paying between a 5-15% service fee to Airbnb. (note that Hosts can charge whatever the market will bear re: cleaning fees).
Hosts Fees. Hosts pay a 3% (of reservation cost, before fees and taxes) service fee for each reservation.
Currency Exchange Rate. This is one you may not know about. Let’s say you’re an American resident traveling to Europe. When you book that ever so charming Parisian pied-a-terre, your credit card will be charged in Euros. And Airbnb will determine the currency exchange rate from USD to EUR. Well, just know that you will not receive a rate of exchange beneficial to you, and Airbnb is making money off the currency conversion.
Foreign Transaction Fee. As if it’s not enough to swipe a piece from the currency exchange transaction, Airbnb charges a separate 3% currency conversion fee. Why? Absolutely no reason other than a cash grab; there are no additional costs incurred by Airbnb to accept payment via credit cards issued in different currencies.
Buried Treasure. I booked my trip to Lysol Central in October for a vacation that was to happen in March. Per their policy, Airbnb demands full payment up front so my credit card was charged immediately upon booking. But here’s the beautiful catch, as far as Airbnb is concerned: they don’t remit payment to the Host until 24 hours after the Guest checks in. Meaning, Airbnb held my money for more than five months.
What’s the big deal, you ask? In the interim, between the time that the Guest makes payment and Airbnb releases payment to the Host, Airbnb invests this money. I can’t tell you how these funds are invested or how much they make off of other peoples money because that information is held tight to the collective chest of Airbnb management. But I’ll say it’s fair to assume that, with more than 80,000 rooms booked every day (and growing) on Airbnb, and likely millions of dollars arriving daily in their accounts, they’re making some serious coin from investing your money.
Who Cares? I Love Airbnb!
‘Listen Ralph Nader, what you’re saying is all well and good and informative but, really, do I care? You’re talking about a for- profit company providing a service that I choose to take or leave.’
Correct. Oh, and I’ll take the Nader reference as a compliment. Because part of my purpose here is to inform readers, to empower them with knowledge that allows for better decision-making. And knowing how a company operates, where your money is going, and what are your choices, falls under my self-appointed mandate.
So, yes, as you may have gathered, I’m not a fan of Airbnb. Its payment policies are too restrictive, and what you see in online photos is not necessarily what you get, no matter how many fawning reviews a Host receives ( … reviews are another game – both Host and Guest want to give each other positive reviews. Host, because they want to attract more Guests. Guests, because they want Host to speak well of them so the next Host they choose will review what others have said and agree to rent their place to the Guest).
For our next vacation, if I don’t book a hotel room, I’ll be using Vacation Rental By Owner. VRBO is sooooo much easier to navigate. They don’t take full payment up front, instead asking for partial payment immediately (a deposit) and the balance sometime before arrival date. And if I have to cancel, the refund is issued by the Owner, not VRBO and, unlike Airbnb, I may actually receive a 100% refund.
But what it comes down to is this: I like to know what I’m paying for, and I prefer to give my business to companies that not only offer consumer friendly policies but also offer transparency as to how they go about conducting business. And now that I’m sufficiently informed about Airbnb, I choose to give my business to their competitor. That’s my choice and my right as a consumer.
Happy travels to you, wherever you stay!