Table of Contents

What Do OTAs Charge for Hosts?

Guest Fees

Hidden Host Fees

Strategies to Manage Fees

How to Become Less Dependent on OTAs

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What Do OTAs Charge for Hosts?

Online Travel Agencies (OTAs) charge a service fee to both hosts and guests when they book a reservation through an OTA platform. This fee is calculated as a percentage of the booking subtotal (excluding taxes and fees) and most hosts pay a flat rate of 3% of the booking subtotal. Guests typically pay a service fee of around 14% of the booking subtotal. 

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OTAs use the service fee to cover the cost of running its platform, including expenses such as liability insurance, payment processing, and customer support.

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What other fees should you be aware of as a host?

In addition to the service fee,  hosts may also be charged other fees associated with their bookings. These fees can include taxes, cleaning fees, and security deposits. It's important to be aware of these fees and factor them into your pricing strategy to ensure you're earning a fair return on your investment. You can customize these fees in your  account settings.

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Guest Fees

OTAs charge guests a variety of fees that may include occupancy taxes, service fees, cleaning fees, and security deposits. Let’s look at each of these fees in more detail:

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Occupancy Taxes: In certain locations, OTAs may be required by local regulations to collect and remit occupancy taxes on behalf of the host and guests. These taxes may be charged as a percentage of the listing price or nightly rate, and they vary depending on the location.

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Service Fees: OTAs charge guests a service fee that is typically around 14% of the booking subtotal (the nightly rate plus cleaning fee). This fee covers various costs associated with the use of the platform, such as 24/7 customer support, secure payments, and fraud protection.

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Cleaning Fees: Some hosts charge a cleaning fee to cover the cost of cleaning the space before and after the guest’s stay. The amount of the cleaning fee is set by the host, and it can vary depending on the size of the space, the duration of the stay, and other factors.

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Security Deposits: Some hosts require guests to pay a security deposit that is returned after the stay if no damage or other issues occur. The amount of the security deposit is set by the host and can vary depending on the space and the length of the stay.

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Why Hosts Should Be Aware of Guest Fees

As a host, it’s important to be aware of the guest fees, as they can affect the perceived value of your listing and the booking decisions of potential guests. Here are a few reasons why:

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Transparency: By understanding how guest fees work, you can provide your potential guests with a clear and accurate breakdown of the total cost of their stay, including any taxes, fees, and additional charges. This can help build trust and confidence in your listing, and reduce the risk of negative reviews or guest complaints.

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Pricing Strategy: By adjusting your listing price and fees, you can influence the perceived value of your listing and attract more bookings. For example, if you offer a relatively high nightly rate but a low cleaning fee, your listing may appear more affordable and more attractive to potential guests.

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Competitiveness: Knowing how guest fees compare to those charged by other platforms or hotels in your area can help you position your listing competitively and attract more guests. If you discover that your listing’s total cost (including fees) is much higher than other similar listings, you may want to re-evaluate your pricing strategy and adjust your fees accordingly.

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Hidden Host Fees

While you might be aware of some of the more obvious fees, like an OTA's percentage of your bookings, there are other fees that hosts might not remember or think about. Here, we'll take a closer look at some of those less obvious fees so you can be better prepared and avoid any unpleasant surprises down the road.

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Occupancy Taxes

Did you know that many cities and states have occupancy taxes that apply to vacation rental stays? These taxes can range from just a few percent to more than 15% of the total booking amount, so they can really add up over time. Some cities, like San Francisco and Paris, require OTAs to collect and remit these taxes directly, while in other locations it's up to hosts to handle the payments themselves. Make sure to research the taxes in your area and plan accordingly.

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Maintenance Fees

Of course, it's no secret that cleaning you can set a cleaning fee for your space. Beyond that, there are often additional costs that hosts might not consider. For example, you may need to purchase cleaning supplies, replace linens and bedding regularly, and pay for occasional repairs or upgrades. Do some research into average costs for these items in your area so you can set your cleaning and maintenance fees appropriately.

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Insurance

One thing that many hosts overlook is the cost of insurance. While OTAs do offer some protection for hosts, it's important to remember that this coverage may not be enough depending on your situation. For example, if a guest causes damage to your property that exceeds your security deposit or coverage limits, you could be on the hook for the rest. Look into adding liability insurance and property damage coverage to your policy to ensure you're fully protected.

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Credit Card Processing Fees

When guests book through an OTA, their payment is processed by a third-party credit card processor. While this might seem like a minor detail, the fees charged by these processors can add up quickly. Depending on the payment method used, you could be paying anywhere from 2-4% of your booking total in processing fees. Some hosts choose to pass these fees on to guests, while others simply factor them in to their overall pricing strategy.

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Tip: One way to cut down on these types of fees is to invest in a great direct booking website with a modern, integrated payment system.

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Local Regulations and Permits

Finally, it's important to remember that many cities and towns have regulations and permit requirements for short-term vacation rentals. These can include things like zoning restrictions, noise ordinances, and health and safety inspections. Failure to comply with these regulations can result in fines, penalties, or even the loss of your license. Make sure to research the requirements in your area and work to stay in compliance at all times.

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Strategies to Manage Fees

From taxes to cleaning costs, it can be challenging to balance the expense of running your vacation rental with the income you are generating from it. Let’s take a closer look at some effective strategies for managing fees as a host.

Set Competitive Pricing

The key to earning money as a host is to maximize your revenue. The amount of money you earn per night will depend on several factors including location, amenities, and competition. To ensure that you are setting competitive pricing, you should research pricing in your area. Use comp sets and pricing tools to get a sense of what others are charging for similar properties in your area.

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Budget for Expenses

It can be easy to overlook expenses associated with running a vacation rental. These expenses can include cleaning costs, taxes, and utilities, among other things. To ensure that you don’t lose money on your listing, you should set aside a portion of your earnings each month to cover these expenses. This will allow you to avoid dipping into your own personal funds to cover these expenses.

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Maximize Tax Deductions

As a host, you may be eligible for a variety of tax deductions. These can include deductions for cleaning and maintenance costs, repairs, travel expenses, and much more. To ensure that you are taking advantage of these deductions, you should work with a certified accountant who is familiar with short-term rental regulations in your area.

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Take Advantage of OTA Help

All OTAs offer a variety of tools that can help you manage your fees and expenses. The platforms provide hosts with a cleaning fee calculator to help determine appropriate cleaning fees. Additionally, many offers a feature that allows hosts to pass on taxes to guests, ensuring that the host doesn’t bear the entire cost of taxes associated with a stay.

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Be a Smart Shopper

Many hosts invest in amenities to improve their guests’ experience. While this can be a great way to earn more, these expenses can also add up quickly. To save money, you should be a smart shopper when it comes to amenities. This might involve shopping around for the best deals on cleaning supplies or negotiating with service providers to reduce costs.

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How to Become Less Dependent on OTAs

As a host, it can be important to find ways to become less dependent on OTAs and keep more of your earnings if you're looking to run a full time business with your vacation rental.

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List on Multiple Channels

You may list your rental property on multiple platforms. Moreover, you can also create your own rental website or use social media platforms to promote your rental property. This may not only help you reduce the reliance on Airbnb but also help diversify your income streams.

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Market your rental property:

Marketing your rental property properly can help you attract more guests and increase your income. Use social media channels like Instagram, Facebook, and Pinterest to showcase your property and its unique features. Highlight the amenities, activitie, and entertainment opportunities in the area. 

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Make your rental property more valuable:

You can take steps to increase its value and help justify the fees you are paying. Adding and improving amenities, re-painting the property, and purchasing better quality furniture can increase the rental price, justify extra cleaning and maintenance fees, and attract more high-end guests.

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Have An Effective Direct Booking Website

Another way to cut down on these types of fees is to invest in a great direct booking website that is SEO-optimized and utilizes tools to increase repeat guests and enhance customer experience.

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When setting up your website, make sure that it allows travelers to find your website easily, engage more deeply with your brand, locate the perfect property, and book from any device.

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Be selective with your bookings:

If you are receiving plenty of guest requests, it is possible to cherry-pick the guests that meet your preferences. By declining or accepting requests based on your preferences, you can tailor your guests to fit the needs, make the most profits and schedule accordingly. This may help increase the value of your rental property, reduce wear and tear damages, and avoid having to pay for additional cleanings.

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