Cash Flow,  Making Money

How To Maximize Your Airbnb Profit

Airbnbs can be very profitable, but how do you know that you’re maximizing that profit? I like to look at my Airbnbs from three different angles.

The first is to analyze the revenue. How many bookings am I getting? What’s my nightly rate? Are my fees fair and reasonable? Am I missing out on potential bookings with blocked dates or bad cleaning practices.

The second is to analyze the expenses. What am I spending money on? Are there are unnecessary expenses? Can I save money anywhere?

The third is to look at buying more property and having multiple listings. Can I beat the competition in my town? How can I leverage my growing business to save money?

Now I want to go in depth with each of those analyses.

Big stack of coins

Increase Revenue

In general, there are three ways to make more money. The first of these is to increase revenue, which means to make more from the things you already make money from.

If you make money from a job, it means getting a raise. If you make money mowing lawns, it means mowing more lawns or charging more per lawn.

Here’s how you increase revenue for an Airbnb.

Increase nightly rate

If you struggle to get bookings, then it’s probably not a good idea to raise your nightly rate. But if you get plenty of guests, then it’s time to experiment with higher prices.

Kate and I have raised prices on our Airbnbs several times. But what happened?

Nothing.

We continued to book guests like we did with the lower prices. And we made more money.

The most important thing when adjusting rates is to measure how it affects your bottom line. If you raise your nightly rate and begin making less, then you should probably lower your rates again.

Keep in mind that Airbnb is very seasonal. For example, our listings make twice as much money in July, August, September and October as they do in December, January and February. It’s best to compare October 2019 to October 2020.

Clean day of checkout

We get quite a few inquiries for a same day check in. Early on we had to reject a lot of these inquiries because we hadn’t cleaned yet. We got in the habit of cleaning the day before or the day of our next stay.

We started missing out on bookings left and right, and we decided to start assuming that every day we would get a last minute booking request.

So we started cleaning the day of each guest’s checkout.

We’ve probably added 2-3 bookings a month simply by cleaning right after each guest checks out.

Increase cleaning fees

I usually think of cleaning fees as a protection against one night stays. Kate and I do a lot of the cleaning at our Airbnbs and one night stays create a lot of work for us.

By raising the cleaning fees we could at least make more money per night on those one night stays.

If you pay a cleaner then you may think about cleaning fees differently.

Either way, cleaning fees can be something of a half measure if you’re not ready to experiment with your nightly rate.

Extra guest fees

One last opportunity to be compensated for your extra effort in hosting is to add extra guest fees. Your default nightly rate is for one guest. But if there are extra guests you can charge an additional nightly fee for each extra guest.

We take advantage of this because more guests means more beds used, more laundry, more trash, more toilet paper, breakfast food, and ultimately more work for hosts.

If we could adjust the cleaning fee based on number of guests, that might make more sense, but currently Airbnb doesn’t have that option. So we use the extra guest fees.

We charge for each guest over two. So one and two guest stays pay the base nightly rate, but three guest stays get a higher nightly rate. And four guest stays pay a higher nightly rate than three guest stays.

We haven’t experimented much except to increase the extra guest fees. Again, we’ve seen no decrease in bookings when increasing those fees.

Improve search ranking

When a potential guest comes to Airbnb, they type in their location, dates and number of guests, and then Airbnb returns a list of potential matches. Their search algorithm determines who shows up first.

You can improve your airbnb search ranking in a variety of ways. And Airbnb tells us a number of their ranking factors:

  • How often users click on your listing when it appears in a search result
  • How often users attempt to book your place after clicking through
  • Quality of the reviews left by guests you’ve hosted
  • Price to stay
  • New listings get a ranking boost
  • Response rate and response time
  • Rejections (not approving booking inquiries)
  • Instant book
  • Filters (a two guest listing can’t show up for a four guest search)

Airbnb search is pretty complicated, so I wrote an entire article about it.

Get more clicks to your listing

Getting more clicks to your listing is part of the Airbnb search algorithm, but it also merits its own section in this article.

If you book 5% of your clicks when you get 100 clicks per month, then you’ll almost certainly get more bookings if you can get 150 or 200 clicks per month.

The best way to get more clicks is to have a better cover photo.

A good cover photo needs to include the property (inside is better than outside), it shows off the best part of staying in your place, and it should draw the eye. The perfect cover photo draws someone’s eye and makes them think “I want to stay there!”

Close better

If you can get more bookings by getting more clicks, then you can definitely get more bookings by converting more of the clicks you do get into bookings.

What I mean is if you turn 5% of your 100 clicks into bookings, then maybe you could turn 7% of your clicks into bookings.

Your cover photo got this potential guest to look at your listing, but it’s your supplemental photos, your reviews and your amenities that seal the deal.

You supplemental photos need to show off everything your listing offers. If you have an awesome view, or you’re close to attractions or have lots of amenities, this is the time to show it.

Getting good reviews is mostly about wowing your guests with thoughtful touches. Welcome notes, coffee bar, restaurant recommendations, breakfast and games are just a few of the ways to make your guest’s stay special.

Cultivating a long list of amenities is great for guests because almost every guest will have what they need. But it’s also great for search. Potential guests can filter by amenities, and having a long list can make sure you don’t get filtered out of the search results.

Decrease Expenses

The second way to maximize your Airbnb profit is to decrease your expenses. Your main expenses running an Airbnb are utilities, supplies, mortgage, insurance and taxes. You may also pay for repairs and maintenance on the home.

Here are some ways you can save money on those expenses.

Buy a router

Our internet service provider charges us a monthly fee to rent a modem/router from them. But they also allow us to provide our own modem and router so we can eliminate that monthly fee.

For us, we spent about $150-200 in order to replace a $10 per month fee. That’s somewhere between a 60% and 80% cash on cash return. That’s significantly better than most of our investments.

It might not seem like much, but an easy $10/month is worth it in my mind.

Smart thermostat

One way to save on heating and cooling expenses is to invest in a smart thermostat. We use the nest.

Admittedly, I haven’t gotten into all the features offered by the thermostat, but there are two features I love.

First, I can adjust the thermostat from my phone, which can be done from anywhere. If we are on vacation and a guest checks out, then I can switch the thermostat into energy saving mode and immediately start saving money on my heating or cooling.

Second, the nest is programmable. You can schedule your nest thermostat. I can look at my Airbnb calendar ahead of time and schedule when I want the temperature to raise and lower.

If it’s winter, then when a guest checks out I don’t need to keep the temperature at 72 degrees Fahrenheit anymore, it can drop to say 60 or even 55 degrees.

I’d love Nest to integrate with Airbnb calendars, but as far as I know that’s not currently possible.

Buy in bulk

Another major expense for us is all the supplies we purchase. We buy toilet paper and paper towels, breakfast food, coffee, creamer, soap, shampoo, detergent, fabric softener, and a handful of other supplies.

These expenses add up.

In fact we generally spend $100-200 per month in supplies. But we can lower the average cost per month of these things by buying in bulk. We have a Sam’s Club membership. So we can buy hundreds of rolls of toilet paper at one time, and hundreds of coffee pods, and giant tubs of laundry detergent. You get the idea.

It’s just a way to reduce the amount your spend on supplies by 20%-30%.

Energy audit

Our city offers free energy audits. They send a city employee to your house to identify inefficiencies in your energy usage.

They’ll report places where there’s airflow to the outside. They’ll check your insulation and verify that it’s doing its job.

For us, they gave us a full printout of everything they found. We were able to tackle a few of the items for free that help us save money every month on heating and cooling. Some of the other items were more expensive and we ignored them.

But it was nice to have a list of ways to lower our utility bills (for free!). You can choose to address them or leave them alone.

Shop for insurance

I like to check my insurance rates every two years or so. Sometimes your insurance needs change and other times you can simply find a better rate.

Insurance can often cost as much as your supplies or utilities.

If you check on your home insurance every few years, make sure you’re getting a competitive rate.

Scaling (Add More Properties)

The last way to maximize profit is to create new streams of income, and for Airbnb that means new listings. Kate and I continue to add new properties to our Airbnb investing strategy, and soon we will be buying property outside our home town.

Obviously, buying a new property can increase profit, but in order to maximize our Airbnb profit we need to take advantage of having multiple properties.

Here are some things we’ve done so far.

Automated messaging

Communicating with guests and leaving reviews takes up a lot of time, even with just one property listed. We pay $5 per month for each of our listings to use the hosttools.com automated messaging.

It allows us to immediately respond to new bookings, send check in instructions a few days before a guest arrives, check up on guests who are staying multiple nights, complete a generic 5 star review and request a review from guests.

It does a lot for us. Many things that we never did before (like asking our guests to review us) are now done automatically.

$5 per month may seem like an expense, but considering some of the factors used to determine search ranking are response rate and reviews, we feel that this expense is paying for itself many times over.

Honestly, I would pay for this service if I only had one Airbnb.

Shared Netflix (and other stuff)

We provide Netflix for our guests, and with each house we list on Airbnb, our average cost for Netflix goes down. We pay for the multiple screens so we can have a screen for Netflix in each house.

You can do the same with other services as well. You may even be able to get multi-house discounts or deals with your internet service provider.

Hire a cleaner

When you do all the cleaning for your listings, you sometimes end up having to block off days. If you go out of town or if you have too many flips to do on the same day, you’ll have to block off dates and miss out on some potential bookings.

When you have 3 Airbnbs, it’s time to hire a cleaner. At that point you should be able to keep the cleaner relatively busy, even in the slower months.

Conclusion

In order to maximize your Airbnb income, you should focus on three areas:

  1. Increase revenue
  2. Decrease expenses
  3. Acquire new property

Keep track of all these things and do some experimentation. Fiddle with your prices and fees. Try a new cover photo. But make sure you know how those changes are affecting your bottom line.

Keep the things that work and throw away everything else.

Happy investing.

Michael

I'm living the path to financial success and sharing everything I learn in this blog. I believe in the power of cash flowing investments, due diligence and time. This is my journey so far.

Before 2016: Just living my life, working full time and trying to get by.

2016: Kate and I start to discuss the possibility of getting into real estate investment. We read books like Rich Dad Poor Dad and listen to the Bigger Pockets Podcast. We find a Realtor and start looking at property. We even make an offer or two, but nothing happens.

2017: Kate and I continue looking for property. We meet with banks and find lenders willing to work with us. In one month (August), we turn our basement into an Airbnb and list it AND we purchase our first long term rental property, which is a triplex. We can't find good tenants for our triplex.

2018: In April, we finally get our first tenant in the triplex, our second in June and get it fully rented in July. Our basement Airbnb makes so much money that in September we decided to buy another property to exclusively rent out on Airbnb. It makes us even more money than the first one!

2019: Kate decides we should put together a mastermind group. So we get in touch with people we know who care about money and start sharing knowledge with each other. Our triplex is profitable, but our two Airbnb properties are making way more money, so we buy another property to put up on Airbnb and VRBO.

2020: Coronavirus hits in March and all the guests booked at our Airbnb properties cancel. We freak out, but after a few weeks everything comes back and we're making money again. Discussion and research from the mastermind group makes me want to investigate online business as an investment strategy. Kate and I started Unbound Investor with plans to purchase a website in 2021.

2021: Our Airbnbs hit new highs after Covid causes more travelers to be wary of using hotels. I spend about 6 months attempting to purchase a million dollar online business with an SBA backed loan only to have the deal come crashing down at the last minute. The experience makes me re-evaluate and I ended up purchasing a small blog instead. I also start a new website. At the end of the year I begin hiring writers and investing in online content in order to grow the online revenue of my 3 websites.

OK you're all caught up!

I learned everything I know from books, podcasts, conversations with friends and family and of course through real world experience as a cash flow investor. And I'm always pushing to learn more.

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