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What is an Airbnb and is it right for you?
Airbnb offers London property owners an opportunity to turn their real estate assets into vacation rentals. Underutilised spaces can be capitalised on to offer an alternative to hotels and other traditional short-term accommodations.
The Airbnb platform is used by more than 5 million hosts catering to over 2 billion guests. More than 8 million list their properties on the platform and these are scattered in more than 100,000 cities and towns worldwide.
Since the online platform was created, Airbnb hosts have earned more than $250B (£192B+), thanks to more than 2 billion guest arrivals.
To date, Airbnb remains to be a favourite option for short-term rentals. No matter what type of property you have or whether you can only rent a spare room, you can create unique stays for your guests.
In this article, you’ll discover what an Airbnb is and how it works. You’ll also understand the pros and cons of investing in an Airbnb property and how to make it the right option for your property portfolio’s growth.
What is an Airbnb?
The name Airbnb is a shortened version of Air Bed and Breakfast. Back in 2007, Joe Gebbia and Brian Chesky found themselves strapped for cash in San Francisco. With a local event constantly filling hotels in the community, they decided to rent their floor space. So they got 3 air beds and advertised them on a website called Airbed and Breakfast. Within a week, they booked their first guests for $80 per night.
Since then, properties on Airbnb offered potential guests a more affordable alternative to hotels. It has since grown to be one of the most successful online platforms connecting hosts and guests from all over the world.
As of December 2024, London accommodated approximately 1 million reservations. On the Airbnb website, there are 105,000 holiday rentals in London. 42,000 of these properties offer dedicated workspaces while 33,000 are family-friendly and 13,000 pet-friendly.
These figures reveal the incredible potential of investing in short-term rentals in London and our data at City Relay can support it. Based on our records, the overall short-term rental industry experienced multiple growth between 2023 to 2024, specifically in booking revenue (15%) and total nights booked (11% to 12%).
How Does an Airbnb Work?
Now that you know how promising and lucrative the Airbnb industry is, your next step is to understand how it works. As a business, Airbnb follows a very straightforward process. You list your property on their platform where guests can view it. Once they’ve chosen your property, they can use the platform to book and pay for their reservation. As the host, you can use the platform to communicate until the guests’ arrival, ensuring that their experience is nothing but the best.
Let’s get deeper into how Airbnb works so you can maximise your property’s earning potential through this online marketplace for guests and hosts.
Listing a Property
Airbnb allows property owners to list their properties to provide guests with information that will help them make a booking decision. The detailed listing should include high-quality photos, a compelling description of the local communities, a list of amenities and competitive pricing. The more informative and appealing the listing description is, the higher the chances of getting quality guests to book.
Get expert tips for writing the best Airbnb listings: How to Write a Winning Airbnb Listing Description To Boost Bookings.
Receiving Bookings
As mentioned, once a guest decides to book with you, Airbnb will make the process smooth, quick and convenient. That’s the appeal of booking online through the Airbnb platform. Guests can view different properties and compare them with each other.
This is why you need to be strategic with the details you’ll include in your property’s listing. Highlight your property’s best features so the right guests can choose what meets their needs. Airbnb can put your property in front of the right guests so your property can meet their expectations, leading to a better experience and satisfaction.
Guests’ Arrival and Stay
Airbnb’s reliable communication channel allows hosts and guests to interact before the booking date. This allows you, as the host, to coordinate check-ins (e.g. key lock boxes, smart locks, etc.) and provide instructions to help the guest settle comfortably. They can also make special requests so you can arrange them before arrival.
To make the guest’s stay as pleasant as possible, you’ll have to provide a clear house guide, including building and community rules.
Payments and Service Fees
Airbnb offers an incredible platform, resources and services – and these come with a price. While hosts won’t have to pay anything out of pocket, Airbnb will get their fees through commissions. The platform offers 2 types of fee options.
The first is the split fee where hosts are charged 3% of the booking subtotal (host fee) while the guests are charged approximately 14% to 16% (guest service fee). The second is the host-only fee where the host shoulders 14% to 16% of the booking rate.
Airbnb will handle all payments and they have the infrastructure to secure all financial transactions. Guests can confidently send their payments and you can rely on Airbnb’s efficiency in providing accurate reports about your property’s performance. The platform offers a convenient way to transfer earnings – after they’ve deducted their service fees.
This hassle-free payment and withdrawal process makes it incredibly convenient for hosts and guests. Find out more about Airbnb’s payment scheme: How Much Does Airbnb Take
Reviews and Ratings
Airbnb guests take reviews and ratings seriously. The platform highlights reviews so potential guests gain insights into what type of experience your property can offer. These ratings build over time and will improve your chances of getting more guests to book a stay. It builds trust within the Airbnb community so hosts like you should always strive to get high ratings and positive reviews from guests.
The more bookings, the higher the earning potential. Learn more about boosting reviews: Secure 5-Star Reviews From Tenants And Guests
Pros and Cons of an Airbnb Business
While Airbnb offers an incredible opportunity to grow your property portfolio, probably more than what you’ll get from a long-term rental, it’s still essential to weigh the pros and cons. Understanding the benefits and challenges allows you to maximise your property’s earning potential while mitigating the risks involved.
Pros
Here are the benefits of investing in an Airbnb property.
- Higher-income potential. Airbnb properties generate up to 30% more income compared to long-term rental properties. The shorter stay allows higher nightly rates. The short-term letting model also allows dynamic pricing strategies where you can adjust the rates based on seasonality, market demand and local events.
- Flexibility. You have full control over the availability of your property. Should you choose to use it, you can block off certain dates so guests can’t book them. Airbnb will also allow you to pause or deactivate properties when necessary.
- Property options. Airbnb allows any type of property to be listed. You can list whole apartments (studio, 1-bed, 2-bed) or just a spare room. Whether you have a highrise condo unit or a flat on the ground floor, you can list them on Airbnb to tap into different guest preferences.
- Global market exposure. The Airbnb platform is a global marketplace that can put your property in front of potential guests from across the ocean. This means millions or even billions of people searching for short-term accommodations in London.
Cons
While Airbnb’s model is impressive, it does come with a few drawbacks.
- Strict regulations. This isn’t exclusive to Airbnb. The short-term rental industry faces strict regulations, not just in London, but in other cities around the world. In London, there’s a 90-day limit. Unless you apply for planning permission, you can only have your property rented for a maximum of 90 days per year.
- Income inconsistencies. Long-term rentals offer security when it comes to monthly rental revenue. Short-term rental demand fluctuates due to market trends, local events, seasonal demands and even competition. Make sure you take vacant periods into account.
- Guest management and property maintenance. The short stays mean the guests are not responsible for the upkeep of the property. The frequent turnover means you need a reliable housekeeping service to clean the Airbnb unit and get it ready for the next guests. You also have to deal with guest inquiries, check-ins, etc.
- Service fees. Airbnb provides exceptional service but it comes with a fee. Both the host and guest will shoulder these fees so you have to understand what exactly you’re paying for. These fees can quickly add up and reduce your overall earnings. Consider these fees in your pricing strategy.
Is Airbnb Right for You?
Listing your property on Airbnb opens a global opportunity that could lead to higher occupancy rates and maximum rental revenue. However, it requires special attention and efficient property management skills. You need to plan and strategise your every move so you can enjoy the highest income potential for your property.
Make sure you have a solid understanding of local rules and regulations so your property is completely compliant with every law. Evaluate your property and guest preferences in your area to determine the market demand. If it shows a lucrative opportunity for high booking rates, then Airbnb is the right option for you.
If you want to get started with Airbnb but you’re not sure where to begin, get in touch with City Relay. We excel in property management, specifically in short-term rentals and Airbnb hosting. We’ll help you find the right property management solution that fits your portfolio and investment goals.
