Welcome to brain Stuff production of I Heart Radio. Hey brain Stuff, Lauren Vogelbaum here. If you've used a travel rental service like Verbo or Airbnb recently, it's possible you were hit with a bit of sticker shock at booking time.
The nightly rental fee is but one part of the equation, with cleaning fees, service fees, and occupancy taxes jacking up the bill big time by hundreds of dollars per night in some cases, and since these other fees aren't added until the end of the checkout process, they can come as a nasty surprise to renters who feel they were lured in by the low nightly rental fee. This change is partially due to changes in the way these services
are being used. Not that long ago, vacation rentals found through these services were intended for backpackers, broke college students, and people who otherwise needed places cheaper than hotels to crash for a few days or months. Often this involved a little more than a bedroom bathroom combo and then otherwise occupied home or a temporarily unoccupied apartment. Though such rentals are certainly still available, the model has changed tremendously.
Business Insider article reported that Airbnb's average daily rates had grown by thirty in the first quarter compared to and as we'll see, daily rates affect all the other charges down the line. Too. Many the fees are anything but clear cut. Here's a breakdown of feeds you can expect to pay. First, there are those nightly fees. These are set by the rental host, each of whom has a
slightly different way of setting the price. For the article, this episode is based on how Stuff Works spoke with Aaron Turner, who uses both Airbnb and Verbo to rent her cabin in Tennessee. She said, I know what my break even point is for the year, and that gives me a base rate I have to charge per night
at so many nights rented per year. From there, I have to determine what portion of the rate will go to online booking agents Airbnb, Verbo, trip Advisor, booking dot Com per night and account for that when pricing the room. She also factors in the costs of maintenance, utilities, booking software, insurance permits, and other normal business expenses. Then there are
cleaning fees. These are also set by hosts and typically are the same per length of stay whether you rent for one night or seven, so cost efficiency really depends on the rental period. Enhanced five step and more expensive cleaning protocols necessitated by COVID nineteen have made these more expensive, and of course professional cleaning rates vary widely by location and the size of the rental. And next, there are service fees meant to cover many of the costs of
operating these services. On its website, Airbnb explains that it generally charges guests a fee that's less than fourteen point two percent of the total nightly fee plus the cleaning fee plus any additional guest fees. That's up dramatically from six point six percent as of and it can go as high as eighteen percent. The hosts themselves are generally charged in additional three to five percent fee as well,
which mostly discovers the costs of credit card processing. Verbo has a similar service fee structure of roughly nine to how staff works also spoke with Verbo representative Alison Quong. She explained verbos traveler service fee varies depending on the cost of the booking. Generally, the higher the reservation amount, the lower the percentage of the fee. Additional fees like pet fees may apply as well, depending on the specific
circumstances of your rental. But finally, there are local lodging taxes. These are added to the bill where there are laws requiring vacation rentals to pay tax. How staff Works also spoke via email with vacation rental industry expert T bout Mason with rentals ail up dot com. He said, a few years ago, a lot of hosts were forgetting to pay local taxes. They were supposed to take them out of their Airbnb revenues and transfer them to the local
tax authorities. Under the pressure of municipalities, Airbnb has started collecting taxes directly from guests and sending the money to tax authorities, So guests may also see an increase in the overall cost of their Airbnb as things are done more legally these days. These occupancy taxes are not set by the service, but by the local government. They are often the same rates that apply to hotels in the area.
So with all of these fees in place, would it be cheaper overall to go to a hotel as opposed to a vacation rental And that depends a study by Inner city bus company Bus bud found that airbnb prices were better than hotels in seven of the twelve US cities and in eight of the nine European cities it looked at. So the short answer there is to do your research, take into consideration that the type of hotel and the type of rental you're looking at may not
be directly comparable. Unfortunately, there are some ways to save or at least make the most informed choice possible. How Stuff Works also spoke with Ann Cross, owner and operator of two Airbnb rentals. She said the way to beat the system is to essentially ignore the nightly rates posted on an Airbnb listing and look instead at the overall rate. This is because Airbnb at least gives higher ranking to properties that use their recommended pricing format, which is often
much less than what the market calls for. She says. These hosts may then make up for the loss of revenue by charging exorbitant cleaning fees. Across said the key if you're looking for an affordable Airbnb is to plan to spend some time browsing properties and skip to some of the properties further in the results. They may be a better overall deal, but because they're not playing the rate game, you won't necessarily see them in the top
search results. Another way to save can be by cutting out the middleman and booking directly through the rental property, although you'll have to seek out its website or phone number on your own, and the booking may not come with services comparable to what companies like Verbo and Airbnb guarantee. Again, be prepared to do some leg work and make sure you're comparing apples to apples. Today's episode is based on the article why have Airbnb and Verbo prices suddenly skyrocketed?
On how stuff works dot Com, written by A. Leah Hoyt. Brain Stuff is production by Heart Radio and partnership with how stuff Works dot Com and is produced by Tyler Clay. For more podcasts my heart Radio, visit the I heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows.