Hosting on Airbnb is a business–and as an Airbnb host–you are a business owner. Before embarking on an Airbnb business venture you should ask yourself several questions:
Is there a market for Airbnb in my area? How much can I charge per night? How often will my listing be reserved? Will it be booked throughout the year, or will it be seasonal? What are my expenses?
Answering these questions will help you conclude whether or not hosting on Airbnb is a viable business venture. In this series you will learn the methods that I use to examine the potential profitability of an Airbnb rental. By using these methods, you will be able to approximate the amount of money you can make renting your house on Airbnb.
Is there a market for Airbnb in my area?
Supply and demand is a basic economic concept that applies to every business. Is there a demand for short-term rentals in your area? Simply put, if no one is searching for rentals near your location then you’re not going to have customers. So how can you determine whether or not people are searching for rentals near you?
The first place you should look is on Airbnb’s website. Go to Airbnb.com and type your location into the search bar. Select a date range (we recommend Friday-Sunday). Then enter 1-2 guests. Click Search.
Airbnb will populate the page with all listings that match your search criteria. Scroll to the bottom of the page and view the total amount of listings. For my area there are 251.
That answers the “supply” side of supply and demand. We have confirmed whether or not there are other individuals in the area renting out their home on Airbnb. But what about demand? After all, having an abundance of suppliers is meaningless without customers.
Scroll back to the top of the page and further inspect the listings. If you look beneath the listing’s featured image, you will see the listing name, room type, and reviews. Examine each listing’s number of reviews. Browse through several listing pages and make note of how many reviews each listing has received. Create an average by adding up all reviews and dividing by the number of listings. I did this for the first page of listings and came up with 33. This means that Airbnb hosts in my area booked an average of 33 listing reservations.
Due to Airbnb’s infancy as a company, you can estimate that most of these hosts have been on Airbnb for one year or less. So Airbnb hosts in my area, on average, hosted 33 times per year. With this being said, you still do not know the duration of each stay, which is how you would calculate revenue generated (number of reservations x nights x cost per night). That’s okay–we’re still only interested in supply and demand.
Now that you know the average number of reservations booked per year, you can further define your potential as a host. What kind of host will you be? Below average, average, or Super Host? Since you’re reading an educational article on Airbnb hosting, I’m going to guess that you’re going to be an above average host.
Scroll back through Airbnb’s search results and find the listings with the highest number of reviews. Now compute an average of the 5 highest-reviewed listings. I got 87. This tells me that the top hosts in my area were booked almost 3 times more than the average Airbnb host. This is where you want to be!
By reviewing the feedback of local Airbnb listings you can better grasp your area’s demand for short-term rentals.
Don’t see a lot of listings or reviews? No worries. This doesn’t mean there isn’t a need for Airbnb in your area! I will teach you how to discover an untapped market.
Pull up Google and type “hotels near me” in the search bar. Scroll down until you see a link that says, “More hotels.” Click that link. Google will generate a list of all the hotels in your area. Scroll to the bottom of the list and see how many pages Google found. There are 4 pages of hotels in my area. That’s almost 80 hotels!
Now ask yourself, would a business person invest over a million dollars in building a hotel if they didn’t believe there was a demand for short-term rentals?
By reviewing your findings you should be able to answer our original question, “Is there a market for Airbnb in my area?”
The next step toward starting an Airbnb business is understanding how much you can charge per night.