How to Start an Airbnb Business | SkillsAndTech

In just one decade, Airbnb has revolutionized the tourism and lodging industries, forcing hotels to offer more services, creating new flights to out-of-the-way destinations, encouraging large groups and families to travel more, and increasing long-term journeys by younger travelers. Airbnb is today one of the world’s most downloaded mobile apps, offering more than 12 million listings in 220 countries. 

If you own a home or residence building, or even just rent an apartment in a potentially appealing destination, you could set up your own Airbnb business and create a steady stream of mostly passive income. Being a five-star Airbnb host isn’t easy, but fortunately you’ve come to the right place, as this step-by-step guide will walk you through the development and launch process that will put you on your way to home-stay success! 

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Let’s get started.

Decide if the Business Is Right for You

You’ll never really know what you’re getting into until you have a bird’s eye view of the Airbnb market. In this section, we’ll cover all the foundational information for starting your business.

Pros and cons

It makes perfect sense to analyze the pros and cons of the industry before you take the plunge. Let’s find out what they are.

Pros

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• More lucrative than renting
• Screen guests to minimize risk
• Property ownership not required in many areas
• You control availability and bookings

Cons

• Success may be gradual
• Irregular, possibly seasonal income
• Risk of property damage

Airbnb industry trends

Airbnb has been so hot that not even the economic downturn related to covid-19 has been able to cool it down. Since the start of the pandemic, home rentals like Airbnb have outperformed hotels in 27 top global markets even though rental prices have increased, according to hotel benchmarking firm STR.

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Airbnb went public in December 2020 and immediately topped $100 billion in value, and its success has helped other home-stay businesses emerge, such as VRBO and Golightly. 

Industry size and growth

• Industry size and past growth – Airbnb bounced back strongly from the pandemic slump and earned almost $6 billion worldwide in 2021, surging past pre-pandemic levels.
• Growth forecast – The broader US vacation rental industry, which includes Airbnb, is projected to grow more than 8% per year over the next five years to reach $21 billion in 2026.
• Number of businesses – There are more than 4 million Airbnb hosts worldwide.

Trends and challenges

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Some of the trends shaping the Airbnb market include:

• Greater interest in cleanliness and disinfected areas
• Alignment with health and safety protocols
• Rise of non-vacation renters, like people who work from home
• Growing preference for unique listings

Challenges faced by the industry include:

• Government regulations
• Damage to property
• Bad reviews

Demand hotspots

• Most popular homes – The most popular Airbnb listings are Zion EcoCabin in Utah, Raven Rock Treehouse in North Carolina, Crow’s Nest in California, The Kingdom A-frame in Burke, Vermont, and The Woodlands House in Sandy, Oregon.

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How much does it cost to start an Airbnb business?

The startup costs for an Airbnb business mainly depend on the number of properties you plan to rent. For instance, it will cost you more to start an Airbnb business with five properties compared to renting out an empty room in your home.

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Whether you rent or own the property, the startup cost for a single unit can be as low as $1,000, or as much as $10,000 or more, depending on the readiness of the space. Here’s a closer look at your likely up-front costs, excluding the cost of utilities, subscriptions, and room or apartment:

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 – $200	$175
Business licenses and permits	$100 – $300	$200
Insurance	$100 – $300	$200
Business cards and brochures	$200 – $300	$250
Renovations	$1,000 – $2,000	$1,500
Furniture and appliances	$3,000 – $4,000	3500
Pantry staples and toiletries	$200 – $600	$400
Website	$1,000 – $3,000	2000
Total	$5,750 – $10,700	$8,225

How much can you earn from an Airbnb business?

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Your Airbnb income potential is practically unlimited! US hosts earn an average of $1,000  per Airbnb booking, so if you’re able to generate 10 monthly bookings, you’d make $120,000 in annual revenue in your first year or two. After expenses, which include utilities, administration, and maintenance, you should expect a profit margin of around 50 percent, which would mean $60,000 in income in this scenario. 

Of course, the higher your occupancy rate, and the more units you make available, the greater your income. You’d have to hire staff, though, reducing your profit margin to 30%.

If you have three units and generate 20 monthly bookings, your annual revenue would be $240,000 and you’d make a tidy profit of $72,000.

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And keep in mind, an Airbnb business can be easily scalable. A young entrepreneur in Myrtle Beach, South Carolina, went, in six years, from renting out her spare room to running 10 Airbnb properties. 

What barriers to entry are there?

The biggest barrier to entry in the Airbnb industry is legislation. In New York, for instance, the Multiple Dwelling Law prohibits renters from renting out Class A dwellings for less than 30 days.

The second barrier is skepticism from potential customers. Staying in an Airbnb might sound off-putting to first-timers, making it difficult for new entrants to win customers in locations where Airbnb is unpopular.

The third barrier is trying to run an Airbnb management company at scale. Unless you own lots of property, finding owners or renters willing to lease out their property for the Airbnb business might be difficult.

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Related Business Ideas

If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.

Hone Your Idea

Now that you know what’s involved in starting an Airbnb business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

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Why? Identify an opportunity

Your direct competition will be other Airbnb hosts in your area, as well as other home-stay options like VRBO. You will also be competing against nearby hotels, resorts, and other lodging choices. 

Providing an excellent Airbnb experience to your guests is one of the most effective strategies to outperform your competition and boost your occupancy rate.

What? Determine your products or services

Once you list your property on Airbnb, you will be expected to do the following:

• Respond promptly to booking requests and guest inquiries 
• Welcome guests and make them feel comfortable
• Avoid cancellations at all costs since they erode your rating 
• Maintain an excellent record to ensure Superhost status and attract more bookings 

You’ll also provide essential amenities and services to your guests, including toilet paper, pillows, towels, Wi-Fi, TV.

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How much should you charge for your Airbnb unit?

The charges for short-term rental services depend on the expenses you’re likely to incur, along with the market trends in your area.

If you’re renting the property, consider the rent amount and monthly overhead costs such as electricity, water, cleaning services, Wi-Fi, and subscriptions. Divide total monthly costs by thirty. The result will be the minimum nightly charge to enable you to break even.

You’ll also want to check out local Airbnb rental rates to help you decide how much you should charge to cover your recurring expenses and make a profit. 

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

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Identifying prospective guests can help you map out how to build a profitable Airbnb business. Also, choosing your target market allows you to know who you’re marketing to and how much they’re likely to spend.

Your primary target market is likely to be travelers under the age of 50, as well as remote workers, and holiday-makers eager to try out the Airbnb experience. Yet as in real estate, location is crucial. People stay in Airbnbs because they want to be close to something, whether it’s a landmark, an appealing city, or specific event or attraction.

Research your town and your area to see what it has to offer, and use this information to determine the people most likely to stay in your Airbnb property.

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Where? Choose your business premises

Location is critical to the success of your Airbnb business. In fact, you can hardly break even if you choose a poor location for your Airbnb startup.

Here are some factors to consider when choosing where to rent or buy an Airbnb unit.

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Closeness to popular attractions: Airbnb occupancy rates are high in areas close to popular attractions such as national parks, amusement parks, landmarks, and beaches. Other factors to consider include the leniency of Airbnb regulations and affordability of management costs. 

Find residential space to rent in your area on Craigslist, Crexi, and Commercial Cafe. When choosing a space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Brainstorm a Business Name

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Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• The name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “Home” or “Stay”, boosts SEO
• Choose a name that allows for expansion: “Jim’s Bakery” over “Jim’s Cookies”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

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Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
• Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
• Product and Services: Describe your Airbnb services and units in detail.
• Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
• Competitive Analysis: Analyze main competitors, assess their strengths and weaknesses, and create a list of the advantages of your services.
• Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
• Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
• Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
• Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
• Appendix: Include any additional financial or business-related documents.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.

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Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to Airbnb listings. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your Airbnb business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

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Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just needs to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

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Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

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Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best options, other than friends and family, for funding an Airbnb business. You might also try crowdfunding if you have an innovative concept.

Apply for Licenses/Permits

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Starting an Airbnb business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

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This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Open a Business Bank Account

Before you start making money you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your Airbnb business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

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Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

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• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.

Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

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You may want to use Airbnb’s preferred software partners, such as rentlio, Beds24, and smoobu, to manage bookings, rates, guests, and payments.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Marketing

Your business will come from online visitors, but still, you should invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness. 

Once your website is up and running, make sure you link to your social media accounts and vice versa. Social media is a particularly good way of promoting your business because you can create engaging posts that advertise your products: 

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• Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area. 
• Instagram: Same benefits as Facebook but with different target audiences.
• Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Book Now.” This can sharply increase bookings.
• Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.

Kickstart Marketing

Take advantage of your website, social media presence, and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include: 

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• Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as the first booking for a given holiday.
• Signage – Put up eye-catching signage at your website. 
• Post a video – Post a video about your Airbnb property. Use humor and maybe it will go viral!
• Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
• Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
• Pay–per-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
• Testimonials – Share customer testimonials about how your Airbnb listing helped them.
• Create infographics – Post infographics and include them in your content.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

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Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your Airbnb meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Some signature USPs for your Airbnb business could be:

• Best deal for a perfect location! 
• High-end furnishings and luxury service
• Fully refundable bookings 

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Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running an Airbnb business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in the home sharing economy for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in Airbnb. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.

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Build Your Team

If you’re starting out small, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for an Airbnb business would include:

• Bookings Manager/Customer Service
• Property Manager
• Marketing Lead 

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter.

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Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Start Making Money!

You’re now ready to start booking guests and making good money! Expect a busy year ahead as Airbnb predicts a strong sustained demand, especially for new listings. In its financial report for Q1 2022, Airbnb says new listings are getting booked faster compared to a year ago. The average time to get a first booking for the majority of new listings is only about a week

​​With careful planning and creative marketing, you should have little trouble capturing a share of the recovering travel industry. Now it’s time to put on a winning smile and launch your Airbnb business!