Is Airbnb cheaper than renting?

When you’re planning a vacation, costs can add up quickly if you’re not careful. You want to get the best bargains on basics such as accommodations and transportation so you can splurge on the experiences that make memories – fun activities, special meals, and maybe even a few souvenirs. Busbud has you covered when it comes to finding deals on bus tickets in cities around the world, so we wanted to explore the cost of accommodations. We analyzed 220,000 Airbnb listings worldwide as well average hotel rates from one of the largest hotel booking websites in the world, Hotels.com, to find out if Airbnb or Hotels are a better deal in major cities around the world.

Travellers have no shortage of options when it comes to finding a place to stay. Along with going the traditional route of booking hotel rooms, many people are turning to Airbnb: an online community marketplace (aka “home-sharing” site) where people can list and book various types of short-term accommodations around the world. We decided to compare the average costs of hotel and Airbnb rates in 22 cities around the world to see how the deals stack up. Read on to see what we discovered.

Comparing hotel and Airbnb rates across the U.S. (as well as in Toronto, Canada’s largest city) yields interesting results. Airbnb prices are more competitive in seven of the 12 cities we examined. Overall, Airbnb wins the price war in the Northeast and Pacific Northwest, while hotels fare better in the South.

In some cities, the difference in price is dramatic. For instance, in Toronto, a hotel room costs about 50% more than an Airbnb stay on average. However, in Austin, the average Airbnb rate runs 57% higher than a hotel booking. Interestingly, Austin is the headquarters of HomeAway – one of Airbnb’s main competitors.

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But is staying in an Airbnb really cheaper than a hotel?

Want to lower the price of your next trip? Lodging is the best place to start. After all, it’s the cost you can best control. Sure, you can hunt for the best airfare or use travel rewards programs to save money, but ultimately you’ll find the greatest price variation and number of choices when you look for a place to stay. And while you may assume that Airbnb will beat competing hotels on price every time, the answer is more nuanced. Read on to discover the pros and cons of both options, as well as how much you can save in a variety of situations.

Last-minute stays

Whether it’s an impulsive weekend getaway or a long road trip you don’t want to plan in advance, a hotel is your best option for short-notice reservations. If you have enough time, Priceline’s “name your price” feature can still score you an incredible deal because hotels will let unsold rooms go for a song at the last minute.

Plus, hotels are conveniently located along major highways, and you can always walk right in to request a room. Unless there happens to be a popular sports game or other event happening on the day you’re in town, it should be easy to arrange a last-minute stay.

Airbnb has two kinds of reservations: “Instant Booking” and “Request to Book.” Both allow you to view a calendar of current availability, but in the second case, you have to wait to hear back from the host. In either case, your ability to make a last-minute reservation will depend on availability. In many Airbnb listings, I browsed, there were no open nights for at least a few months.

How much can you save?

Airbnb’s prices are generally stable, though I did see a “Memorial Day Weekend sale” offered for one listing. Whether you book last-minute or well in advance, you’ll pay the same rate. On the other hand, hotel room rates go up or down based on the day of the week and the time of year. If you book a last-minute stay on your computer (instead of just stopping at the first hotel you see), you’ll be able to compare the shop for the best rate.

Family travel

No matter how much of a deal you find on an Airbnb pad, you could end up paying more if your toddler breaks, stains or otherwise disfigures someone’s furniture or a family heirloom.

If you have children under 4, you’ll either need a crib or a bed big enough to fit the whole family. Most hotels will provide a free crib upon request (ask in advance to make sure there won’t be a charge), whereas you’ll probably have to bring your own to an Airbnb rental. If you don’t already own a travel crib, you’ll have to purchase one, and you may have to pay extra to check it on the plane (strollers and car seats can usually be checked at the gate for free).

Pets are another issue. Many hotels will let your pet stay with you, but it could be harder to find an Airbnb host who doesn’t mind hosting your dog or cat.

On the other hand, hotel rooms are pretty small and could feel claustrophobic for a family, especially for a longer trip. If you rent a whole house or apartment through Airbnb, you could get the same amount of space your family is used to having at home.

How much can you save?

Finding a hotel that will provide a free crib will save you about $100 to purchase a new travel crib (plus mattress and sheet). The checked baggage fee will vary by airline.

Reliability

Hotel chains offer a consistent experience. Whichever brand is your favourite, you know what to expect, and the quality is the same every time. If something does go wrong, the person at the front desk will answer your call any time of the day or night.

And however far in advance, you reserve your hotel room, you don’t have to worry about losing it right before your scheduled to leave. An Airbnb host could cancel your reservation any time for any reason.

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How much can you save?

If you choose a hotel over an Airbnb for the sake of reliability, you may end up paying more. However, you could save a lot of time. It’s not easy to browse through Airbnb’s many listings to find one you like that’s actually available when you need it.

Also, if your Airbnb reservation were cancelled at the last minute, you could end up spending more money to find a substitute. And if you show up and don’t find the Airbnb suitable, you may not get all of your money back.

Rewards programs

If you participate in one or more travel rewards programs, you can redeem your points for a free or discounted hotel stay. And your reservation will help you accumulate more points for future use.

How much can you save?

Depending on how often you travel and how many points you’ve accumulated, you could receive a discounted nightly rate or even a free stay at a hotel.

Airbnb doesn’t have a loyalty or rewards program. You can save money by inviting friends to use the site. For every friend who travels through Airbnb, you’ll receive a $27 credit toward your next reservation. If any of your friends become hosts, you’ll get $80. 

Privacy

You’ll pay less for a private room in someone’s house than to have the whole place to yourself, but you’ll lose some privacy. Yes, hotel rooms come with shared walls, too, but you don’t have to share any of the living space. Even in common areas where you might encounter other travellers, you won’t be expected to make small talk or otherwise engage. So if privacy is something you don’t want to compromise on, a hotel room will often be cheaper than renting a whole apartment or house.

How much can you save?

A lot, if you don’t mind sharing living space. My husband once paid $30/night to stay on someone’s sleeping porch in upstate New York. Even the cheapest budget motels don’t have rates that low.

Location

In less desirable (i.e. popular and tourist-y) locations, you’ll probably find the best deal with a hotel.

For example, let’s say I want to visit my friend in Hillsborough, NC. It’s a small town, but still, there are two hotels near the downtown: a Holiday Inn where the lowest rate is currently $94/night and a Microtel with the hard-to-beat rate of $64.99/night. Having personally stayed in the Microtel before, I can assure you that while it lacks amenities such as a pool or lobby bar, it’s a perfectly nice place to stay.

An Airbnb search for Hillsborough turns up more options, but only one listing—a studio apartment within a larger house—is cheaper than the Microtel. Alas, the studio has a 7-night minimum stay, so it’s not an option for a shorter visit.

A few studies have been done in the past few years to see whether Airbnb is always cheaper than a hotel room. A study by Priceonomics in 2013 found that it was 21 per cent cheaper to rent out a whole apartment on Airbnb than get a hotel room, and 49 per cent cheaper to rent out a private room. However, a study in 2016 by Busbud had more mixed results: Overall, Airbnb stays were cheaper, but there were several major US cities (like San Diego and Nashville) where a hotel room was significantly less expensive than an Airbnb, or the cost was about even.

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How much can you save?

In terms of location, Airbnb can give you a deal on lodging outside the city centre. Most hotels are concentrated near airports and within a city’s central neighbourhoods. If you’re willing to stay off the beaten path and take public transportation, Airbnb is the best option. For example, on a trip to London, I stayed in an Airbnb apartment in a quiet neighbourhood outside the central tourist areas. The apartment was cheaper than a hotel room and riding the tube was such a pleasant experience that I didn’t mind the extra travel.

Amenities

Many people cite the use of a kitchen and washer/dryer as reasons to stay in Airbnb lodgings. After all, if you reduce the amount of restaurant dining you do on vacation, you’ll save money. You can also save on checked baggage fees if you only pack a few items of clothing and wash them for free throughout your trip.

My only advice is to ask yourself how much you’ll use that kitchen. I’ve rented apartments instead of hotel rooms for the same reason, only to discover that I didn’t want to cook on vacation.

How much can you save? 

Buying ingredients to cook at home is at least half the cost of purchasing prepared food or eating in a restaurant. Even if you only eat one meal a day at home, the savings will add up.

Hotel or Airbnb? It comes down to emotion and practicality

While some people want the comforting familiarity of a favourite hotel brand, others crave the charm of a unique home and want to “live like a local” on vacation. Still, others are simply looking for the best deal in order to afford their trip. This blend of emotion and practicality will ultimately determine your choice between a hotel and Airbnb. Which option do you prefer—or does it change with each trip?

Airbnb vs Traditional Renting: Rental Income

In order to analyze Airbnb vs traditional renting in terms of generating positive cash flow, we need to break down their rental income. Airbnb’s high nightly rate does not only allow you to generate double or triple the amount you make with traditional renting, but also let you rent the property for short periods of time, giving you the chance to have more guests throughout the month and constantly check on the property’s condition. Airbnb’s policy requires guests to pay money in advance by holding the amount of money on guests’ bank accounts when they book and directly transfers it to the host’s bank account once they check-in. This is a great benefit for Airbnb’s hosts and secures their right. However, in traditional renting, you have to always check with tenants to make sure they pay their rent every month. Another way of making extra money with Airbnb vs traditional renting is that with Airbnb, you can make money off of cleaning fees. Traditional renting for long periods of time does not usually require cleaning fees; however, this is not the case with Airbnb as most hosts require cleaning fees as part of charging guests to clean the rental, allowing investors to make extra money. For example, if you rent out your investment property 37 times per year and you request $55 as cleaning fees every time, you can make up to $2,000 a year as cleaning fees, and most Airbnb guests are used to pay for these fees.

Airbnb vs Traditional Renting: Insurance Policy

When comparing Airbnb vs traditional renting in terms of insurance policy, one disadvantage of having different guests throughout the year in Airbnb rental properties is that the possibility of damaging the rental goes up, which consequently increases damage and maintenance costs. On the other hand, having a constant guest during a one-year lease does not necessarily ensure the property’s protection. Most hosts of traditional rentals require a security deposit which equals a payment of a month, and they might have a commercial insurance policy that would cover damages’ costs. Some hosts on Airbnb also require a specific amount of money to go towards a security deposit. Still, many of them do not usually interact with guests face to face and do not ask for a security deposit. However, as a host on Airbnb, you have a one-million-dollar insurance policy that comes with hosting account for damages’ costs. Airbnb also gives you the chance to use its reviews’ system to inspect your guests somehow and see what type of lodgers they are, which the traditional rental system lacks.

Airbnb vs Traditional Renting: Occupancy Rate

One of the biggest advantages of traditional renting is that hosts secure occupancy for relatively long periods of time, and this is not the case with Airbnb because guests mostly use it up to one week or so. With Airbnb, you might have a full booking for one month and no booking for another, depending on the season. Although occupancy rate on Airbnb relies heavily on the location and whether the area is close to tourism sites, shops, restaurants, and beaches, Airbnb hosts can be really smart about it through working hard to market for the property, keeping it clean and tight, taking good photos, and uploading them on Airbnb with creative and eye-catching description. Airbnb hosts should put great attention on getting good reviews from guests because Airbnb users rely heavily on reviews to evaluate the property before booking it. These factors play a huge role in increasing Airbnb occupancy rate throughout the year, ensuring the consistency of generating positive cash flow for the host and a higher turnover rate. However, consistency of having lodgers increase the pressure on the host to prepare the property and ensure its cleanliness and tightness, but if the real estate investor is making double the traditional rental income, it is worth the efforts and time.

Airbnb is one of the biggest drivers of over-tourism. It has created a lot of new accommodation for travellers, which in turn contributes to higher tourism numbers.3 On the one hand, that’s good: cheaper accommodation = more tourists = more revenue. But, when unregulated and combined with the issues highlighted above, increased tourism kills the very places we love. It becomes a vicious cycle: more tourists = more money = more properties on Airbnb = fewer local residents. However, thankfully, as I highlight in this article, a lot of locales are fighting back and beginning to restrict the service.

Moreover, the company doesn’t take action against hosts behave badly. From spying on guests to denying last-minute bookings to substandard conditions to fake reviews, complaints against hosts go unattended until they become news stories like this:

  • Airbnb quietly shut down a top host amid scathing reviews, but hundreds of guests were left to stay with him
  • Airbnb Has a Hidden-Camera Problem
  • A disturbing video of a violent Airbnb host is reigniting fears of racism in the sharing economy
  • ‘Which monkey is gonna stay on the couch?’: Airbnb host kicks out black guests in racist exchange
  • British couple spends $11,800 on Airbnb rental in Ibiza that doesn’t exist

As such, I’ve found the customer service to be really terrible and slanted toward hosts. There are a lot of protections for hosts but not guests. If I cancel, I have to pay a fee. If the host cancels, there’s little punishment. When talking about my recent experiences with Airbnb on Twitter and Facebook, I found I was not alone. A lot of people have noticed a decline in the quality of the service lately. They still use it, but I was surprised that so many people didn’t do so as much as they used to.

When it comes to the question of whether Airbnb yields higher rental income compared to traditional renting, there are reasons and factors more than the eye can see. Airbnb as a rental strategy does not generate higher rental income by itself, as it depends tremendously on the location of the investment property and the willingness of the investor to market the property, get good reviews, and take advantage of the Airbnb rental strategy. If these factors are met, the comparison, as mentioned above of Airbnb vs traditional renting with regards to generating rental income will prove that Airbnb yields higher rental income.

If you decide that Airbnb rentals are the right investment strategy for you, check out what’s needed and required to become an Airbnb host.

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L'Barza Apartments offer short and long term accommodation for those who are looking for a superior level of accommodation, service and quality in Shepparton. We are a little different than other serviced apartments, in that you feel at home from the moment you arrive, as you don't walk into a reception or lobby area.

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