Do you want to start an AirBnB business without owning a house? If YES, here is a detailed guide on how to start an AirBnB business with no money / experience plus a sample AirBnB rental business plan template.
An Airbnb business is known to provide guests with a place to stay within a person’s home. Many travellers in this modern age are looking for lodgings that are a little more personal and unique. Airbnb rentals provide this home feel. Guests may stay as short as one or two days or extended stays of up to two weeks.
Owning a business similar to an AirBnB can be fun. Surely, you will be earning a profit, but you will also get to learn about various cultures while you make money.
What It Takes to Open an AirBnB Business
Starting an AirBnB related business is also not too difficult, however it requires that you maintain a diligent attitude in every step you take. This sort of business needs hospitality knowledge, organization skills, business acumen and good communication.
It will also be dependent on customer satisfaction, so if you are not a people person, you may find that it is not a suitable profession for you. Many people start hosting on Airbnb as a side hustle, which is a good way to gauge if you enjoy the day-to-day management of an Airbnb business.
Traditional real estate investors are called landlords. In Airbnb you are called a host. This means you are in the hospitality business. Your success is not just based on providing a nice place to stay. It is also based on your ability to provide a great experience.
How Much AirBnB Owners / Hosts Make Monthly?
If you are looking to ease into retirement or have more flexibility in your work hours, then an Airbnb may be an easy fit. Airbnb is often touted as an easy way to make money, but it is not a way to get rich quick. Airbnb hosts make, on average, $924 a month, with a median of $440.
Remember that these numbers include part-time or occasional hosts. Have it in mind that not everyone who dabbles in this business is going to get rich off it. A lodging host earns $2,000 or more per month.
There is, however, the potential for savvy hosts to make tens of thousands of dollars in this sort of hospitality business with the right strategy. The amount of risk you are willing and able to take will determine how much you can scale in this business.
Steps to Starting an AirBnB Business Without Owning a House
1. Understand the Industry
The hospitality industry is made up of the hotel and motel or lodging, trade. As defined by the Council on Hotel, Restaurant and Institutional Education, it also includes food services, recreation services, and tourism. The hospitality industry provides accommodations, meals, and personal services for both the traveling public and permanent residents.
Businesses in the hospitality industry are divided into five categories. Transient, or commercial. Hotels make up three-fourths of the hotel business in the united states and cater to commercial travellers, business people, salespeople, and tourists.
Motels or motor inns are generally located near highways and airports and in small cities; residential hotels provide permanent or semi permanent housing on a weekly, monthly, or sometimes yearly basis; resorts are hotels that offer recreational or social activities in addition to lodging; and convention hotels and centres are used as meeting places for large groups or businesses, or for major exhibitions.
As well as providing lodgings for the conventioneers, convention hotels and centres must have state-of-the-art audio-visual and technical equipment among other services to stay competitive and attract business. Irrespective of the category, businesses in this industry require staff to fill similar positions. The range of employment opportunities in the hospitality industry is massive.
All positions, from bellhops to executive managers, share the same goal: serving the public. The primary responsibilities of those who work in the hotel and lodging sector include making sure that guest’s needs are attended to, their accommodations are comfortable, and that general hotel operations are running smoothly.
Front office, service, marketing and sales, and accounting workers fill front-of-the-house positions, or those jobs most visible to the public. Less visible, back-of-the-house jobs include those in food and beverage, such as bartenders, chefs, and wait staff, as well as housekeeping, and engineering and maintenance.
Most establishments in the hospitality industry also operate on a three-shift system, providing 24-hour service for their guests. According to reports, this industry employed more than 7.8 million people in 2012, with accommodations and food services segments combined accounting for 35 percent of the total travel and tourism industry’s sales.
The American Hotel and Lodging Association reported that the lodging industry saw $163 billion in sales in 2013, a $7.6 billion increase over 2012, and estimated total employment in the travel and tourism industry at 7.9 million workers.
The United States is home to more than 60,000 lodging establishments, ranging from small boutique hotels to internationally renowned resorts. Although over the long term, growth in the hotel industry looks positive, it should be remembered that the hospitality industry is tied directly to the amount of money people can spend on leisure and business activities.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
To successfully start this business, you will need to extensively research your market and find out the worth of your property and the average occupancy rate in your local area. If you reside in touristy areas, it may be easy to turn a decent profit.
Highly seasonal markets can have a big impact on cash flow throughout the year. Knowing your market will help you understand your potential customer. Your location and the type of property you offer will dictate the type of people you are likely to cater to.
Your customers will be looking for a more personal touch than a hotel/motel. They may also be looking for a space in an area which doesn’t have hotels available.
Most customers are looking for a brief stay, usually between 2 and 5 days. If your establishment is an entire home, your clientele may be groups staying for special events, such as business trips or seminars, large sporting events, or music/concert events in the area.
3. Decide Which Niche to Concentrate On
Although there are no known niches in this sort of business, there are many different reasons why someone would want to become an Airbnb entrepreneur— or a similar business. First, there are people who have some extra space in their existing home or apartment, like a spare bedroom or a guest casita, and they want to make some extra money.
They also have specific times where they want to rent and don’t want to rent. For instance, many big sporting events like the Super Bowl come to Phoenix; opportunists might open up some listings to capitalize on that. Also, Side hustle seekers use this sort of business as a way to provide stable extra income, but it is not a full-time gig for them.
There may be times where they don’t offer a listing, but they are pretty consistent in renting out. They also will take advantage of special occasions. It is important to know your why before you begin your AirBnB business because it will inform your approach.
The Level of Competition in the Industry
The international hospitality industry is really not kind. For a very long time, there was next to no innovation in this field, but the arrival of technology-fuelled on-demand economy has dramatically changed that. Airbnb’s appearance on the scene was an indicator of this change, along with the rise of boutique hotels.
With time, even traditional restaurant chains began experimenting, growing, acquiring and by consequence, innovating intensely. This brings us to the current hospitality scenario. Although it continues to be a brutal, unyielding, and fiercely competitive industry, the path to success is now multifaceted.
Note there isn’t one formula that applies to all and hotels no longer have to subscribe to hard and fast rules. Technology plays the role of a grand equalizer, giving even the smallest player a fighting chance to survive. Around the world, the travel, tourism, and hospitality sectors remain a key for economic development and job creation.
In this economy where transport has become more affordable and country borders are blurring, it is easier to assume that travel and tourism will remain a dominant sector for the near, and far, futures. There is little doubt that companies like Airbnb are competing head-to-head with hotels in certain segments of the market.
This implies that a part of the business may be additive, as travellers are taking more trips (and longer ones, too) than they would without the option. However, what is important is that private accommodations have altered consumer expectations on a fundamental level, by redefining what and where a hotel is.
In emerging markets around the world, 1 billion people are expected to come online globally. Most of these will be customers who will experience their entire guest lifecycle on their smartphones. Hospitality and travel companies have no choice but to invest in mobile friendly and mobile-first guest engagement and retention strategies.
Howbeit, customers are always looking for that ‘personalized’ experience and leveraging innovative mobile tech the way AirBnB and Uber have. Hotels will have to offer booking functionalities, lightning fast operations, and other touch points for the entire customer journey on mobile phones for the convenience of their clients.
Note that with internet access becoming nearly limitless to digital natives and non-natives alike, connectivity is only poised to increase. Meanwhile, with the proliferation of connected devices and wearables in the market, hotels will have to get innovative when it comes to new ways of interacting and engaging with the consumer.
Virtual reality tours, augmented reality interactions, robotics, and AI will drive the market and poise it for yet other travel experiences that can be vicariously delivered. Tapping into big data allows for the creation and curation of an extensively personalized experience for every type of consumer.
A lot of marketing campaigns can be leveraged seamlessly, and monitored keeping tangible numbers in mind for growth and further optimization. It also speeds up existing processes like customer service, feedback collection, email automation, and customer engagement. Furthermore, it can also facilitate upscaling and downsizing the business according to company goals.
4. Know Your Major Competitors in the Industry
This industry has, for long, maintained its special importance in economic and society development. In most cases, tourists would be satisfied with their travels and want to reuse your services if your service is friendly, thoughtful and does a good job as a mood raiser. That is not all; the hospitality industry helps create quality employment.
Note that employees in this industry are meticulously trained about technical and behavioural skills for best customer satisfaction. They are expected to show off aesthetic, emotional and other types of labour in a sustained fashion.
Very often, they are required to interact with customers with different cultural dimensions and quality perceptions. That is more than enough to prove how clever, flexible and knowledge they are. Evidently, the hospitality industry has been significantly thriving around the globe. While other industries struggle to regain from the global economic downturn, hospitality has still proved resilient.
For example, the hotel sector has bounced back promptly and been increasing from its 2009 decline. The travel and tourism industry is generally well positioned on top of important drivers of economic growth, holding almost 9% of global GDP. It also tops the list of largest employers.
5. Know the Possible Threats and Challenges You Will Face
According to reports, this industry will keep experiencing and enjoying growth trends, largely because of the growing needs for personalized lodging and temporary accommodation. Even with the growing demand and intense competition for market share, the industry is still very open if you plan accordingly. Note that hard work and persistence can see you through. Possible threats to this business may include;
- Market research and feasibility
- Penetrating the market
- Employing experienced workers
- Gaining patience in handling your clients etc.
6. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
Note that this is one of the most crucial decisions you will have to make when starting your home lodging business. You will have to choose the kind of legal entity you want for your business. In the United States, there are many different types of entities to choose from.
The type of legal entity you choose to form determines how much you pay in taxes, what type of organizational structure your business will have, and the personal liabilities that you assume as a result of that structure. Below are possible legal entities to consider for your home lodging business.
This is a business in which an individual owns an unincorporated business entirely alone. Note that as the sole proprietor of a home lodging business, you control the business and make quick business decisions to respond to a changing market.
Also, you expose yourself to legal liabilities from both your employees and your clients. If a client falls and injures due to the slippery floors, they or their family may sue you. As the sole proprietor, you may have to pay those damages out of pocket. It is advisable as a sole proprietor that you buy liability insurance for such events.
This is simply a business formed between two or more persons, or organizations which each contribute in some way to the business and share the profits and losses equally. In the home lodging business, this legal entity would be beneficial to partner with someone who has experience in the field, especially if you do not.
Also, you might enlist partners who bring different strengths to the company. Unfortunately, partnerships entail the same disadvantage as sole proprietorships, personal liability, as well as sharing control over operations and business decisions.
Note that this type of legal entity eliminates double taxation and personal liability for its owners, and is led by a board of directors. Although you can still be held accountable for criminal wrongdoing, business losses, fines, or legal settlements won’t come out of your own account.
Have it in mind that corporations also tend to have easier access to capital and often enjoy significant tax breaks, which could be crucial considerations as you start up your own home lodging business.
Limited-liability Company (LLC)
This legal entity is run by members who can be either corporations, individuals, or other LLCs. Also note that these businesses are highly variable in form, and must conform to state regulations concerning their makeup.
If you are worried that the other members who you start the business with might bail, you should forgo this type of business in favour of a corporation. Like corporations, LLCs provide limited liability, so if your business is sued, you will not be personally responsible.
7. Choose a Catchy Business Name
You need to be cautious when choosing a name for your business. Your business name will turn out to be the first identity you create for your business. It will be how customers identify you and the services you offer. With this in mind, your business name should be easy to remember, say something about the kind of business it is and sound professional and caring.
- Nice Homes
- Comfy Night
- Closest pals
- Cool Breeze
- Next door
- Fast ‘N’ ready
8. Discuss with an Agent to Know the Best Insurance Policies for You
In this line of business, you need adequate insurance to protect you from problems and liabilities. It can protect you in the case of a lawsuit or claim. It is advisable you check with your state about the basic insurance you need for your business.
There are insurances you might need, especially since you will be tending to the needs of people from various walks of life. It is best to check with your insurance company to learn what is required. Here are some of the insurances you should consider…
- Physical damage protection
- Liability insurance
- Medical payments
- Uninsured or Underinsured Motorist
- Commercial auto insurance
- Comprehensive coverage
9. Protect your Intellectual Property With Trademark, Copyrights, Patents
Intellectual property protection in the home lodging business is about protecting the time, money and effort you put into your business.
This protection will help you hold onto and protect what’s yours, shape your handwork and ingenuity into profitable returns, set you up for growth or business expansion, keep competitors away, ensure you are not fringing in anyone’s right, prevent employees from helping your competitors, attract investors and also promote your business to investors or potential buyers. Intellectual properties in the home lodging business may include;
- Registered and Unregistered trademarks – Your brands name of logo.
- Patents – typically a new way, process or material invented as a business innovation
- Secrecy agreements – contracts that keep valuable information safe and client confidentiality
10. Get the Necessary Legal Documents You Need to Operate
Before you decide to start an AirBnB similar business, it is advisable you ensure are legally allowed to become a lodge host in your jurisdiction, and you are prepared to follow local laws and regulations. Local laws regarding the hosting of paying guests can vary greatly depending on your city/state or provincial laws. In some locations they are prohibited altogether while in others they are subject to an occupancy tax.
If your space is an apartment or condominium, check to see if you are allowed to sublet the premises. Apartment landlords and condominium associations often have rules in place to prevent owners from renting out their units as Airbnb spaces.
Renting out your apartment without your landlord’s knowledge can get you evicted. Also, alignments with the neighbours are also a major consideration. A few noisy or inconsiderate guests can quickly turn you into a pariah in the neighbourhood.
Assuming none of these issues are insurmountable, becoming a lodging host can be an excellent home-based business opportunity. Generally, AirBnB regulations have become more stringent in recent years. Some municipalities and even homeowner associations forbid personal rentals or short-term rentals.
Some states, moreover, limit the number of times you can rent in a year. It is necessary you study carefully the regulations and state laws that govern lodging rentals within your area or the area you are choosing to invest in real estate. Contact the local city council and inquire about the most recent regulations.
You may also need to attain a business license and register to collect taxes. Make sure to inquire about the license as well. Learn thoroughly of the procedures for attaining a license and observe the rate at which real estate investors are granted the license. In some states, government officials have limited the number of business licenses given out.
11. Raise the Needed Startup Capital
There are many ways to obtain finance for your home lodging business. You can get a personal loan or fund. If you have a significant savings chucked in somewhere, or can obtain a personal loan from a rich family member, you may be able to cover your start-up costs yourself.
Indeed this is the best option for covering your start-up costs. An interest-free loan means you don’t have to fill out all that daunting paperwork, and can negotiate a more generous repayment plan than you’d ever get from a bank or private funding source.
Have it in mind there are a number of financing options available to a new lodging business. You could consult a local bank after setting up your business account and negotiate a loan with them. To do so you will have to present your business plan and make a convincing case as to why your business is worthy of the loan.
You could also get a loan with a guarantee from a public or private organization, like the Small Business Administration (SBA). You can also apply for grants. Grants from a private organization or government agencies are probably the most attractive option for funding a new business.
With a grant, you aren’t spending your own money, or money you will have to pay back later. The money awarded with a grant does not need to be repaid. However, compared with loans, grants are much more difficult to get.
12. Choose a Suitable Location for your Business
Finding the best place to start your home lodging business is a crucial step when starting this business. You must conduct a real estate market analysis to determine the most suitable location to buy a rental property. When you are studying a location, consider regulations and everything necessary.
Also, note that a location might be suitable for a traditional rental property but not for AirBnB similar business. The best locations for these rentals are those that enjoy a high influx of tourists and travellers. Consider locations that also have many amenities and are in close proximity to city centres.
These locations will provide you with high occupancy rates, rental income, and return on investment. Remember that tenants have chosen personal lodging facilities over hotels for the experience that they offer. Tenants’ expectations are high and you are there to fulfill their needs and cater to them for an enjoyable stay.
Preparing the property could include hiring professional cleaning services to clean the property, and/or doing some repairs depending on the condition of your investment property. Also make sure to provide clean towels, kitchen cutlery, and other essentials that tenants would need during their stay.
Consider providing your tenants with brochures or even coupons to some of the city’s attractions such as restaurants, theatres, and museums. Most importantly, make your rental property homey for your tenants.
13. Hire Employees for your Technical and Manpower Needs
An AirBnB business is without doubts a great way to add some extra income, especially if you have unused rooms or lots of space in your house. You will have guests staying in your home, so you should be comfortable talking and interacting with guests.
Some homeowners who travel often, will also rent out their homes when they are out of town. This allows them to receive income and have someone watching their home when they’re not around.
Your job will be to manage the rental requests, interact with potential customers, and make your rental space as hospitable and customer ready as possible. You will have to advertise your space through your pictures and descriptions.
Be detailed in your listing and discuss all of the pros (and potential cons) of your space. Take clear pictures which show off the space, yet also let customers know exactly what to expect. Research surrounding rentals to learn what customers like and don’t like.
Read the reviews as well, and understand your customer base. Clean the space regularly and update with modern amenities, whenever needed. List nearby attractions, events, and activities for potential renters.
You want to be a good host, yet unobtrusive at the same time. By explaining much of the particulars up front, you will have given your guests much of the information they need before they arrive. Once they are staying, be available, yet respectful of the renters and rental space.
To successfully rent out personal lodging spaces, you should be a personable individual, who is comfortable with interacting with others. If you have any experience in the hotel, service, or even retail industries, this lodging business may be a good fit.
You should also be adept at balancing your finances and resources, pertaining to the rentals. It would also prove beneficial if you were able to perform handyman services around the house, in order to make minor repairs or upgrades, without paying an outside source.
Photography and writing skills will also come into play, as your description and accompanying photos will be your advertisement for your rental space. Since you are renting out your own space(s), much of the costs involved will be maintenance and necessary upgrades.
Cleaning supplies and amenities for guests will also be a relatively inexpensive cost, depending on what you offer. Regularly re-stocking amenities in your rental(s) and periodically updating towels and linens will make up a portion of your expenses.
Any repairs, cleaning services, or maintenance fees will be incurred, as needed. Meanwhile, much of the team for this business will be yourself and possibly a few other family members, friends, or professionals, such as plumbers or electricians.
Some renters also hire cleaning services to tidy up after a customer has vacated. If you decide to take on multiple properties, you may want to delegate a chain of command in case you are not available. Have emergency contacts for your renters, so any problems can be solved quickly and efficiently.
The Services Delivery Process of the Business
As with any investment, the goal is to figure out how to make money. This means you need to run a solid financial model that takes you and your clients’ interest into account. Although, pricing for rental units is variable, so just picking one price and running it through your model could be deceiving. You could assume you will make more than you will…or you could be leaving a lot of money on the table.
To understand your pricing, do a lot of research on Airbnb for properties like yours. How does their pricing change from night to night, special event to special event, holiday to holiday, season to season? Factor that into your model. You have to do frequent cleanings and you need to restock your unit more.
Additionally, because you furnish the unit, you will need to factor in replacement costs. Because AirBnB related businesses are highly seasonal and based on nights, vacancy can be higher. This is not a bad thing since income can also be higher, but you can’t use standard rental vacancy numbers. Take a variety of factors into account and come up with a conservative vacancy rate.
An important aspect of hosting an AirBnB is making sure house rules are clear, simple, and understood. This means not just having them in the app, but also having them in the unit. A binder in an obvious location that has contact info, area guides and suggestions on fun things to do, instructions on how to use electronics and utilities, and a list of house rules is a very smart thing to do.
Things to consider are extra guests, smoking, off-limit areas, eating areas, cleaning procedures, laundry, gatherings or parties, quiet hours, and pets and animals. These all need policies detailed and clearly explained.
Describe your space accurately but make it stand out. Remember that your business, just like AirBnB, will leverage the online marketplace and in order to maximize guest interest in your property, you need to think like a realtor and make your listing stand out from the competition. Start by researching similar Airbnb listings in your area and note the listed features/amenities and prices.
Your listing description must be accurate, detailed, complete, and emphasize what makes it unique. Thoroughly outline the amenities and features of your space as well as any rules or expectations of guests. It is extremely important to provide high-quality images of your space.
Remember that your guest rankings will be partly based on the accuracy of your listing description—you do not want guests to be disappointed because the space is not as described or you have exaggerated the amenities. Your research of similar listings should also give you an idea of how to price your listing. To keep your property continuously booked (and maximize profits) it must be competitively priced.
14. Write a Marketing Plan Packed with ideas & Strategies
Trust in this kind of business is paramount if you really want to go far. If you succeed in gaining the trust of your first customers, they will tell their friends, and you will soon have enough customers to handle. Pass out business cards to everyone you meet, and leave flyers and brochures at places like airports and other places often visited by tourists. Other strategies may include;
- Maintain a separate business line that plays a professional message for callers.
- Design a flier, brochure and business cards and print a large quantity of all.
- Take the fliers and brochures directly to tourist centres, sightseeing venues, airports etc.
- Get shirts, hats and jackets with your business name and logo and wear the clothing when you are running errands.
- Apply your company name and logo to your business equipment, such as clip boards, messenger bags and envelopes.
- Attach signs or banners to your car, bicycle or other vehicles used to perform your services.
- Attach a magnetic sign to the cars of family and friends to cover more ground with your advertising message.
- Establish an Internet presence with your own website and a Facebook page. Find a free or inexpensive hosting service for a simple website people can find when searching for your services.
15. Develop Iron-clad Competitive Strategies to Help You Win
The Airbnb community, for instance, is built on trust, so guests will be looking for hosts that have verified contact information, references, and positive reviews.
Verification is especially important for new hosts—updates your profile to add other information such as your phone number, email address, Facebook profile, etc. Also, to build further trust you can post references from friends, family, co-workers, business associates, etc. You can also write references for other Airbnb members.
16. Brainstorm Possible Ways to Retain Clients & Customers
In this industry, clients only stop patronising any business just for the sake of uncertainty and not being satisfied. It simply means that ample service production and acknowledgement can keep your customers loyal and within reach. To keep your business profitable over the years, you will need to satisfy your customers by making them part of the business.
As any entrepreneur will tell you, customer service is the backbone of any successful business and being a lodging host is no different. Lodging hosts who provide the best guest experience are rewarded with positive reviews, higher search rankings, and more bookings. The most successful hosts are:
Hosts who can’t be bothered to respond to inquiries in a timely fashion (or at all) are a major turnoff to guests. Hosts who have the best response ratings are rewarded with higher search rankings and increased bookings. Be available by phone at all times when guests are present and follow up with them during extended stays to see if there is anything else you can do to improve the service.
Update Your Calendars Regularly
As well as improving the guest experience, keeping your calendar updated improves your search rankings.
Fix All Problems ASAP
When a guest reports a problem such as a leaky tap or burnt out light bulb, get it fixed right away and apologize to the guest. Providing five-star service is a sure way to improve your guest rankings.
Act on Their Reviews
If a guest posts a negative review, correct the problem and learn from your mistakes. Respond to complaints in a professional manner at all times.
17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
Simply put, brand awareness is about making your customers aware of who you are and what you offer. That is why you need to make sure you promote your brand and get your name in front of as many people as possible. Note that it takes planning and innovation to be able to push your business to a point where people can easily identify it and patronize you. Ideas for boosting your brand awareness and creating a corporate identity may include
- By using the web
- By creating a social media presence.
- Advertising using traditional methods
- You can also Sponsor public events
- Join a professional association