Airbnb has flipped the formula of traditional business. Instead of hiring sales people that once sold a company’s products for a commission, Airbnb along with Uber and similar companies has put the consumer (guests and hosts) in charge and provided a platform where it takes a commission from them for using the platform. Airbnb charges the hosts a 3% host service fee everytime a booking is completed on their platform. Per their website, this fee covers the cost of processing guest payments and comes out of the host payout.
Airbnb also charges a guest service fee which they claim covers the cost of running their site. Their primary source of income comes from these service fees. Depending on the size of the reservation, guests are charged 6% to 12% non-refundable fees where a more expensive reservation will result in a lower service fee. When a reservation is booked, guests pay the service fee unless the host cancels the reservation or retracts their listing. If the reservation is altered, Airbnb adjusts the service fees to accommodate the user.
Depending on local or international tax laws, users are also subject to a value-added tax (VAT). A value added tax is a tax assessed on the final sale of goods and services. For guests seeking accommodations in the European Union, Switzerland, Norway, Iceland and South Africa, Airbnb charges a VAT in addition to its service fees. Due to different tax laws, Airbnb does not charge a VAT to every guest across the board. In particular, guests with reservations in the EU are subject to taxes based on the rate found in the guest’s home country. Furthermore, guests paying for bookings in a currency different than the one the host has chosen are subject to varying exchange rates determined by Airbnb.
With transportation and lodging more accessible than ever thanks to mobile computing, the sharing economy continues to expand rapidly. Companies such as Airbnb and Uber have taken advantage of technological innovations to create platforms that connect individuals to exchange everyday needs.