The hidden costs of running a competitive Airbnb property eat into any profits a host may think he can gain, according to an entrepreneur, who has since left behind his job of managing such properties.

In light of the recent debate sparked by the suggestion from JHTA President Omar Robinson that Airbnb operators should pay a hotel accommodation tax, the Jamaica Observer spoke with entrepreneur Ian Dunn, who worked in the Airbnb business for seven years, to learn what his opinions are on the subject, and how those opinions have been shaped through his experiences in the industry.

Dunn pointed out that in the same way that he started offering this service as a way of supplementing his income, he observed that most homeowners engage with Airbnb to supplement their own income as well. He suggested that it is by no means a business that you go into to get rich.

“In this business, like most businesses, you need money to make money,” he explained. “It is only the people who own luxurious properties in the affluent neighbourhoods that make impressive money. They can charge the kind of rates that easily cover expenses while generating significant profit.”

During the years 2011 – 2017, Dunn offered management services to Airbnb operators in Montego Bay. This was an enterprise he engaged in to supplement his income from a nine-to-five job, which he held at the time.

The 38-year-old entrepreneur also started his car rental business, Bonus Car Rental and Services Ltd, in 2017 and just opened an auto parts enterprise this year called Bonus Parts Accessories and Auto Imports Ltd.

Dunn managed four properties in Montego Bay while working with Airbnb operators. One was in the neighbourhood of Ironshore while the other three were in the residential area of Westgate Hills. One of these properties was a large, seven-room house which would sometimes see more than 40 arrivals a month in the high season.

He managed bookings for his clients’ properties as well as operations, depending on the demands of the particular client. He dealt with guest queries, managed staff, such as housekeepers and gardeners, arranged meals, transportation, security, decor, maintenance, and made recommendations for property improvements.

Dunn insisted that only people who are involved in the business are aware of the cost that Airbnb operators have to endure to enjoy success in a highly competitive and seasonal market.

“Many of the people who are calling for a tax do not understand what the average Joe has to go through to produce one room,” he lamented. “To set up a very competitive Airbnb that commands a good rate you need a lot of capital to provide at least some of the amenities you would find in a hotel. This includes air conditioning, attractive furniture, and accent pieces for the decor. When you check it out, you have to spend a lot of money.”

“Within three years, if you are doing well and getting a lot of clients, then wear and tear will occur,” he continued. “You will have to look at changing furniture and appliances, you will have to repaint. These are all additional maintenance costs.”

Another cost that is often underestimated by entrepreneurs going into the business is electricity.

“Most of the time, tourists don’t turn off their air-conditioning units,” he revealed. “Even when you use signs reminding them to turn it off when they are off the property, or to not leave the doors and windows open, many of them ignore your pleas.”

“Electricity costs will go up not just through air-conditioning usage but through additional washing of linen and tablecloths,” he added. “If you have a pool then there is the additional usage of the pool pump, which eats up so much electricity. These factors can combine for electricity bills in the tens of thousands of dollars. Maintenance for the pool can run from between $25,000 to $30,000 every three months, and that is being conservative.”

Earlier this year it was reported that a typical Airbnb host in Jamaica earned US$2,600 in 2018. Dunn insists that after expenses are taken into account this amount would be significantly lower.

“If you’re going to tax people making that kind of money from their property, considering the tax breaks that some larger businesses get, that’s going backwards,” he said.

Dunn related that providing services for Airbnb operators was a financial struggle for him in the long run. Clients could not afford to pay him the US$500 to US$600 a month he needed to properly manage a large property. This included travelling to the property several times a day to monitor staff, responding to and checking on guests, purchasing household supplies and food, arranging tours and transportation, as well as conducting ongoing discussions with potential guests on the Airbnb platform.

In the end, the most his clients could afford was US$250 — and many times payments were two or three months behind.

The types of services he offered resulted in Airbnb operators charging visitors more for accomodations. The less services or amenities you provide for the guest is the less you are able to charge for your property, he explained.

He pointed out that people offering the kind of services that he provided are often hired to manage bookings and properties by homeowners, who either don’t have the time to do it, or do not consider themselves savvy enough to manage the marketing side of the business and the Airbnb platform.

“If it was that easy to manage the business and make money, most people would quit their day job and do it themselves — but that rarely happens,” Dunn said. “Nobody in Westgate is earning millions, or even in Ironshore.”

The entrepreneur suggested that if a tax must be implemented, the Government should consider a threshold where only those properties earning above a certain amount are taxed.

Dunn has moved on from the Airbnb business. However, when asked if he would return if he could afford his own Airbnb property, he answered in the affirmative, but with specific conditions that would apply.

“I am thinking about doing it, but I would have to have a property of first-class quality,” he said. “You need features that will make the guest want to stay there — like a waterfront, a pool, hot tub or bar. You need to offer services that add value. If I can’t provide these things then I am not going into it. As I said before, in this business you need money to make real money.

“I have yet to see one person who lives comfortably from only doing an Airbnb business, unless they have properties like these,” he added, underscoring his point. “I have a friend who, even though he has 80 per cent occupancy each month, cannot live off his property rental alone and so he runs two other businesses.”