Anyone who has booked accommodations for a vacation getaway through Airbnb or Expedia is well familiar with the drill.

Track down that deluxe hotel room or sweet rental house with the saltwater pool, confirm your length of stay and then, regardless of how far away your actual travel is happening, get that credit card. If you want to play, it’s time to pay, even though your online booker won’t be transferring those funds until you show up with your bags.

Turns out, that IRS-style policy of paying up front for liabilities that don’t come until later has become a cash cow for the online booking business and that’s thanks in large part to interest rates that are now the highest in decades.

Putting your money to work, but not for you

On Tuesday, The Wall Street Journal dropped a report offering some insight into how Airbnb and Expedia leverage the customer cash that’s in their control between the time you book and the time you stay.

Back before inflation took off like a runaway train and the Federal Reserve pulled out its interest rate-hike scooters to try to catch up, interest rates were residing in the basement and the opportunities for online booking services to grab a little extra green on the idled funds were fairly limited.

But now interest rates on money market funds, Treasury notes and certificates of deposit have surged above 4%, bringing in tens of millions of dollars in additional income for those firms and making them an unlikely beneficiary of the Fed’s record-setting series of aggressive rate hikes, according to the Journal.

How much money are we talking about?

In the third quarter of 2022, Airbnb collected $58.5 million in interest income on its own cash as well as its customers’ cash, a whopping uptick from the $3 million it made over the same period in 2021, per the Journal report. The company doesn’t parse what portion of that fund is customer cash versus its own money but according to its most recent fiscal reporting, customer funds account for about 30% of its assets.

Airbnb held $7.5 billion in funds on behalf of customers as of June 30 and $4.8 billion at the end of September, according to its earnings reports to a Journal analysis. But it also noted the company’s terms of service agreement makes clear that Airbnb can invest customer money and keep the interest.

In a statement shared with the Journal, an Airbnb spokesman said its payments system “is secure and simple for guests to use and ensures timely payment for hosts.”

What other businesses can do this?

Brad Erickson, an analyst at RBC Capital Markets which covers U.S. internet companies, told The Wall Street Journal that few other industries have control over such vast sums of customer funds. 

“Most businesses don’t get to hang on to $7.5 billion of other people’s money,” Erickson said.

Expedia has also done very well recently when it comes to putting its customers’ money to work.

The Journal reported that Expedia had $7.5 billion in traveler funds on its balance sheet as of Sept. 30 based on its earnings report. The company said it earned $20 million in interest income in the third quarter of 2022 — a tenfold increase from the third quarter of 2021. Like Airbnb, it doesn’t say how much of that income is from customer money.