VRBO strikes The Ire of Owners with Guest Fee

March 30, 2016
Categories: Airbnb

VRBO-strikes-The-Ire-of-Owners-with-Guest-Fee

VRBO owners are angry.  Very angry.  Since the acquisition of VRBO/Homeaway by Expedia, a 4% to 9% fee is being charged to guests.  This is in addition to the listing fees being paid by the homeowner and the credit card fees collected by the site for online payments.  To add further insult, the fee is cloaked as a “payment protection fee”, to imply that owners are not trustworthy.  Many owners claim they were not informed about the guest fee prior to implementation and had just renewed their subscription.

Add to this, the non-transparent ranking methodology and owners are feeling deceived and ripped off.  Overwhelmingly, owners are fed up and looking at other alternatives like, Airbnb and other sites.  The most common complaints about VRBO revolve around all of the following:

  • Expensive “pay-for-positioning packages” that are not converting to increased inquiries and bookings
  • A (online) booking and rate model where “one-size-fits-all” (think hotel)
  • Guest booking fees that offer no benefit for Owners or their Guests
  • Search algorithms which force owners to play by VRBO rules or risk having their listings pushed to the bottom of the pile

VRBO Ratings

One rating site, shows significant traffic in ratings against VRBO, primarily by Owners, since the guest fee was instituted last month.  Out of 444 ratings, 409 or 92% are 1 star out of 5!  The rating distribution from the site is shown below (Based on 444 ratings out of 666 reviews): 1.10/5

VRBO Rating on Consumeraffairs.com

  • 5 stars 5      1%
  • 4 stars 1      0%
  • 3 stars 4      1%
  • 2 stars 25    6%
  • 1 stars 409 92%

A typical comment from the site is – “VRBO is NOW charging renters a SERVICE fee ranging from 4-9% but will not reveal to homeowners on the site how they come up with that number. When asked, they say it is a sliding scale but will not tell the owner or renters what that scale is. They will not publish the scale to the owners which means they are “manipulating” the SERVICE fee as they like. This has got to be illegal and renters and owners should be furious! As an owner of a property, I will be moving my business to another site. No one will put up with a company that randomly charges a SERVICE fee at their leisure. This is a lawsuit waiting to happen.” Posted by Audrey of Los Angeles, CA 3/9/16.

The guest service fee debacle is perhaps the last straw.  Owners and Property Managers are looking for viable alternatives.  Many owners insist they were not informed of the change prior to it being instituted.

Where to Go?
The number of vacation rental websites out there today is tremendous, especially if one considers foreign markets.  It can be a daunting task to select the best place to list your property.  Many owner and property managers will list properties across 10 or more sites to maximize exposure. 
 
Besides the Expedia acquisition of Homeaway/VRBO, additional indicators show times are changing.   A consolidation of the bigger sites has created only a few main players.  Increasingly, Hotel/Hospitality players are eyeing the market looking for an increased presence.   

Three other key players in the US market are:
Airbnb
FlipKey
VacationRentals

To get insight as how many and the type of rentals by zip code or area for Airbnb check out – airdna.  This site will show the number of homes, rooms or shared rooms for rent on Airbnb in your town or area and also has more in depth data for an additional cost.  Airdna is a Santa Monica, Calif. based firm that sells data analytics to Airbnb hosts.

Flat Fee vs Pay Per Booking

Vacation rental websites have remained the same for almost 15 years before Airbnb arrived. Property owners purchase annual subscriptions to multiple individual vacation rental websites.  The VRBO basic fee is $349.  Serious hosts would pay premium listings to improve their visibility and be placed at the top of the search results.  These premium listings cost over $1000.
  
Airbnb took an opposite approach and did not charge a fee to owners for the listing but did charge owners a 3% fee on the confirmed bookings; as well as a fee to the guest.  HomeAway / VRBO subsequently offered the pay per booking option of 10% to compete with Airbnb.  FlipKey (by TripAdvisor) is another vacation rental site with a similar pay-per-booking option.
  
Which fee structure is best for your rental property?  Generally, if you are casually only renting a few days or weeks per year, the pay per booking will cost less.  If you assume $500 as the average listing price, the break-even point is between a $500 fixed-fee listing compared to a pay-per-booking fee of 3% is $15,000. So, if you expect to earn more than $15,000 in rentals you will make more by paying the fixed fee.  However, you need to factor in the guest fee now being charged by both Airbnb and VRBO, to get the complete picture.  If one assumes and average guest fee of 8%, the new break even is reduced to $5,000. Most VRBO owners believe they have to reduce prices to remain competitive as a result of the guest fee; further eroding the profitability.

 HomeAway Class Action Suit Due to Guest Fee

Recently, one vacation rental property owner, Ivan Arnold started the process of bringing a class action suit.  You can read about it here.  Class actions require a judge to certify them before it can continue.  It remains to be seen if HomeAway will have to answer to their actions in court.

VRBO Statement

Brian Sharples, Co-Founder and CEO, posted a statement on the VRBO website community platform.  To read the whole statement, click here.  Notable in the statement is:

“Many owners have asked me if our fee was motivated by greed.  The reality is that we’re re-investing the majority of this money into marketing to bring in more travelers (we nearly doubled marketing spend with the introduction of this fee) and to provide true financial guarantees that can protect and help travelers who have bad experiences from using our sites. And we’re also more than doubling our investment in government relations efforts to continue fighting for the rights of property owners all over the world.”

 “Our #1 goal at HomeAway is to drive more bookings to our owners and property managers.   Your success is our success, as it has always been in this business.  Every piece of evidence says that the right way to do this, given the demands of the “new” vacation rental consumer, is to do the following: 

  • Provide transparent price and availability data so travelers can get accurate quotes online
  • Back up every transaction with a strong guarantee, instilling trust in new travelers who are unfamiliar with our industry and how it works
  • Invest heavily in brand and online marketing to compete with other travel alternatives such as hotels.  Now that vacation rentals are mainstream and the category is large, we need to work harder than ever to bring in more travelers
  • Protect the rights of owners to rent their homes on a short-term basis.  We are currently fighting battles in dozens of cities and investing millions of dollars to maintain your ability to rent out your home to guests.”

“I also want to acknowledge again that I could have done a better job of communicating our rationale up front. Please know I am listening to your concerns, and we will take them into account as we design our new pricing plan to be announced in April.”

Perhaps, the biggest lesson learned by VRBO is to do a better job of communicating and that impacting the guest with a fee, does not only affect the guest, but has profound consequences to owners.

Going Forward

The lesson for property owners is to diversify and build a brand.  You can diversify by including your listing on all appropriate channels.  Of course, this needs to be balanced with the cost.  There are many low-cost to no-cost channels like Facebook groups – one group is here. Investigate niche sites to see if a listing would be cost effective.  A little trial and error may be needed before finding a good match for your vacation home.

Vacation home owners who want to remain independent should have a dedicated website for the vacation home.  The domain should be the home name for easy recognition and to build the brand.  Continue to use the house name in all your descriptions in other channels.  Make it a habit to refer to the home with its name; not our home or the like.  Allow guest to book directly on your website with a booking calendar to capture impulse sales and to make it as easy as possible to book.  Your vacation home website will make it easy for you to be found with a Google search.  If you need advice or assistance with your website, contact Paveya; not only will they design stunning layouts but also provide search engine optimization and marketing strategies to drive traffic to your site.

Xpert Home Services supports VRBO owners by providing services to guest and owners.  Contact us today for a custom VRBO package including, maintenance, check-in/out, house cleaning, pool/HT servicing, linens and more.

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