The VRBO service fee, explained.
For over a year now, vacation rental owners and property managers have been dealing with cryptic messages from VRBO and parent company HomeAway about how it has been experimenting with guest service fees on a sliding scale, and it’s caused a stir in the industry.
Back in 2014, HomeAway vowed not to implement any guest fees for its services. “When you come to our platform, you don’t pay a fee,” HomeAway Co-Founder and CEO Brian Sharples told shareholders that year.
Fast forward to 2018 and the VRBO rental agreement now says the company may charge up to 12% (or more) per booking in guest service fees, which it is using for improved online services, such as 24/7 support. But if you’ve spent any time in a vacation rental owners forum, you know the consensus is that this move is only hurting VRBO/HomeAway users -- and far from putting their interests first. Users claim the fees are leading to fewer bookings and drops in rankings, and an overall worse experience for the guest who, in many cases, ends up blaming the owner or property manager for the exorbitant fees.
Making matters worse, the company has provided few specifics on its “experiment.” The clearest explanation we’ve found comes from the FAQ page on VRBO. The explanation reads:
“The service fee is between 6-12% for most bookings but can be above or below, based on the reservation. The percentage rate may change from time to time. Generally, the higher the reservation amount, the lower the percentage of service fee.”
This is decidedly ambiguous. Here at InvitedHome, we put our revenue management team to work to figure out the exact percentages of the sliding scale. Here’s what we found.
We looked at data from eight of our reservations in two destinations. Booking dates ranged from three nights to 11 nights, with accommodation charges varying from $447 to $3,424. We then took into account the management fee, taxes, and HomeAway’s service fee, and crunched the numbers to come up with the following scale.
When based on the grand total including management fees and taxes, HomeAway’s guest service fees didn’t appear to swing too widely, from 5.44% on the highest booking ($3,424) to 9.64% for the lowest ($447) This appears to be the sliding scale VRBO and HomeAway disclaim.
However, when looked at as a percentage of the actual accommodation charges (what guests expect to pay), the situation changes. That $447 booking resulted in a service fee of $89 - nearly 20% of the accommodation charges. As for the high-end booking, the service fee amounted to $240, or just over 7%.
It’s no wonder travelers are getting irked by both the high fees and the perceived inconsistency with which they’re applied.
Extrapolating the data from all eight reservations and applying what information HomeAway has made public, we created a table of the service fee travelers can expect to pay based on the grand total of their accommodation.
The sliding scale becomes more problematic for guests beneath the $2,500 booking threshold. The service fee rises one percentage point for roughly every $380 drop in price until it reaches the announced 12% cap. While $112 isn’t a huge leap from $100, $667 vs $600 could catch potential guests by surprise, and possibly turn them off to the reservation.
At InvitedHome, we're committed to providing the best vacation rental experience for both our owners and our guests. When guests book your home through our site (as 60% of our guests do), they'll pay a flat 5% - the low end of any online travel agency's sliding scale. This means no more lost reservations due to last-minute backouts. Get in touch with our owner consultants to learn more.
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