Travel and tourism are one of the industries most affected by unexpected events. Extreme weather, flight delays and cancellations, an unexpected illness, rescheduled appointments, and other potential problems, such as the pandemic-related travel restrictions, may force travelers as well as vacation rental owners and property managers to cancel reservations.
To protect guests, hosts, and property management companies against the negative effects of cancellations, Airbnb developed a series of policies, including the host cancellation policy, guest cancellation policy, and the rebooking and refund policy. In this article, we’ll focus on the latest changes to the rebooking and refund policy and their potential impact on vacation rental management companies.
How the New Changes Could Impact Your Bottom Line
Airbnb’s rebooking and refund policy is meant to lower the guest’s, host’s, and property manager’s perceived risk and act as an incentive for attracting and retaining guests. However, the new changes to the policy, which will come into effect on April 29, 2022, are expected to have a large negative effect on many vacation rental management businesses.
To begin with, the following are the most noteworthy changes that every vacation rental property manager should be aware of:
- In addition to the refunds that will be issued to the guests who have experienced a travel issue and deducted from your payout, you might be required to cover or reimburse the costs incurred by Airbnb as a result of assisting travelers with finding comparable or better accommodation options;
- Airbnb loosened the definition of what constitutes a travel issue; vague terms could cause ambiguity, which might give Airbnb more say in any action taken by a guest against your business and more leeway in how they’ll handle complaints and refund requests;
- Airbnb extended the time frame for requesting a refund from 24 to 72 hours, which means that guests can report a travel issue and ask for a refund up to 72 hours after they check-in; but guests could claim a refund even after the 72-hour window has expired if they can prove they were prevented by circumstances beyond their control from filing a complaint in a timely manner.
Although the new policy might eventually translate into more bookings in the future, these changes come at an inopportune time. Here is why.
First, the new changes make it easier for travelers to file complaints and request refunds. Thus, the number of guests asking for a refund is expected to increase considerably. Whether a guest is entitled to a full or partial refund and is reimbursed before or after you receive the payout for the booking, it will lead to a loss. If there are multiple refund requests issued within a short period of time, you stand to lose much of the revenue for those refunds. As a result, the overall revenue and profit on some of the properties you manage might be lower than what your clients expect. Not only will this affect their financial situation; it could also have a lasting negative impact on your company’s financial health and reputation.
Second, the vast majority of vacation rental management businesses are still struggling to recover after they’ve suffered major revenue losses from the pandemic-related cancellations and refunds. Moreover, most of them have used their emergency funds in order to keep the properties they manage in good shape. As a result, these businesses might be unable to overcome the financial losses potentially resulting from increasing numbers of refunds.
In addition to all these, Airbnb has failed to consider how the new changes will affect the cancellation rates during stays and whether property managers will be able to get last-minute bookings in order to reduce the financial impact of cancellations and refunds.
Another problem is that the vacation rental property owners and managers might need to raise their rental rates in order to accommodate the more generous rebooking and refund policy and offset the risks associated. However, raising rates in the current economic context and in a competitive environment, like today’s vacation rental market, could drive away guests. This might result in fewer bookings.
Unfortunately, Airbnb isn’t the only vacation rental listing site that continues to update its policies with a focus mostly on the guest’s wellbeing. In order to attract and retain more guests, other platforms are also considering adopting more lenient policies—such as charging a lower rate for partially refundable bookings and a slightly higher rate for fully refundable ones— which may lead to lower profit margins for vacation rental property owners and managers.
For the moment, it is too early to accurately assess the impact of Airbnb’s updated policy on your business. But even though these changes could lead to more complaints and refund requests, the financial losses may be offset by a higher number of bookings. It’s also worth remembering that the vacation rentals that perform well will show up much higher in search results. Those properties are more likely to receive more bookings, which could increase your revenue and profitability, irrespective of the changes that vacation rental platforms make to their policies.