We recently wrote an open letter to Airbnb expressing our frustration that their cancellation policy was unilaterally putting all of the financial burdens of addressing the coronavirus on hosts. Rather than let hosts stick to mutually agreed upon cancellation policies or work out accommodations for guests like credit for future travel, Airbnb is letting hosts cancel up until the moment before check-in, as late as April 14th, and demanding that hosts give out full and unconditional refunds, effectively guaranteeing that hosts don’t have a chance of filling in their vacancies. To make matters worse, hosts don’t have the slightest assurance that Airbnb will not extend this policy, prolonging their inability to bring in critical revenue. Since Airbnb has already extended this policy once from April 1st through April 14th, it’s very reasonable to worry they’ll do so again leaving their hosts with very little revenue they can be confident of for the foreseeable future. This, in turn, is forcing many hosts to cancel cleaning services, and lay off staff or cut pay. If Airbnb or governments don’t quickly take decisive action to help hosts make up for this lost revenue soon, we aren’t far away from seeing many hosts getting evicted from their units and homes due to inability to pay their rent or mortgages.
Fortunately, VRBO took the wiser and fairer path of announcing a policy that splits the burden between hosts and guests and empowers them to come to a constructive solution together. Rather than just throwing hosts under the bus, in a March 18th email to hosts, VRBO recognized its equal obligation to both parties, “Vrbo is a two-sided marketplace, so for every traveler who paid hard-earned money for a getaway they may not take, there is a partner who is experiencing a loss of bookings and a large number of cancellations.” Consequently, VRBO is waiving all of its fees for cancelled travel and asking hosts to do the following:
“Option 1 (Default): Offer a credit for full value and flexible stay dates within the next year (at no additional cost) to travelers who can’t take trips now due to COVID-19.
Option 2: If the traveler is unwilling to accept a credit, we advise partners to issue them a refund. If partners are unable to accommodate a full refund, Vrbo expects partners to provide at least a 50% refund if the traveler cancels during this time.”
With this approach, guests at least have an incentive to re-book for later travel and to not wait until the last minute to make cancellations. It’s common sense that if guests can get 100% of their money back for future travel vs just 50% that they should try to make the 100% work out if at all possible. So VRBO’s approach helps hosts retain the working capital they desperately need now while locking in future bookings as opposed to just giving away money. Also, if guests know that hosts have some discretion in how they’ll handle refunds, they’re incentivized to cancel as soon they know they’re unlikely to travel, knowing that hosts are more likely to be flexible if they still have time to re-book the unit and recoup the losses the cancellation would cause.
This is a key point that’s often missed; cancellations do not cost hosts nothing- if cancellations are not made far enough in advance, they cost hosts the opportunity to fill their units with guests who actually plan to stay. It’s a myth to think that nobody is willing to stay in vacation rentals at this time; for reduced rates, many units are still filling up. In this period of social distancing, many vacation rentals from isolated cabins to beach houses present a great opportunity to get away for a temporarily remote workforce; they just need to gather supplies and drive out to them and they can avoid human contact in a beautiful environment for weeks. Even urban flats are urgently needed by college students whose classes have been moved online and whose dorms have been closed and who need to distance themselves from all their roommates.
Finally, it’s refreshing to see that VRBO is enforcing this request of hosts by promising greater listing visibility for those who comply than those who don’t, as opposed to just unilaterally taking the money like Airbnb. For one, this leaves hosts with some choice: if they’re at risk of losing their homes and livelihoods this month, they can choose to survive this month and live to worry about optimizing their listing visibility another day. This shows that VRBO has greater respect for hosts are running their own vacation rental businesses for which VRBO is simply a platform. Platforms can incentivize behavior which reflects positively on the platform and disincentive behavior that reflects negatively on it. But when Airbnb simply overrides hosts’ policies and gives away their money, that reflects the attitude that hosts have no autonomous businesses of their own and are simply expendable pieces of Airbnb’s business.
Kudos to VRBO for a very balanced and level-headed response to an unprecedented crisis and best of luck to Airbnb as it works to regain hosts’ trust and acquire federal relief to help them out of the position they’re partly responsible for putting them in!