AirBnb, HomeAway, VRBO & TripAdvisor to Stop Charging Service Fees to Travelers

Mar 8, 2019

Soon vacationers won't have to pay service fees to book vacation rentals from large booking websites like AirBnb, HomeAway, VRBO and TripAdvisor, saving guests billions of dollars each year. Sounds like great news, right? Well, that's what these big sites would like you to believe.

In recent years there has been an ever increasing stream of "service fees" charged to travelers who book vacation rentals through these large booking websites. AirBnb, which has always charged to book through their site was joined by HomeAway & VRBO (owned by Expedia) and TripAdvisor, all whom have followed suit and instituted "service fees" into their models.

These fees have increased, especially this past year, to a point where travelers are now paying service fees that equate to as much as 20% of the rental rate on top of the actual rental rate. A summer beach house listed on VRBO may cost an extra $500 in service fees for a weekly booking through their website. It is estimated that travelers paid over $10 billion in service fees in 2018 based on revenue reports from these large booking sites.

While some travelers haven't even noticed the fees (the sites do well in hiding or mislabeling them), and other travelers have just accepted the service fees as the new norm, there has been some backlash from both homeowners and travelers at the inceased cost of booking their vacations. Many travelers have begun to notice the cost they are paying and are seeking alternative ways to book without having to pay these service fees.

The backlash has led to the launch of many new national and regional vacation rental listing websites that do not charge service fees to guests or commissions to homeowners. These new sites have seen a steady increase in homeowners looking to diversify where they list their vacation rentals in order to provide alternative options to reach out to travelers who wish to book without paying service fees.

As the popularity of these alternative websites has increased, the large sites are now looking to change the blame game for service fees. The new strategy being adopted by these sites is to shift the burden of paying service fees from guests to homeowners, giving the illusion to travelers that they are saving money by not having to pay service fees. AirBnb has already begun an optional pilot program in some areas, and the other large sites have been actively exploring the idea for well over a year.

In the AirBnb pilot program owners have the option of paying a 14% service fee (plus an additional 2% for super strict cancellation policies) on bookings while guests would pay no service fee. The alternative would be to remain at the current status where owners are charged 3% (plus an additional 2% for super strict cancellation policies) and guests are charged up to 20% in service fees. It can be logically assumed that the 14% would eventually increase to as much as 20% in short order. It is expected that as early as November 2019 homeowners will have no option and will be saddled with the service fee for bookings.

For the vast majority of vacation rental owners, their rental homes are a second home. It is not a big business and renting it out during vacation season helps pay the mortgage, insurance, taxes, etc. Most owners work on very little margin and, if they carry a mortgage on the house, might break even at the end of the year or possibly even generate a small profit. Most homeowners will be unable to absorb a 14% decrease in revenue for their vacation rental and survive. This leaves only 2 options for them to continue in the business:

1. Raise their rates to include the 14% service fee (which would result in lodging taxes being charged on the rental rate and service fee) or
2. Add the 14% as an additonal fee themselves to their rental.

Either way, the guests will still be paying the service fee in the end.

The plans by these large sites is merely a case of smoke and mirrors. They will claim they do not charge service fees to travelers and hope to look magnanimus, while pushing to blame for high rental costs onto the homeowners, and still reaping their rewards.