Vacation Rental Shell Game: Find the Service Fee

Jun 22, 2018

The North & south Carolina vacation rental industry has been in turmoil for the past couple years, and travelers to the Carolinas have been unwittingly paying the price. When Expedia acquired HomeAway (parent company of VRBO) and introduced service fees to their platforms, this brought full circle an entire industry where all of the major vacation rental sites that dominate the market (HomeAway, VRBO, TripAdvisor, AirBnB) now have service fees that travelers must pay to book through their respective sites. These service fees currently range any where from 6 to 25 percent of the rental rate, amounting to hundreds of dollars for each booking.

Many travelers to North & South Carolina have been unaware of the service fees they have been paying when they book through these major vacation rental sites because the sites make a concerted effort to disguise or even hide these fees, lumping them in with the total cost, misidentifying or mislabeling the fees, trying to make it look like it is the homeowner who is charging the fee.

The Exodus

Savvy travelers though, have begun to find ways to avoid these fees by searching for alternative sites, such as Carolina Vacation Home Rentals (carolinavacationhomerentals.com), where they are able to book directly with the homeowner without paying any service fees. Vacation rental owners have also begun to push back by listing on Carolina Vacation Home Rentals, with some homeowners going so far as to create their own websites and Facebook pages for their properties to give travelers a better way to book.

This shift has not gone unnoticed by the major vacation rental sites. They have taken to extreme measures to fight the exodus that has ensued, using fear tactics and sometimes illegal methods to dissuade owners and travelers from working outside their platforms. They have instilled fear for travelersto the Carolinas that their site is the only secure way to book, promoting limited guarantees attempting to instill confidence of travelers that offer little to no protection in most cases. One major vacation rental site has even gone so far as attempting to hack smaller vacation rental sites in the middle of the night. While their attorneys have denied such actions, evidence exists tracking their attempts through the third party server they used to try and disguise themselves. Their attempts were unsuccessful.

The Shell Game

AirBnb & HomeAway are now considering a new model, which transfers the responsibility for paying the fee to vacation rental owners rather than travelers, making it appear to travelers they are paying no service fee to book. AirBnb has already begun limited trials of this new model and HomeAway is reportedly considering rolling this new model out in early 2019, as indicated by Alan Pickerill , Expedia Chief Financial Officer. “I expect that the monetization will shift a little bit more to supplier pays and away from traveller pays based on what we've seen in other industries.”

Under this new model, travelers to the Carolinas (and everywhere) will see no obvious upfront service fee, however it is inevitable that vacation rental owners will have no choice but to to pass these fees on to travelers by raising rental rates, because most vacation rental owners work on a very thin margin and cannot adsorb the additional cost. It is essentially just a shell game by the major vacation rental sites, using slight of hand and illusion, akin to the line from The Wizard of Oz, "Pay no attention to the man behind the curtain".

Rate Parity

HomeAway is already looking to avoidvacation rental owners charging less on Carolina Vacation Home Rentals because they would not have to pay the service fee. This has come about with their "Premier Partner program, which originally stated "those that are premier partners that list a property on multiple websites, set their rate on HomeAway either at or below the rate on competing sites". They have since reworded that statement to "Set and maintain fair, competitive, and consistent pricing". But, the writing is on the wall. HomeAway will eventually insist on price parity because it can’t have it’s base prices significantly higher for the same vacation rental which the homeowner has also listed on their competition.

Rate parity is offering the same rate with the same conditions for a particular property, regardless of the distribution channels used for booking.

In the vacation rental industry, rate parity agreements do not currently exist between distribution channels and vacation rental providers. Consequently, VRMs can (and do) offer varying rates over multiple channels and on their own website.

In the USA, no uniform regulation of rate parity clauses has emerged. In February 2014, a significant antitrust case against 22 travel brands including Marriott, Expedia, and Priceline was dismissed, which reduced pressure for regulation in the country. Several new accounting standards that impact the hotel industry came into effect in the US in January 2018. While these standards do not touch on price parity regulations in the country,  they will require hotels to more transparently record costs associated with merchant model OTA bookings.