On June 15th, 2024, Vrbo, a leading Online Travel Agency (OTA), made a significant policy shift that has stirred conversations among short-term rental hosts and property managers. The introduction of the Extenuating Circumstances Policy marks a departure from Vrbo’s historically pro-host stance, aligning more closely with traveler-centric approaches seen on platforms like Airbnb and Booking.com.
What is Vrbo’s New Extenuating Circumstances Policy?
VRBO said in its recent article, “When broad-scale travel disruptions prevent or legally prohibit Vrbo travelers from completing their reservations, Vrbo may activate its Extenuating Circumstances Policy, applicable to all bookings made on Vrbo. If an event covered by this policy occurs, and Vrbo activates this policy, partners must provide refunds for impacted reservations, regardless of the reservation’s cancellation policy.”
What Does This Mean?
This policy means that in the event of significant disruptions—such as natural disasters, government-imposed travel bans, or pandemics—that affect large areas or groups of travelers, Vrbo can enforce a blanket refund policy. This applies to all bookings on the platform, overriding any existing cancellation policies set by property managers.
Here’s a detailed breakdown:
- Broad-Scale Travel Disruptions:
This refers to significant events that affect large areas or groups of people, making travel impossible or illegal. Examples include natural disasters like hurricanes or wildfires, government-imposed travel bans, or pandemics.
- Activation of the Policy:
Vrbo has the discretion to decide when to activate the Extenuating Circumstances Policy. It will only be triggered in response to major events that disrupt travel on a broad scale.
- Applicability to All Bookings:
Once activated, this policy applies to all bookings made on Vrbo, regardless of the individual cancellation policies set by property managers. This means that even if the property manager has a strict no-refund policy, they will still be required to provide refunds under this policy.
- Mandatory Refunds:
If the policy is activated, property managers must issue refunds to guests affected by disruption. This is mandatory and overrides any existing cancellation policies the property may have.
Why Should Property Managers Be Concerned?
This policy shift significantly impacts property managers because it places the financial burden of cancellations squarely on their shoulders. Previously, hosts could rely on their cancellation policies to mitigate financial risks. However, under the new policy, even well-crafted cancellation policies are overridden during covered events, leaving hosts vulnerable to unexpected financial losses.
Historical Context: Vrbo’s Pro-Host Stance
Historically, Vrbo has supported property managers by allowing them to set their cancellation policies. During the COVID-19 pandemic, Vrbo did not mandate refunds, instead encouraging hosts to make their own decisions. This approach was in stark contrast to Airbnb’s mandatory refund policy, which caused significant backlash from hosts who felt their rights were being overridden.
Comparing Vrbo with Other OTAs:
- Airbnb’s Approach:
During the pandemic, Airbnb required hosts to refund guests, which led to widespread dissatisfaction among hosts. The platform prioritized traveler protection, sometimes at the expense of host interests.
For a detailed breakdown of the most updated version of Airbnb’s cancellation policy and its potential impact on hosts, you can check out our previous article: AIRBNB UPDATES CANCELLATION POLICY: IMPACT FOR AIRBNB HOSTS
- Booking.com’s Policy:
Known for its stringent refund policies during natural disasters and other disruptions, Booking.com has long required hosts to provide refunds, aligning with the approach Vrbo is now adopting.
Industry Reactions and Concerns
Dan Driscoll, Co-Founder at Boutiq, expressed concerns that this policy shift undermines the support OTAs should provide to their hosts. He stated, “OTAs need to support their hosts (suppliers), not work against them – if there isn’t equity for all stakeholders, the relationships between OTAs, hosts, and travelers will falter.”
This sentiment reflects the broader concerns within the property management community about the sustainability and fairness of this policy.
The Financial Toll on Hosts: What Are the Numbers?
The financial implications of this policy are substantial. Hosts must refund bookings and also lose out on non-recoverable credit card processing fees. For instance, on a $10,000 booking, the processing fee might be around $390. This cost is non-recoverable, meaning that even when the stay is refunded, the host still incurs this expense.
Financial Impact Examples:
1. Non-Recoverable Costs: A host in Florida has a booking worth $15,000 for a week-long stay during the peak season. If a hurricane hits, the host would have to refund the full amount, losing out on the $585 processing fee and potentially other pre-stay expenses like stocking the property.
2. Operational Costs: A property manager in California may have spent significant amounts preparing a property for a high-profile event. If wildfires prevent guests from traveling, the manager not only loses the booking income but also the non-recoverable expenses incurred in preparation.
What’s Driving Vrbo’s Decision?
Vrbo’s response to the Maui wildfires last summer hinted at this policy shift. A Vrbo spokesperson stated that the change was informed by the company’s response to the wildfires and a shift in industry norms to improve traveler protection during major weather events. This shift aligns Vrbo with broader industry trends but has left many property managers questioning the abruptness and rationale behind the decision.
Protecting Travelers vs. Supporting Hosts
While Vrbo’s intention to protect travelers is commendable, the financial burden it places on property managers is a significant concern. Property managers are already grappling with high operational costs, and this policy adds another layer of financial strain. The shift from Vrbo’s traditionally pro-host stance to a more traveler-centric approach is not only surprising but also challenging for hosts who have relied on Vrbo’s support.
This policy sets a concerning precedent for how future disruptions will be managed, leaving property managers uncertain and anxious about potential financial impacts from unforeseeable events. Vrbo should consider the needs of both hosts and customers, striving to reach a middle ground that ensures fair treatment and financial sustainability for all parties involved. The “middle ground” for Vrbo’s Extenuating Circumstances Policy could involve a more balanced approach that takes into account the needs of both hosts and travelers. Here’s what this middle ground might look like:
- Partial Refunds Instead of Full Refunds: Instead of mandating full refunds for all affected bookings, Vrbo could implement a policy that requires partial refunds. This would allow travelers to recoup some of their expenses while also minimizing the financial burden on hosts.
- Flexible Rebooking Instead of Refunds: Instead of offering refunds, Vrbo could encourage flexible rebooking policies. Travelers would be allowed to reschedule their stay at no extra cost within a certain timeframe.
Vrbo cites industry norms as a reason for the policy change; however, this move also aligns with a broader trend of standardization across the industry. By implementing this policy, Vrbo is bringing its practices in line with those of its competitors, which could be seen as an effort to maintain consistency and fairness across platforms.
