37 Replies Latest reply: Dec 4, 2019 1:12 AM by scottr RSS

    Double-check your service fee amounts - I'm getting charged WAY too much

    lindata Active Contributor

      My bookings have dried up.  I keep trying to figure out why since I have been happily renting fairly well for five years.  Anyhoo, I looked at the service fees.  I have two properties.  I did test rates on six or seven dates on each property throughout the next six months.  Each property I have service fee charges ranging from 10.9 to 11.3 percent!!!  They "said" it would be 10 percent max when they rolled this ridiculous fee out initially.  I have always had the max service fee.  Always.  And now this???  UGH.

        • Re: Double-check your service fee amounts - I'm getting charged WAY too much
          timthek Active Contributor

          That's simply not true. I'm not one to defend VRBO, but I've been with them for 4 Years and their fee has never been capped at 10%. If I recall it was a sliding scale from 8-12%. I think it's still the same but with a cap of $599. Also I think they now say their rate varies from 8-12% "but can be higher or lower."

           

          Also, what do you want owners to "check"??? Rates vary depending on dates, length of stay, number of guests and how VRBO is feeling that day. There's nothing for owners to check. Furthermore, everyone agreed to VRBOs lousy TOS so there's nothing you or anyone else can do about their rates. 

          • Re: Double-check your service fee amounts - I'm getting charged WAY too much
            feibus Senior Contributor

            Bookings always dry up around this time of year.  Just the nature of corporate vacation calendars.  Let us know if it doesn't pick up by Jan 15, because it could be because of something else you're not seeing.

            • Re: Double-check your service fee amounts - I'm getting charged WAY too much
              wildiris Active Contributor

              My recollection of the traveler service fee is in accordance with timthek's recollection.  Vrbo varies the traveler service fee percentage charged for the same vacation rental.  It ranged from 8.9% to 9.5% for my property in 2019.  Not a huge range, perhaps, but enough to be noticed.  What I find ironic is that the traveler service fee is regressive.  The lower the nightly rate, the higher the percentage, and it has a dollar cap.  I believe that the current dollar cap amount is $499, not $599.

              • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                kmcbhense Contributor

                I do have $599 service fees on some of our places. But they are high dollar rentals (15-20K) so the percentage isn't bad. But we still get plenty of complaints about it from potential guests

                • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                  casitacynthiasantafe Contributor

                  I checked my e-mail and found the initial announcement of the odious service fee, and confirmed my suspicions that it's been silently creeping up ever since:

                   

                  What you need to know about the new service fee
                  Dear Cynthia,

                   


                  Last month, HomeAway began rolling out a new service fee to be charged to travelers who book on HomeAway, VRBO, and VacationRentals.com. We wanted to be sure you’re aware of this new fee, and to share with you why we’ve implemented it and what it means for you and your travelers.

                   

                  Below you’ll find a brief overview of the service fee, with opportunities to learn more on the HomeAway Upgrades 2016 webpage or via a webinar Q&A to be hosted by HomeAwayCOO Tom Hale later this month.

                   

                  Charged to travelers on HomeAway, VRBO, and VacationRentals.com, the new service fee is a percentage-based fee of 4–9% (average 6–7%) based on total rental price. The fee is collected during the checkout process.

                  Learn more about the new service fee

                   

                  HomeAway is leveraging the service feeto invest more heavily in marketing and advertising, helping in turn to drive travelers to your listings. As the vacation rental market grows, so too does the competition. In order to remain the leader in delivering bookings to you, we need to increase our visibility with new travelers. Travelers are also benefiting as we make our marketplace the most trusted in the industry.

                   

                  Learn more about the service fee and our 2016 plans at https://www.homeaway.com/info/upgrades

                   

                  If you have additional questions on the service fee, we encourage you to sign up for a live webinar to be hosted by HomeAway COO Tom Hale on Wednesday, March 23, 2016 at 1 p.m. (CST).
                  Sign up now


                  Please submit your questions for Tom before 5 p.m. on March 21, 2016

                   

                  Thank you for being a HomeAway customer.
                    • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                      wildiris Active Contributor

                      Thank you for searching for (and finding) this email!  It certainly has been "silently creeping up" since it was implemented.  No doubt that Vrbo will continue to see how high they can push the percentage. 

                      • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                        martyp Contributor

                        Interestng. The percentage is based on total rental price  I ran a test for two nights on my property and I came up with a "rental" price of $340.00, and a VRBO "Service Fee" of $53.00.  That comes up to a service fee of 15.6%.      6

                        $170 x 2 nights

                         

                        $340.00

                         

                        Cleaning Fee

                         

                        $120.00

                         

                        Service Fee

                         

                        $53.00

                         

                        Tax

                         

                        $40.80

                         

                        Total

                         

                        $553.80

                         

                        Your payment is$553.80

                         

                          • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                            margaret CommunityAmbassador

                            martyp Your total rental cost includes fees. Rent $340 + cleaning $120 =  total rental cost $460. The service fee is 11.5% on this one. The service fee is dynamic so it could be different for another booking at the same rate.

                              • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                martyp Contributor

                                There is a fallacy associated with including the “cleaning fee” in the calculation. First, presume that I have already priced my rental at the maximum that the market is willing to pay[1]. THEN, along comes VRBO with their surcharge (erroneously called a “service” fee). With the implementation of the VRBO surcharge, my home is now priced out of the market; My only choice is to lower what I receive. Since the taxes and cleaning fee are both fixed, pass-through charges that can not be changed, the only adjustment I can make is by lowering the nightly rental fee, which happens to be 14.5%.


                                 

                                notes:

                                1. It is a safe presumption that my off-season fee was maxed out for two reasons: 1. My VBO off-season rentals dried up after the VRBO surcharge was implemented; 2. The VRBO Market Maker said my rental price needed to be lowered … by the amount of the VRBO surcharge.

                                  • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                    wildiris Active Contributor

                                    martyp wrote:

                                     

                                    There is a fallacy associated with including the “cleaning fee” in the calculation.

                                    There are some owners and property managers who charge a higher cleaning fee than they actually pay their cleaning service.  They pocket the difference.

                                      • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                        casitacynthiasantafe Contributor

                                        I eliminated my cleaning fee when HA added the "service fee." I do charge a pet fee, and an extra guest fee, but I just decided that with the service fee, the cleaning fee was one fee too many. I pay my cleaners well, and just consider that their pay comes out of my rental revenue. I don't know if that was a good decision or not; I don't know how many travellers notice and appreciate the fact that I don't charge a cleaning fee (no one has ever mentioned that), but that's what I do.

                                        • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                          martyp Contributor

                                          You are missing the point entirely. It doesn’t matter what formula VRBO uses or how the amount is calculated; the fee is excessive. Consider my 2 day rental above. In addition to the $53 VRBO surcharge (“service fee”), VRBO also receives $28 from the prorated portion of my subscription fee … a total of $81.

                                           

                                          Out of the $553.80 transaction, VRBO receives $81 and I receive $312. For me, that simply is not a sustainable ratio. If it were not for my bookings outside of VRBO, I would just break even. Breaking even is not an acceptable option after investing hundreds of thousands of dollars in a real estate investment.

                                           

                                          Since the implementation of the "service fee", I have expanded my bookings outside of VRBO.  I seriously doubt that I would eliminate VRBO entirely, but I would like to reduce it as much as possilble.

                                            • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                              feibus Senior Contributor

                                              Out of the $553.80 transaction, VRBO receives $81 and I receive $312

                                              Gonna have to show your work for that math.

                                                • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                                  martyp Contributor

                                                  You are right; I goofed on the prorated portion of the $499 subscription fee. Last time I did the calculation, the $499 subscription fee was right at 5% of my total nightly rental income. So, the prorated portion in my example is $17 (5% of the $340 nightly rental charge).

                                                   

                                                  The traveler pays: $553.80

                                                  VRBO receives: $53 + $17 = $70 (“service fee” plus my $17 prorated subscription fee)

                                                  The cleaning fee and the taxes are a pass through.

                                                  I receive: $340 minus the $17 I paid to VRBO = $333.

                                                   

                                                  Corrected statement:

                                                  VRBO receives $70; I receive $333.

                                                   

                                                  Because of the amount of the VRBO “service fee”, I had to lower my off-season rate;

                                                  because of the amount of the VRBO “service fee”, I was prevented from raising my on-season rate.

                                                   

                                                  This is not sustainable.


                                                   

                                                    • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                                      feibus Senior Contributor

                                                      I was about to do a long explanation of why you should never sell on price... then I looked again at the math and can't understand why you're on a subscription if you claim to be calculating 5% is the cost of the subscription for that $340 booking.  That translates into less than $7K per year and PPB is a better deal until you get to $10K, so maybe you shouldn't have a subscription at all.

                                                        • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                                          martyp Contributor

                                                          My VRBO nightly room rental came to right at $10,000.  The subscription fee of $499 is right at 5% of that $10,000.  My total nightly rental bookings, VRBO + outside nightly room bookings was $22,000.[1]

                                                           

                                                          I never liked the idea of PPB because of the delayed payment. I also liked the idea of the Gold level because I got something of value for my money, a favorable listing position. THEN VRBO got rid of the Metalic model and added the outrageously high surcharge (service fee).  VRBO did that  in a February, just as I was about to raise my on-season rate.  I couldn't raise my season rates or I would have priced myself out of the market.

                                                           

                                                          THEN, VRBO raised the subscription fee by 25%.  In the total financial picture, a $100 increase will not be significant, BUT, to me, that is an absurdly high and abusive percentage.[2]

                                                           

                                                          Please tell me why I should never sell on price.

                                                           

                                                          Notes:

                                                          1. I base my expenses on the nightly room income because: the taxes and cleaning fee are pass-through; and the nightly room rental income is the only income that I can use for paying expenses.

                                                           

                                                          2.   The $100 is not significant to each individual, but increase is an ethical issue: A person who takes $1 from 1 million people hurts no one, but he has no  ethics, just as the person who takes $1 million from one person has no ethics.

                                                            • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                                              feibus Senior Contributor

                                                              Claiming a fee increase is an "ethical issue" is just nonsense.  Businesses raise prices all the time, that's what they do when they can, just the same as I raise my rental rates every year if I can.  It's how businesses stay ahead of their always rising expenses.  If they didn't announce the fee increase ahead of time and just imposed it... that would be an unethical practice.  But just raising it... it's the way capitalism works, you charge what you can for what you're offering and your customers are free to accept your price or find/fund an alternative.

                                                               

                                                              My cleaning fee is not a pass-thru, because I charge more and use part of it to self-insure accidental damage coverage.  Or if there's not enough accidental damage, I made a few dollars more per stay.  I don't charge an "administration fee" or a "pool heating fee", although some of my competitors do.  That's their marketing model, not mine, but I can also see the validity in it if it brings them more money during the year.

                                                               

                                                              As for why not to sell on price: because you can't lower your price enough and it's a hard number that guests can complain about.  Always better to sell on the value your home brings to the vacation, that way you can charge what you want as long as you can explain the value in the guest paying more.  For example, I have amazingly comfortable beds.  Having spent many bad vacation nights on uncomfortable beds, I know that my guests see the value in having a really wonderful bed experience.  So I sell on that.  Not on price.  Another example: my guests are families with small kids, so I stock the home with books, games, video games, DVDs, anything to keep the kids occupied while the parents get a little "nap time" (wink wink).  Again, that's a value I can sell the guest on and I can charge more because much of my competition offer nothing to keep the kids occupied.  I raised my rates for this year both for every single weekend and for high seasons.  In 2020, I'm raising them $5/night pretty much throughout the year, low season or high.  And I made $4K per home more this year compared to last year with about the same number of nights booked.  I'm priced a bit above the mid-point of my market according to MarketMaker, and that's about where I want to be overall, because that's the level of value I'm offering.

                                                               

                                                              But back to math: you're only booking $22K per year, so that says to me that it's highly seasonal, so you need to maximize high season by being nearer the high end of the price range than the mid-point.  So you need to figure out what value you (can) bring to the guests' vacation that will justify that price.  If you don't have one, that's something you can address with some inexpensive purchases or process changes if you focus on what your guests might want that you aren't offering.

                                                               

                                                              What's your value proposition for guests?

                                                      • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                                        wildiris Active Contributor

                                                        I understand that you think that the traveler service fee is too high.  I agree.  The point that I was trying to make was that your proposed solution of not including the amount of the cleaning fee in calculating the service fee would do a disservice to owners who include the cleaning fee in their rental rate and encourage other owners to reduce their rental rate and charge an extremely high cleaning fee.

                                              • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                                lindata Active Contributor

                                                Casitacynthia - I KNEW I wasn't imagining things.  I vividly remember there was a cap, and I thought it was supposed to be max ten.  That was when they first "rolled" it out.  Now I'm on the phone with another rep and he is saying max 15%!!$$  When did THAT happen?  Ugh! 

                                              • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                                kmcbhense Contributor

                                                Heres where I see things going on the service fee/vrbo income front. 3rd quarter income is flat for VRBO with the same predicted ahead. Expedia stock prices have dropped by over 35%. Turmoil at the top level of VRBO with changes in upper management.

                                                So taking all this into consideration, how does vrbo answer shareholder concerns?  They have to get additional income. We all know that vacation guest income has slowed down to a standstill. So where does that additional income come from?

                                                Its coming folks....won't be long before we see a service fee on the owner side of things as well.

                                                • Re: Double-check your service fee amounts - I'm getting charged WAY too much
                                                  lindata Active Contributor

                                                  Okay.  I am currently on the phone with another service rep since no one called me back as promised.  Thank you, HOMEOWNERS, who responded to let me know that the CAP has changed and is no longer what I thought.  This new service rep has been here "a couple of months," and I am APPALLED at how confrontational he is being.  I started asking questions, and he started getting snippy, so I started getting snippy, and now we are just mutually annoyed at each other.  Ugh.  What the H-E-double hockey sticks is going on at Verrrrbo these days?

                                                   

                                                  By the way, there is apparently NO cap to the service fee.  That is what the rep told me tonight.  NO CAP.  I said so you can charge 20, 30, 40%?  He scoffed and said that is highly unlikely.  Well, but there is no cap, so ...