9 Replies Latest reply: Jul 15, 2019 8:21 AM by u0999 RSS

    A Detailed Look at HomeAway's Advice to Owners Regarding Damage Deposits

    wildiris Active Contributor

      The Marketplace Feed on owners' dashboards has an article entitled "Put Your Best Price Forward."  I took a look at it.  I was particularly interested in HomeAway's advice to owners regarding refundable damage deposits.  Here's what the article says,

       

      "Refundable damage deposit

       

      You need peace of mind when it comes to potential damage in your vacation home. However, a refundable damage deposit is another upfront fee for travelers.

      • Build an additional amount into your nightly rate instead of using a refundable damage deposit. This helps eliminate the perception of an extra fee. You can use those additional funds in case of damage at any point.
      • Avoid setting a refundable damage deposit that is more than double your nightly rate.
      • Offer property damage protection. It’s a low-cost option for travelers and it can protect against accidental damages."


      At the outset, I have to state that I am a firm believer in refundable damage deposits.  I believe they provide an excellent incentive for guests to take better care of my vacation rental because the guest wants to have his refundable damage deposit returned to him at the end of his stay.  So, why is HomeAway trying to discourage owners from having a refundable damage deposit?


      First, HomeAway charges the traveler's service fee on rent and the owner's fees.  It does not charge a traveler service fee on refundable damage deposits.  So, it's in HomeAway's financial interest for owners to "build an additional amount into your nightly rate instead of using a refundable damage deposit."  HomeAway will make more money if owners do this.


      Second, HomeAway holds refundable damage deposits in escrow until the guest leaves.  If a guest damages the vacation rental, an owner contacts HomeAway about how much money should be withheld from the damage deposit.  No doubt many guests dispute this amount.  There's an expense for HomeAway to administer the refundable damage deposits.  If HomeAway can convince owners to do away with refundable damage deposits, HomeAway will make more money.


      Third, per the HomeAway website, the Property Damage Protection is "provided through HomeAway, Inc. and administered by CSA Travel Protection and Insurance Services."  HomeAway isn't marketing the PDP insurance for CSA out of the goodness of it's heart.  HomeAway is being remunerated in some fashion for doing this.  My guess is that it receives a percentage of each PDP policy that travelers buy through the HomeAway website.  In my opinion, the PDP provides no incentive for guests to be careful.  They are already out-of-pocket for the PDP and won't have the premium refunded if they don't damage anything.  Also, remember that owners are not the insureds under the PDP.  The guest is the insured.  If the guest denies causing any damage, the PDP won't pay.  Further, the PDP only provides coverage for accidental damage caused by the guest.  It does not provide coverage for intentional damage.  If a guest throws a beer can through your wide-screen TV, the PDP won't pay.  So, why does HomeAway recommend that owners use the PDP instead of a refundable damage deposit?  Because HomeAway will make more money.


      I understand that HomeAway's goal is to maximize it's profits.  My goal is to maximize my profits.  HomeAway is not being transparent in it's advice to owners.  In my opinion, HomeAway's advice regarding Refundable Damage Deposits benefits HomeAway only, not owners.


      Edited by wildiris.




        • Re: A Detailed Look at HomeAway's Advice to Owners Regarding Damage Deposits
          twobitrentals CommunityAmbassador

          I so wish they they would have just continued to pass the deposit to owners for their personal decision on what to do with it. As for the daily addition, how does that work when we are continually asked to give discounts. LOL

          • Re: A Detailed Look at HomeAway's Advice to Owners Regarding Damage Deposits
            feibus Senior Contributor

            1. The damage deposit feature that HA offers is for owners who don't have another secure way to manage damage deposits.  Our on-site managers offer us a way to collect and manage a security deposit, but if they didn't, I'd end up programming a check-in form on my web site that would collect the person's photo ID and security deposit via a credit card "auth".  But that's me and I'm a techie, so that's not so far-fetched for me, but for an average owner it's definitely beyond their abilities.  So I see the point in having the feature.  I don't see the point in HA talking people out of it.

             

            2. "Accidental" damage insurance is a bad joke played on the owners. It only pays if the guest admits they did the damage by accident and there are guests who just can't admit fault.  Don't fall for the joke.  Better is to build in the purchase of ARDI with each reservation, so that you're covered for most incidental damages and you don't need the guest to admit anything at all.  I tell my guests NOT to purchase accidental damage insurance, but some don't listen.

             

            3. Set a damage deposit amount that's commensurate with your homeowner's insurance deductible or the typical damage you think the guest can do during a normal stay.  It has little to do with your nightly rates, which can vary from season to season.  The amount of the deposit is -- if you think about it -- a message to the guest about how much you value your home and want to encourage them not to damage it.  That has nothing to do with your nightly rates, although from a marketing perspective, the guest who wants to pay $50/night is likely not the guest who can come up with $1000 damage deposit, so your messages there need to align with your guest's expectations.

             

            Added later: this year instead of using ARDI, I raised my cleaning fee by $10, which is the cost of a $500 ARDI policy.  Gives me an extra $10 a booking (and I keep all that instead of ARDI), which is an additional $800 to cover wear-and-tear items in my two places.  I might raise it another $10 next year, thinking about that a little bit now.

            • Re: A Detailed Look at HomeAway's Advice to Owners Regarding Damage Deposits
              psphoto Active Contributor

              "First, HomeAway charges the traveler's service fee on rent and the owner's fees.  It does not charge a traveler service fee on refundable damage deposits.  So, it's in HomeAway's financial interest for owners to "build an additional amount into your nightly rate instead of using a refundable damage deposit."  HomeAway will make more money if owners do this."


              Exactly!


              " If a guest damages the vacation rental, an owner contacts HomeAway about how much money should be withheld from the damage deposit."


              Not exactly.....the owner just sets the amount to be refunded...along with the reason. There is no real "contact" with Vrbo/HA about this.


              "There's an expense for HomeAway to administer the refundable damage deposits."


              No...in the world of money, getting hundreds of thousands or possibly millions of $$ to hold as damage deposits is a very profitable exercise!

              It's essentially a huge free loan!


              • Re: A Detailed Look at HomeAway's Advice to Owners Regarding Damage Deposits
                koko Contributor

                As I had stated in another thread I have strong misgivings about DD's held by HA.

                The idea that I should INCREASE my rental price to "hide" an insurance policy in there is more than absurd.

                I would have to increase my nightly rate by 15% to get to an amount I would consider close to the DD I would collect with a CC hold.

                This in turn would price me right out of my market, I would feel like a cheat because I know that my price right now is fair and correct but more would not be at this point. I also do not discount because of that. My price is fair in both directions, up and down.

                Having said that, I feel that hiding this increase in the nightly rate is very dishonest and deceitful toward the guests. How long does HA think that people can be beaten until they start to scream and simply not use the platform any more? Guests have calculators too and can figure out what is the better route to go.

                Expedia prides itself on cut throat prices and suggests at the same time to inflate prices to hide Damage Deposits in there?

                Self insurance is what I did the last 20 years with my rental and I think I will continue to do so.

                As to feibus suggestion to increase the cleaning deposit by a small amount - while this is a valuable idea it would take a long time to accrue a $5000 deductible.

                  • Re: A Detailed Look at HomeAway's Advice to Owners Regarding Damage Deposits
                    feibus Senior Contributor

                    I'm not trying to match my insurance deductible (which is $1000 and my Sec Dep is $500), but to provide a little extra income to cover stupid -- non-accidental -- stuff that an ARDI policy might cover for the same price.  Over 7 years now, biggest damage has been $200 for extra cleaning when a kid threw up on a comforter and the puke also got on the carpet.  But we're in a family-centric secured resort, so our protection needs don't match someone else's necessarily.

                  • Re: A Detailed Look at HomeAway's Advice to Owners Regarding Damage Deposits
                    hmmmm Senior Contributor

                    And these guests who do damage and run out the door, have learned that they can create damage and have no responsibility for their actions.

                     

                    The Refundable security damage deposit, keeps them honest.  Or it has for me for the last 30 years.

                     

                    No consequences and some will run amuck.

                     

                    It makes for a kind of free for all type of operation.  Not my guest demographic for my properties.

                    • Re: A Detailed Look at HomeAway's Advice to Owners Regarding Damage Deposits
                      u0999 Premier Contributor

                      very well written and agree on most points. The owners will be wise NOT to follow this advice.