Yesterday Airbnb announced a change to its refund policy that has the potential to be disruptive for professional vacation rental managers and homeowners, aka “hosts.” Airbnb’s new policy goes into effect for stays made on or after April 29, 2022, and defines “how we will assist with rebooking a reservation and how we handle refunds when a Host cancels a reservation or another Travel Issue disrupts a stay.”
In addition to loosening language around what constitutes a Travel Issue, the new policy states: “Where Airbnb incurs costs in assisting a guest with finding or booking comparable or better accommodations, the Host will be responsible for, and Airbnb will have the right to require the Host to pay or otherwise reimburse, those costs in addition to the amount of any refund.”
Kleenex®, Post-it®, Uber, and Airbnb
There’s a lot to unpack with the policy change, but let’s take a critical moment to consider Airbnb’s brand through the eyes of the consumer. It is fascinating when the general public makes an unconscious, collective decision to call a product or service by a brand name. As the vacation rental industry stood on the sidelines watching consumers label private-home rentals as “Airbnbs,” comparisons frequently were drawn to Kleenex®, Post-it®, and Uber to make sense of the phenomenon. However, these comparisons are misleading to the public.
Kleenex® and Post-its® are products which are owned, standardized, produced, distributed, and quality controlled; and, even though Uber contracts with drivers who own and service their vehicles, Uber Technologies ultimately controls and is responsible for its service. The company has standards, vetting, processes, and accountability for its drivers’ actions when servicing Uber’s customers.
In contrast, Airbnb is a website that lists short-term rentals and doesn’t own, manage, service, or control any of the rental properties listed on its website. And listing is fast and easy. According to CEO Brian Chesky, “We’re going to allow you to become a host in less than 10 minutes.”
Instead of Kleenex®, Post-its®, and Uber, Airbnb is more like Amazon’s retail arm. Both models require building significant trust with the public. Since neither company controls the product(s) it sells, both use a primary tool to garner trust with consumers: easy refunds.
Airbnb was already risky
On March 11, 2020, Airbnb infamously used its Extenuating Circumstances policy to override its hosts’ cancellation policies and issue blanket refunds for any stay within the following 45 days. However, vacation rental managers have long been reporting (before and after March 2020) that Airbnb’s customer service representative are quick to take the side of the guest over the host and refund for any issues that arise during a stay, regardless how minor or unsubstantiated these issues may be.
In addition to refunding, Airbnb rewards hosts with the most flexible cancellation policies. However, for vacation rentals with an average booking window of 80+ days, for example, a 48-hour cancelation policy equals lost revenue. According to industry expert Amber Carpenter, “If you dig even deeper you will figure out that Airbnb is hard at work to update its search results algorithms and consumer-facing search filters to promote properties with the most flexible cancellation policies, which is great for guests but really hard for homeowners and property managers who cannot replace the lost revenue with 24 hours’ notice like an urban hotel.”
Beyond refunds and cancellations, property managers have reported multiple problems from Airbnb guests, including squatters and guests who rent homes for large parties causing damage to the home and problems with neighbors.
Airbnb’s new refund and reimbursement policy for “travel issues”
Yesterday’s policy announcement affirms that Airbnb intends to continue buying consumer trust with refunds.
And why not? Airbnb isn’t refunding its own money. It isn’t refunding the booking fee it collects. The cost of this trust is born on the backs of its host community.
There are three noteworthy changes to the refund policy. First, guests are able to request a refund 72 hours after a Travel Issue is discovered instead of 24 hours, and in some cases, they can report more than 72 hours after the issue is found. Second, the language defining a Travel Issue is more ambiguous. Third, hosts may be required to pay for “comparable or better accommodations” for guests who have a Travel Issue.
1. 72 Hours
The previous policy stated that guests had 24 hours after discovery to report a Travel Issue to Airbnb and request a refund.
2. Travel Issues Concerning the Condition of the Property
With a historically subjective refund policy, property managers were hoping Airbnb would be clearer and stricter in specifying the parameters and kinds of issues that would entitle guests to a refund. Instead, the language remains ambiguous, and in some cases, even more so.
The previous policy said, “at the start of the Guest’s booking, the Accommodation: (i) is not generally clean and sanitary (including unclean bedding and/or bathroom towels); (ii) contains safety or health hazards that would be reasonably expected to adversely affect the Guest’s stay at the Accommodation in Airbnb’s judgment, or (iii) has vermin or contains pets not disclosed in the Listing.”
The screenshot on the right is from the new policy. As you can see, language about safety was changed from “safety or health hazards that would be reasonably expected to adversely affect the Guest’s stay” to “They contain safety or health hazards.”
In addition, the term “vermin” was changed to “pests,” and “generally clean” was changed to “reasonably clean.”
While subtle, the changes give Airbnb even more leeway in issuing refunds.
3. Airbnb can now require hosts to pay or reimburse for “comparable or better accommodations.”
The new policy added a new component to its refund policy: “Where Airbnb incurs costs in assisting a guest with finding or booking comparable or better accommodations, the Host will be responsible for, and Airbnb will have the right to require the Host to pay or otherwise reimburse, those costs in addition to the amount of any refund.”
Consider a hypothetical situation in which a guest books a 6-bedroom beachfront home during the week of July 4th for their group. A couple of days after check-in, they find ants in the kitchen. They call Airbnb to say they want to be moved. Airbnb decides to refund the guest and move them to the only unoccupied 6+ bedroom home on the beach which is now 3x the rate they paid. Will Airbnb charge the host for the cost of that home in addition to refunding the unused—and now unbookable—nights?
Airbnb’s average stay value, average length of stay, and average booking window is below other channels
In addition to increased risk for bookings on Airbnb, compared to direct bookings, the average stay value (ASV) was 53 percent lower, the average length of stay was 31 percent smaller, and the average booking window was a 63 percent shorter for bookings on Airbnb (see charts below).
Moreover, Airbnb’s guests book more last minute than guests booking on Vrbo or directly with property managers. The gap becomes more pronounced as the number of bedrooms increases. For example, for homes with 7-8 bedrooms, the booking window is 66–69 percent shorter on Airbnb than on direct channels and over 50 percent shorter than on Vrbo (see charts below).
Buying trust with refunds
Thinking back to the comparison between Airbnb and Amazon’s retail business, both companies are built on being consumer-friendly and trustworthy marketplaces. Trust is the foundation of the model. Airbnb is following Amazon’s lead by leaning heavily on refunds in order to secure this trust. The difference is that Amazon’s retail suppliers sell widgets. In contrast, when Airbnb issues a refund for a 7-night stay, the individual host loses 2% to 14% of their annual revenue (based on average occupancy rates across destinations). If the host then must pay additionally for “comparable or better accommodations” for the guest, the loss is untenable.
As fiduciaries, professional vacation rental managers have a responsibility to their homeowners to manage risk—risk to the home and risk to the revenue. When evaluating future distribution strategies, risk management is going to play a more significant role in determining success.
If Airbnb’s strategy is to gain consumer trust by refunding its suppliers’ revenue, it will start to see its high-quality supply move elsewhere.
There are always 2 sides to every issue. Airbnb is built on trust. But it bears responsibility, as well, both to the managers and to the renters, each of whom pay money to Airbnb. I just returned from a disastrous Airbnb stay. I bought and pre-paid to Airbnb a 19 day package to stay for a ski vacation. Airbnb, and their “host”, fraudulently and without warning or notification, instead sold us a series of 6 separate reservations. The result of that was the host was supposed to “renew” the reservation every 2-3 days, which he only did at the very last minute, and we never knew whether it would be done, or not, with the hotel warning us each time that we were expected to check out the next day at 11 AM. The final portion of the stay was never renewed, and we were forced out, with no other accommodation, during Spring Break Week, in Park City. The host (who was obviously a multi-property manager and not an owner)was inaccessible after the first day, and Airbnb did nothing to help, and refuses a refund. Why should the host be able to get away with this fraud? Why should Airbnb, which is the entity that actually took my money, be permitted to shirk responsibility?
Airbnb is nothing without hosts? It is also nothing without guests. No trust – no business. Never again with Airbnb.
Get a load of the way they will charge you for disrupted stays:
I negotiated a refund with a guest TWO YEARS AGO, and Airbnb just deducted it from a current stay. It was a $900 hit! No advance warning, no explanation, and no assistance from customer service. I didn’t even remember the guest, or the stay.
Now, they will be transferring another deduction from ONE YEAR AGO, from ANOTHER listing that I closed, to my next upcoming stay. Again, no communication for a $700 hit!
Forget striking, I am cancelling my account. I refuse to work with this unethical company.
In addition to all these subjective changes, AirBnB platform has a very poor review system as well. Consistent to its lack of objectivity and accountability. Precisely, it uses one way review – (what the guest say, even if host reported damages to property and steal from property)and it still punishes the Host/property suspending the advertisement for 9 days automatically. The damage goes further. It never removes unreasonable and reviews that violates its policy after submitting removal request. AirBnB doesn’t check if the guest review follows their own review protocol. Arbitrarily suspends/punishes everything costing money to property owners and hosts but them.
The changes in their policy is consistent to one way business or better say poor accountability policy-winners are guest and AirBnB. Looser the property owner and the hostess ( the ones that have the product).
I’m happy this issue is an opportunity to develop more vacation rental platforms where accountability to all parties involved in the transaction is highly recognized.
Claudia Fortunatti
“Ticked off” – couldn’t find your # but what about a petition on Change.ORG?
I’m absolutely up for a boycott – we have 4 vacation rentals in SWFL and I’m so sick of Airbnb and their socialist policies. Just LMK when and I’ll pull the plug.
Horrible policy!!
Interesting that they have made these changes straight after they implemented a host only service fee, (they no longer charge a guest service fee) just seams to me like another slap in the face!
Write to your government consumer complaints department and competition regulator and local government representative, they will collect all the complaints and act on bullying, unfair contracts, price fixing, etc.
All hosts worldwide should boycott airbnb on specific days/weeks, as one person said they are nothing without hosts. Lets take the power away from them. Do this on a regular basis and when their profits fall and the press gets hold of it I think they will change their ways…we can only try. who’s in? #hostsboycottAirbnb lets agree on dates? Who’s in?
I’m with you! The first time this happens to me will be the last time it happens.
I cancelled all 4 of my listings yesterday
Not worth the risk
I list several properties on AirBnb and will be watching this matter very closely. I am particularly concerned that my very fair (posted in house rules) cancelation policy can now be overridden by AirBnb. The 48 hours policy is ridiculous, hence the separate policy for protection against lost revenue. As to unfair refunds, the first time it happens will be the last time. My property listings will be removed.
After 10years with AirBnB it will be my last.
My Airbnb property is in the suburbs and I live not too far from it. The weather is lovely and often we leave sliding doors open to the outside. Sometimes field mice get in. It’s happened both at the own house and the Airbnb. Quick to deal with putting traps or bait out. However under this new policy, if a mouse, a cockroach or ants get in, which does happen, the stay would be refunded with no opportunity to rectify (spray) the situation? It’s unfair. Even the cleanest houses sometimes get a pest enter it!
I suggest we replace airbnb with a new str app.
I’ve been hosting two properties with airbnb for 10 years. Never had any major problems and I’m not worried about these changes. I run a tight ship and guests are happy 99% of the time. Wondering who the writer works for. A rival platform perhaps?
The person who commented above (“Delia”) seems to think that guests should be unconditionally trusted to be honest 100% of the time. She seems to miss the fact that this new policy is giving unscrupulous guests an opportunity to “upgrade” themselves to more expensive accommodations, at the host’s expense.
I’m glad that her “eight years” of hosting experience has been a perfect one, for her, and reinforced her blind trust in the good will of the general public, but my experience has taught me otherwise.
As a host, we plan to take a “wait & see” approach, in terms of this new policy. We will be vetting our guests with more scrutiny, and looking into contingency plans, should our affiliation with Airbnb render itself untenable. We already use Vrbo, and although we don’t prefer them, this new policy might change that. We also are going to look into Vacasa and Houfy as alternatives & we are open for other suggestions.
The first time someone is dishonest about the state of our rental, and gets a refund under false pretenses, incurring not only an opportunity cost to us from losing the booking, but an additional cost for their accommodations elsewhere, will be the last.
Time will tell.
Airbnb has no product without host. This is way over the top. Despite our strongest efforts we don’t know when an appliance will crap out. We can’t keep our ants during heavy rains. 3 days to find and report issues?!? This is absurd. I am strongly considering delisting 75 properties.
Airbnb is the worst company I have ever encountered. I am an avid traveler and stayed at Airbnb facilities in most my travels. However, I had a very bad experience at the last Airbnb in Lisbon, Portugal. I reached out to the customer service a dozen times to help me cancel the one- month reservation and get a refund, but they were totally useless and impervious to the fact that I had become ill due to the unhealthy circumstances. I finally left two weeks early without a resolution. I wrote to Brian Chesky and several other corporate people. None have responded to my letter. Although I have had many good experiences at other locations because the hosts were excellent, I give no credit to the company, which in my opinion has no care for the guests or the host. Their bottom line is to make money and they do not care about you or me. I have vowed not to ever stay at an Airbnb again.
Airbnb is the worst company I have ever encountered. I am an avid traveler and stayed at Airbnb facilities in most my travels. However, I had a very bad experience at the last Airbnb in Lisbon, Portugal. I reached out to the customer service a dozen times to help me cancel the one month reservation and get a refund, but they were totally useless and impervious to the fact that I had become ill due to the unhealthy circumstances. I finally left two weeks early without a resolution. I wrote to Brian Chesky and a number of other corporate people. None have responded to my letter. Although I have had had many good experiences at other locations because the hosts were excellent, I give no credit to the company, which in my opinion has no care for the guests or the host. Their bottom line is to make money and they do not care about yo or me. I have vowed not to ever again stay at an Airbnb.
This new policy is insane. Airbnb needs to at least allow Superhosts an exclusion to this new policy. Otherwise they’re saying, even our best hosts with a stellar record are going to be faulted here. That’s just ridiculous.
Airbnb was built on trust, value and transparency. I’ve been a host for almost eight years and I welcome the changes proposed and mentioned. Although, rather costly for the hosts and property managers, possibly a three strike policy should be considered.
Hosts and property managers are responsible to provide guests exactly what is advertised in a listing. If your hot tub isn’t working, let the guests know in advance, offer a partial refund. If the listing doesn’t meet Airbnb standards nor what the individual listing advertises then hosts and property managers need to fix the issue and take responsibility.
The changes seem to encourage hosts and managers to be transparent and provide what a listing promises. The cancellation policies vary as policies of a hotel, your plans change? Guests can cancel 24 hours in advance. Less than 24 hours, communicate with the host and transfer your reservation to a future date without additional charges to the guests, not hosts incurring a loss.
I haven’t fact checked all the comments in the article, there are important facts left out one relating to the pandemic cancellations. I do get the impression the writer isn’t a fan of Airbnb, but rather a fan of the hotel business. In short, provide what your listing advertises and take responsibility when you do not. Simple.
What hotels provide accommodations for displaced Ukrainian refugees or people displaced by natural disasters? None. Airbnb has provided stays for thousands of displaced citizens of the world. I wish I had the stats.
In the month of March in our various managed properties we had a hot tub pump die, a two year washing machine’s motherboard pack it in, and a still under warranty dishwasher’s door latch stop functioning. Given March is busy ski season and with school spring breaks, nightly rates are prime. Had airbnb Guests been able to trigger this new refund policy it would have been extremely costly.
I’ve been planning on listing with Airbnb, but now, I don’t see that as a possibility.
I’ve been a host and a guest, mainly a guest nowadays. I’m more likely to book it the first place with a more flexible cancellation policy. I’ve often opted for hotels over Airbnb’s yo decrease my own risk for losing my money. As a host, i always felt i could make up the booking more easily than a guest could recoup their money.
The new refund policy to be unacceptable. It one sided and it’s not protecting the Hosts at all. I will definitely be looking elsewhere to host my property.
Vacasa is our property manager for our rental. We here issues immediately and they have our permission to contact our resources. So far very smooth with them in control.
I am 3 years into superhosting my space.I find the new refund policy to be unacceptable as it does not protect me,the host.I will be looking elsewhere to host my property as the refund police is unacceptable to me.Im getting a lawyer!
We left VRBO after many years when Expedia purchased and the incredible greed and owner restrictions set in. We liked AIR and stayed with them until we sold our last condo in 2020. In 5 years we had 1 damage claim ruled in our favor by AIR.
I didn’t like the potential for our rental agreements to be over ridden by AIR in a dispute, and the ridiculous 48 hour cancellation (which never affected us, thankfully, but could potentially drastically affect owners).
AIR has changed since going public, and this has convinced me to never use them again: Ashton & Mila’s 30 million (now 40) GoFundMe for Ukraine will go to Flexport & AirBnB, both non-profits with billions in revenue and assets. Ashton is financially invested in both. Accountable to? Overseen by?
When you attach a rental agreement to your listing, does the renter have to sign it and return it to you or is it implied by the renting on airbnb. I’m interested to know more about adding rental agreements. Thanks
Airbnb is built on trust. Trust of hosts and trust of renters. We love the concept. Have enjoyed staying in interesting places and the cost savings.
We have only had one rental that was questionable. The neighborhood seemed a bit seedy, but all turned out ok.
This new policy seems very onesided. Where are the safeguards for the person renting out their property. Seems renters could easily take advantage of this policy. No proof required.
I certainly hope Airbnb keeps track of complaints, otherwise, some will really game this policy.
Im airbnb host in Vegas. More regulation through ordinance and airbnb treating hosts like their slaves, I will be out of STR soon. Airbnb will end up like uber where hosts will retaliate by delisting
My greater concern is new policy also appears to nullify our rental agreements/contracts:
“Other things to be aware of
This Policy applies to all reservations made on or after the Effective Date.
When this Policy applies, it controls and takes precedence over the reservation’s cancellation policy.”
This affects me given my own Lawyer-written Legal Agreement and my notation in Airbnb that guests must sign/agree to my Rental Agreement:
“Repairs. The Owner will make every reasonable effort to have any needed repairs made. However, due to Owner’s remote location and the distance for service repair providers in the area, Owner cannot guarantee the timing for repair. No refunds will be issued for malfunctioning equipment unless it poses a safety hazard, in which case a prorated refund will be given. Non-essential equipment and facilities are provided at the discretion of Owner. Owner takes no responsibility should any non-essential provisions breakdown or become unusable. Such equipment includes, but is not limited to: TV, VCRs, DVDs, and Jacuzzi.”
We just suffered a refrigerator that decided to die. We were able to resurrect it sufficiently for a guest while we waited for the new one – but not without great angst given not only our rural location but also supply chain issues.
Wisely and with great forethought I do not take instant bookings, my minimum is 4-nights and I vet the bejezzus out of the guests. Yet as I experienced…Fecal matter happens and the you and pooch have much more in common than I’d like to put in print now.
Sketchy properties in sketchy neighborhoods on Airbnb not advertised honestly. I did not receive a refund for the fraudulently described accommodation I booked. I’ve stopped rolling the dice on Airbnb untrustworthy advertisements. Airbnb does not have a quality control program in process.
Well written analysis and good data consistent with my experience with bookings from Airbnb vs. Vrbo. I will either increase my Airbnb pricing structure or cancel my listing with them due to this change in policy. It will be interesting to see what this change does to their stocks.
Thank you for a well-done explanation and analysis. A dog that keeps biting the hand that feeds will go hungry.
Could not agree more. We already reduced our share of AirBnb reservations by increasing the price in AirBnb due to one sided refund decisions and with this latest change we will likely stop using their services. And as it turns out, our inventory is being sold just as well if not better by other OTAs
It seems like 1 in 5 guests that book thru AirBnB cancel on me now, so I guess I should just add a 20% mark up to my nightly rates versus VRBO and other listing sites so I can make up the lost revenue from cancellations.