361. Vrbo's 12% Host Fee Starts Oct 29: What Hosts Need to Do Now

Tim Hubbard (0:00)

Vrbo's host fee is officially going to 12% on October 29th. If you've been connected to a property management platform like Guesty or Hostway, you've been paying 5%.

If you haven't been connected to a platform, you were paying 8%.

Everyone is going up to 12%.

There's also a few other things you need to know. If you have a direct booking website, which I hope you do, and your prices are actually lower on your direct booking website, well, Vrbo knows that, and they're going to penalize you. And don't take it from me. These are official emails that we received from Vrbo. My team and I managed 1,310 Vrbo reservations over the last 12 months. And so this is certainly going to affect us a lot, but it's also going to affect you. So stay tuned as we break down all the details.

Welcome to Short Term Rental Riches. We'll discuss investing in real estate, but with a specific focus on short term rentals, quick, actionable items to acquire, manage, and scale your portfolio. I'm your host, Tim Hubbard.

So we got an official email from Vrbo. They are in fact moving their host fees to 12%.

If you were on some sort of old legacy pricing, well, you're also going to 12%.

This means the guest fees that are now between 11 and 14% are gonna drop considerably. The end price is essentially gonna be the same for them, but if you don't mark your prices up, then you're gonna be leaving money on the table. Here's the email my team and I received. This is on Vrbo streamlining pricing for hosts. We know that any change to how you earn Vrbo is significant. That's why we wanna be upfront about an upcoming change to your pricing model and the reasons behind it. As part of our commitment to evolving alongside the vacation rental industry, we're streamlining our pricing model to help travelers find the most competitive rates when searching for vacation rentals. These changes are meant to make it easier for your property to stand out while providing hosts with a commission model that is lower than many of our competitors. If you've been tuning in the channel, well, you know we covered Airbnb recently. They've increased their host fees officially to 15.5%.

booking.com has been at this level for quite some time. And so of course, if you don't adjust your prices, yeah, your property is gonna be a little more attractive to the guests because it's gonna be cheaper and you're gonna be earning less. The email ends with beginning October 29th, 2026, you will transition to a single transparent 12% commission fee. Now, let's look at what that actually means to your numbers. If you had a $600 reservation and you were using a property management software platform, most of us are these days, so we can manage all the different channels like Airbnb and Vrbo and booking.com so we don't get double bookings. Well, you would have spent $30 with Vrbo on that $600 reservation. Starting October 29th, that $30 goes to $72. Quite a jump, right? Our team managed 1,310 reservations from Vrbo alone in the last 12 months, and so this is really going to impact us. You better believe that we're going to be adjusting our rates, and I hope you do as well. If you've been following along in the industry, well, you know the writing was pretty much on the wall for Vrbo, as we've seen Airbnb adjust their prices twice in the last year. If you missed our episode on those updates, please go back and watch it because it means if you haven't marked up your prices there, well, your guests are also getting a lower price. That was episode 310 We've been doing this for a really long time. If you're new to the channel, you can check out all of our prior episodes at strriches.com.

So how much should you actually mark up your prices if you're paying 5%? It's not an even 7% markup to get you to the 12 Remember, we want the net amount to come out to the same. So the actual formula is 1 minus your old fee divided by 0.88 minus 1 Simple terms, if you were paying 5%, just mark up your prices 7.95%, and you're going to end up with the same net amount. If you're paying 8%, well mark up your prices 4.55%. Again, by marking up your prices, your guests aren't going to be paying more, right? The end price, because Vrbo is lowering their guest fees, is going to come out to roughly the same for your guests. So again, if you don't mark up these prices on October 29th, then it means you're just leaving money on the table. Your guests are getting a cheaper reservation. Now a lot of you out there, especially you savvy STR hosts, who have direct booking websites set up, and you're bringing lots of traffic through there, we might be thinking, that's fine, I'm just gonna push more people to my direct booking website because I have lower prices there and then I won't have to pay any commission. Well, I've got some bad news from you. Another email that arrived from Vrbo, the same day they sent us the notice that they're raising their commission rates. And that email reads, our data back system identified that your rates on another booking site, our direct booking site, are lower than your rates on Vrbo. When your Vrbo price is higher than comparable listings, your property may be less competitive and less visible to travelers, which can mean fewer bookings. There's no need to guess. Update your nightly rate now to keep your pricing competitive. In other words, if your price is lower on your direct booking site, they're gonna lower your visibility on Vrbo. Now, our team has managed tens of thousands of reservations. We've been doing this for a really long time. We knew this was the case already on booking.com, and so again, Vrbo following suit. And while we don't have any public notice from Airbnb about this, you better believe that Airbnb is also doing this. So what do we actually do about it? Well, for starters, mark up your prices again because you're just gonna be leaving money on the table. I would also go back and see how many Vrbo reservations you actually have. And if you have a lot of them, and you have no direct bookings, then maybe you want to take Vrbo's word for it and make their pricing at least as competitive as your direct booking prices. Now, if you have a ton of direct bookings, and you're not getting a lot from Vrbo, well, you can favor your direct booking, and you should because ultimately you're building your business on your own platform and not on Vrbo's. As we've seen, the OTAs, the Online Travel Agencies, they can make policy changes whenever they want. But if our business is coming directly to us, well, then we get to call the shots. So our team will be marking up the prices for sure, but ultimately what we do is we look to optimize every property. And that doesn't just mean optimize on one channel, it means optimize across the whole industry, right? We want to maximize the profitability for all of our properties. And we do that across all the different channels, using promotions, using markups, using dynamic pricing, creating really good listings. There really is a lot that goes into it these days. And if you don't want to handle this all yourself, or maybe you're not happy with your existing manager, well, our team at Coorsley would love to partner up with you. We have a virtual model. It's the cheapest in the industry, and we offer the most value. You can go to coorsley.com, corzly.com.