Will Vrbo’s new rate parity clause kill your direct booking strategy?

Yuvika Vahi (0:00)

Vrbo recently announced that it was increasing its commission for hoes from as little as 5% to a seemingly whopping 12%. You would think that that increase would be the headline. But talk to short-term rental managers about it, and you will find that the number isn't the thing that's bothering them. Or at least it's not the biggest part of it. Instead, it's something in the fine print, something called it parity. So that's what this video is about. What Vrbo is changing on October 20 in terms of the commission in terms, what rate parity even is, and what does it mean, what do the new terms mean if you are outside of the US.? Hi, my name is Yuvika Vahi from Rental Scale-Up by PriceLabs, your go-to source for short-term rental news and insights. We curate news every week and make it make sense for you. Welcome to RSU by PriceLabs Weekly Podcast. Subscribe now.

Vrbo recently shared that from October 29, verbal commission, all verbal commission models will move to a flat 12% commission per booking, just for the uninitiated Vrbo is Expedia Group's Vacation Rental brand. How big a change that is really depends on what model you are on at the moment. If you're a host with listings on verbal and you're on paper booking already, you're paying a commission per booking already and you're connecting to Vrbo using a PMS, using a property management software, you were likely paying to Vrbo about 5%. That goes up to 12% on $1,000 booking, that's $120 instead of the $50 from before.

If you were on paper booking, now you're connecting to Vrbo through a PMS, so you were connecting to Vrbo directly. There was no... You've likely been paying an 8% commission, which is your 5% commission and a 3% payment processing fee that Vrbo charges. That also becomes 12%. If you're using verbal payments, that also includes the payment processing fee. But if you're not using verbal payment, then the payment processing fee is going to be extra. And you might be on a third model entirely. You might be one of the hosts who were on Vrbo's annual subscriptions, where you could pay one flat fee annually that would cover the commission for the entire year. And you didn't have to pay the commission per booking, which there were a lot of subscribers on that. That model is being retired. It will no longer be available. That subscription will no longer be available. So once your subscription ends, you move to the new pay per booking model and also pay a flat 12% commission.

The commission obviously applies to your nightly rate and any fees on top of that, like your cleaning fee, for example. And in some regions, including Europe, Australia, New Zealand, Vrbo says that it can be anywhere between 12 to 15 percent. To know exactly your specific rate, you should look at your owner dashboard on Vrbo. That will tell you your actual rate. Now, of course, those of you from the industry might remember Airbnb very famously recently also said that Airbnb has structured its commission fee, its fee structure, so that guests no longer see a fee applied to them on their side of the booking. Instead, the fee is transferred completely to the host.

So it wasn't exactly an increase in most cases for hosts, in Airbnb's case. But from the guest side, one of the reasons Airbnb says to have done it is for the guest to see fewer fees, to see a more simplified price, which is more likely to get them to book, and also fight the perception of Airbnb being expensive to book. So is Vrbo doing the same thing? Well, Vrbo's communication indicates that the commission increase is, number one, to come in alignment with what's out there in the industry. So you could argue that Vrbo's commission was the lowest, and now it's standardizing it.

Vrbo also says that this decision was made to provide more competitive prices to guests. Does that mean that the guest fee is going away, just like it did in case of Airbnb, or transfer to host like in case of Airbnb? No. Guests on Vrbo will still see a fee.

However, Vrbo does claim that it's going to be lower than what it used to be, without providing any ceiling or floor as to what it could be.

Vrbo does say that he is going to be charged dynamically, so every guest is going to see a different fee. However, they do maintain, like I said, it will be lower than before.

Overall, you will pay more per booking, but your guests may pay a bit less in fees.

Now, for the part that got people talking, the industry pros talking, the fine print. My co-host and rental scale-up founder, Thibault Masson was at the VRMA conference in Nashville just a few weeks ago. Now, this is one of the largest industry conference. It's the conference of short-term rental managers, co-hosts and vendors. It's pretty big. It's the kind of event you go to connect, to find out what's the latest in the industry and find out where the industry is heading. The property managers that Thibault spoke with at VRMA, they were fairly pragmatic about the commission itself. More expensive, sure, but they'll adapt. To a degree, they understand the standardization of fee across all big booking platforms. I'm not saying it's not going to pinch. I'm saying it was surprising that that was not the center of all the discussion. Because what they kept coming back to is rate parity. So what is it? Essentially, rate parity means that your price on Vrbo, the price of your listing per night on Vrbo, cannot be more than anywhere else on the internet, on any other platform, including your own website. Not on Airbnb, not on booking.com, not your direct website. This happened when Vrbo released updated terms and conditions, which talked about the commission. But of course, there were a few additions. One of them was rate parity. The words rate parity never appear in the terms themselves as such. However, there is one clause that's that what you list on Vrbo must be at least as complete, accurate, current, detailed and favorable as anywhere else, including your own website. And another clause makes it clear that includes your rates, discounts, fees, even your listing description. Why does that matter so much? Well, because a lot of professional managers price their own direct booking sites lower than the big platforms on purpose. There's no platform commission to pay for when someone books for your direct website. So they can pass on some of the savings to guests and build direct relationships. A parity rule that covers your own website cuts right through that. Understandably, there was some pushback at VRMA.