Should You Offer Refunds on Your Vacation Rental?

Astrid LindstromLeave a Comment

Should You Offer Refunds on Your Vacation Rental?

You get a call from a guest complaining that the stove has broken. You send your maintenance guy out promptly, but he can’t get the part he needs to fix it until the next day. The stove is fixed pretty quickly, but your guests couldn’t use it for two days out of their one-week stay.

Here’s the million-dollar question: should you offer a refund?

Owners are often resistant to offering refunds, but in our experience, a little goodwill goes a long way toward creating a profitable business. When should owners offer refunds to unhappy guests?

The answer: almost always. Here’s why.

Refunds Are Standard in Every Industry

This method of offsetting a purchase that didn’t deliver on its promise is a standard part of doing business all over the world. It’s in retail stores, in restaurants, in hotels – and, a guest expects, in vacation rentals.

If you refuse to provide refunds for any reason, a guest will feel that a social contract is being violated. Refunds are so standard, so ubiquitous, that it is surprising – and upsetting – to them when one isn’t provided in a situation where they feel other businesses typically would offer one.

When people expect that a problem with their purchase will be resolved with a refund, they find it personally upsetting when owners refuse to offer them. From their perspective, a social contract has been broken, and their sense of unfairness kicks in.

If a guest feels they were treated unfairly, the owner winds up paying a very real price.

Refunds Pay for Themselves

Most owners are resistant to refunds simply because they don’t want to relinquish money that they already counted as “earned.” The guest paid $1,000 for their booking, and the owner considers that $1,000 a done deal.

Being asked to give up even 10% of that money is a serious inconvenience for the owner in the short term, and it can be very difficult to see past the immediate inconvenience to the big picture, which is this:

Failing to provide a refund will cost even more money down the line.

Refund 10% now, and you’ll lose out on $100. That’s no fun, which is why you’d rather avoid it. But fail to provide the refund, and you’ll wind up with a 1-star rating and a scathing review that warns other travelers off.

If you pay $100 now, you miss out on $100. If you fail to provide the refund, though, you’ll wind up costing yourself thousands in missed bookings.

We’ve discussed the problem with short-term vs. long-term thinking in vacation rental pricing before, and the same logic applies here: sometimes it’s worth earning a little less now to ensure your rental keeps earning income over time.

Refunds Are Rare and Relatively Inexpensive

We service over 3,000 properties and field plenty of guest complaints that might require a refund, so we’ve got a pretty good idea of how often refunds are requested and how much is refunded.

On average, any given owner is asked to provide a refund to a guest about once a year. Refunds typically range from 10%-50% of the booking, depending on how much the guest was inconvenienced.

Some owners are unlucky and get a string of refund requests back-to-back for unrelated reasons, and some owners are lucky and never get a refund request. But for the most part, you can expect a guest complaint that warrants a partial refund about once every thirty bookings. 

The average refund was about $280 – or about 1% of the average annual income for a vacation rental owner on HomeAway. Which means your cost is quite small in return for what you get: good reviews, a good reputation, and your guests’ goodwill.

Important Note: Refund Requests Are Almost Never Scams

Owners will often push back on refunds because they feel a guest is exaggerating the inconvenience to them, or is simply wrong about their complaint. They might even feel that the guest is deliberately fabricating a complaint to get a free – or heavily discounted – vacation.

It’s possible. There are scam artists out there who do this sort of thing, just as there are people who go to nice restaurants and insist on having their meal comped for a made-up problem.

But it’s very unlikely.

For the most part, guests sincerely believe that they are due a refund for inconvenience, even if the inconvenience is imagined or partially their own fault. If a guest can’t access the property via the lockbox, it doesn’t really matter if you provided clear instructions or not: the fact remains that the guest couldn’t get in the property, and was inconvenienced.

Is that your fault? No, not at all. But the guest feels like it is. And they’ll review your handling of the situation based on their perception, not on any kind of objective reality. A partial refund will go a long way to soothing hurt feelings and maintaining a reputation as a fair, reasonable owner.

Guests who deliberately fabricate a false complaint are few and far between – and it’s better to assume their grievance, even if it’s only a matter of perception, feels legitimate to them.

Refunds Have a Real Purpose

A guest who stays at your vacation rental has paid a sum of money to receive a certain ‘product’. That product includes access to the property itself, but it also includes getting to enjoy a clean property and all the amenities they were promised when they made the purchase.

If they don’t receive any portion of the ‘product’ they paid for, they’re going to feel they didn’t get their money’s worth – and as we’ve established, the standard way businesses make up for their product not meeting a purchaser’s expectations is a refund.

Owners often feel that if an inconvenience to the guest is relatively minor, no refund is necessary – but that’s only true as long as the guest agrees.

Here’s a useful analogy: let’s say you go out to dinner one night and the waiter brings you the wrong entree. If you don’t really mind, you may not feel a refund is necessary as long as he brings you the correct meal pretty promptly.

But if this was a special occasion you’d been looking forward to for months, you might feel very differently about having to wait an extra 15 minutes for the correct entree to be prepared. You hoped to have a special evening, and now your evening has been upset. You want to feel that someone cares, and is willing to make up for the mistake that marred your experience.

The same goes for a guest’s stay at a vacation rental. Even if the inconvenience is relatively minor from your perspective, your guest was on vacation. They had hoped to have an effortless, worry-free stay – and they didn’t receive that. A refund is a way of showing you care, and you’d like to make up for it.

And Finally: Refunds Are Kind

When in doubt, consider what you’d want if your positions were reversed. If you’d arrived at a property to find it wasn’t clean, wouldn’t you want your cleaning fee refunded? If the AC went out during 100-degree weather, wouldn’t you want some compensation for the night you spent unable to sleep in the heat?

Handling guest complaints is one of the least enjoyable parts of running a vacation rental, but this simple guideline can help you come to an amicable resolution and preserve your reputation as a good vacation rental owner the next time you’re asked for a refund:

Put yourself in the guest’s shoes, and ask yourself: what do you think is fair?

Dread those occasional guest complaints? We’re here to help. Our full-time Customer Experience team is happy to mediate a good resolution between you and your guests whenever there’s an issue – and all the rest of our teams help ensure those problems are few and far between. Here’s how we do it.