An OTA is what we used to call a rental listing site, it stands for Online Travel Agency, which is not a great name as it doesn’t really explain what it is.
It’s a site where you can book and pay for short-term rental accommodation. There are 4 dominant OTAs right now: Airbnb, Booking, Vrbo (aka Homeaway) and Tripadvisor.
Basically, if you are marketing a holiday rental property anywhere in the world, you would be quite the outlier if you are not using at least one of these. (That said, according to data from VRMintel in the States, most bookings are still direct with owner, and not booked through an OTA at all. Find out how to take direct bookings here).
But which OTA should you be using? Airbnb, Vrbo, Booking or Tripadvisor?
Each OTA has a different fee structure, and slightly varying target markets. The most important consideration to a rental owner may well be the cost – or what a site removes from your rental income from each booking. As we will see though, it’s not necessarily as simple as that.
OTA fees explained
OTA fees are in a state of flux, as they finesse the right percentage to charge both renter and owner (or put more simply: how much they can get away with). The exception is Booking, which simply takes 15% off the owner, and charges the renter 0%. WTF? 15%! Cross them off the list, I hear you say. Well, not necessarily, hold on to your hat and read on…
At time of writing, here is the fee structure of each of the big 4 OTAs. (Note that if you have had the great idea of paying less commission by making your rent lower and your cleaning fee enormous, this doesn’t work because the cleaning fee is included in the calculation of the commission).
The Booking commission for vacation rentals depends on your location but averages 15%, so let’s call it that. Unlike other OTAs, this commission is paid by you the owner, and there is no commission for the renter to pay.
Most hosts pay a service fee of 3%, but Airbnb Plus hosts, hosts with listings in Italy, and hosts who use Super Strict cancellation policies may pay more. This fee is calculated from the booking subtotal (the nightly rate plus cleaning fee and additional guest fee, if applicable, but excluding Airbnb fees and taxes) and is automatically deducted from the host payout.
Most guests pay a service fee that is “under 14.2%” of the booking subtotal (the nightly rate plus cleaning fee and additional guest fee, if applicable, but excluding Airbnb fees and taxes). The fee varies based on a variety of booking factors and is displayed to guests, including during checkout before they make a reservation. The reality is the fee is invariably more than 14.1% but just less than 14.2%. But this is assuming there is no VAT in your country, like in the USA. If you do have VAT, like in the UK or EU countries, that 14.2% has VAT added to it. If your VAT is at 20%, the Airbnb fee to guests becomes 16.9%.
What is Airbnb up to here? They want you to switch to the ‘no fee for the guest’ model. It looks terrible when a potential renter gets an Airbnb quote and the service fee is clearly disproportionately large. What they want is for it to read ‘0’. So they are making it just slightly cheaper for you to absorb the whole fee yourself – the host-only fee is 14-16%, a little less than that eye-watering 16.9%. But if you pay it then the guest has nothing to pay and is much more likely to book. And to sweeten the deal even more, at least for now, listings that do not charge a guest fee are shown ahead of those that do.
Tripadvisor has two ways of listing – free and a paid annual listing. The difference between them is that with a free listing your bookings are taken through the site and you are charged a 3% processing fee. With an annual listing you pay an annual fee for your property and this gives you the option of taking payments direct and saving the 3% it costs to take a booking through Tripadvisor. What is this annual fee? They don’t say. Meaning it depends on your property and how much they think they can charge you.
The commission for renters on Tripadvisor is between 8% and 16%. Quite a range. And when someone books, the commission is not displayed as a separate item, they are just given the total price.
Vrbo also offers two ways to advertise – pay-per-booking or annual subscription.
With an annual subscription of $499, your fee per booking is reduced to 3%. We can regard this as a payment processing fee, which is in line with Tripadvisor.
With the pay-per-booking model there is no subscription but the fee per booking is 8%. This is made up of the 3% payment processing fee, plus 5% commission. If there is VAT in your country, that is applied to the 5% only. So if the VAT is at 20%, the commission becomes 6% instead of 5%, and the total fee to you is 9%.
What all that means is that if you do not get many bookings from Vrbo it makes sense to stick with the pay-per-booking model. But there comes a point when you should switch to the annual subscription of $499, and that is when the income from 5% (or 6% with VAT) of your Vrbo bookings is greater than $499. That cut-off point is therefore $9980 per year at 5% and $8317 at 6%.
And that is not to mention the Vrbo fee paid by the renter…that is currently 10-11%.
So that means that a rate quote on Vrbo includes up to 20% in Vrbo fees.
Can you see a pattern here? Fees are totalling around 20% on both Vrbo and Airbnb. This is creating a scenario where we will be happy to go with a 15% fee for us and zero for the renter. After all, we would simply pass on the 15% to the renter with increased rates. But it will give the perception to the OTA users that these sites cost them absolutely nothing.
And that 15% is just the notional figure for now, because that is what Booking is charging. OTAs will charge us whatever they can get away with.
The relatively high fees of OTAs is one of the reasons for the arrival of the ‘book direct’ or #bookdirect movement. Travellers aren’t delighted to see a large chunk added in booking fees, and owners aren’t delighted that everything seems to be loaded in the favour of the renter, while they simply supply the stock being sold.
Who uses each OTA to look for accommodation?
There is historically a difference in who uses which OTA. Airbnb is likelier to attract (on average) younger people in smaller groups looking to stay for slightly shorter periods. Vrbo only lists entire homes so its users are looking for slightly larger properties, more family-oriented, and for a longer period than Airbnb. Booking has the shortest stay average of the OTAs as well as the lowest number of guests in a booking (logical since its genesis was as a hotel-booking platform). While Tripadvisor has the longest booking periods and the same number of guests as Airbnb.
As you can see from the tables, there is only a slight difference between them all, and while it is true that a millennial is likelier to reach for Airbnb or Booking than the other two, there will also be more competition for their attention on these platforms. So don’t assume based on the numbers that one OTA will work better than others for you,
What about other factors beyond commission that should influence your choice of OTAs? Let’s take a look at other important aspects like cancellation, what happens when things go wrong with a rental, and vetting and communicating with guests.
Airbnb is the outlier here. With Vrbo, Tripadvisor and Booking you can choose varying strictness on cancellation policies, ranging from completely non-refundable to ‘cancel whenever you want!”
Airbnb’s strictest allowed policy is their Super Strict 60-day, which means the guest can cancel at least 60 days ahead and get a 50% refund (Airbnb pocket their full fee though). However, you can only apply the Super Strict 60 if you are a ‘software-connected host’. What is a software-connected host on Airbnb? It means you are using either a property management system or channel manager to control your listing(s).
If you are not a software-connected host then the best you can do is Airbnb’s Strict policy. Contrary to the normal understanding of the word ‘strict’, this allows the guest to cancel at least 14 days ahead and get a 50% refund. In addition, they can cancel within 48 hours of booking, as long as that is at least 14 days before check-in, and get a full refund.
Airbnb’s Flexible cancellation policy is bend-over-backwards flexible. Guests can get a full refund if they cancel at least 24 hours before check-in, and if they cancel later than that they just lose the first night. They can also cut their stay short and get a full refund on unused nights (full refund always excludes the Airbnb fee, which is sacrosanct).
Vrbo‘s cancellation policies range from ‘no refund’ to the 14/7 day policy, which give the renter a 100% refund if they cancel at least 14 days before check-in, a 50% refund (minus service fee) if they cancel at least 7 days before check-in, and no refund less than 7 days ahead of check-in.
Tripadvisor‘s cancellation policies ranges from relaxed to super strict. Relaxed means guests receive a full refund up to 14 days before arrival. And the strictest policy is ‘no refunds’.
Booking allows you to set a cancellation policy to suit your desires.
What about the effect of different cancellation policies? You can bet your bottom dollar that the more lenient/flexible you are, the higher your listing will show on an OTA property search.
The Booking difference
Vrbo (or Homeaway as was) for a while monopolised the world of online booking sites, having bought up all the big ones. Then along came Airbnb and now the two basically mirror each other in many respects.
Booking.com comes from a different place, as it was initially a hotel booking platform that moved into holiday rentals. Consequently, it forces rental homes into the hotel sausage machine.
Big points of difference with Booking vs Airbnb and Vrbo, on Booking:
– all bookings are ‘instant book’ just like a hotel, you cannot vet renters before accepting a booking.
– you do not have to take payment through the site, you can manage that offsite. So the Booking commission is a separate payment you make to the site.
– you do not write the description of your property on Booking, you supply the information and the description is automatically generated by Booking.
– the owner pays the whole of the commission on Booking (about 15%), the guest pays nothing. That is one point of difference which the other OTAs are sure to copy.
– there are no guest reviews and no information on who is booking your property.
Lots of rental owners are put off Booking because the perception is it costs more, since the 15% commission is all on the owner’s side, and the renter pays no commission to Booking.
This is a misconception though. If you look at the table below, it shows what happens when you put the same property on different OTAs with their different commission structures. The important figures to look at are the price advertised on a site and the amount that ends up in your pocket.
The commission should not put you off using Booking, but what might is that you don’t know who you are renting to; it is a little trickier to set up your listing right; and Booking swerves important details the others take care of for you.
Booking.com allows you to take care of payments yourself or they will do it for you like the other OTAs, with an additional charge of 1.1%-1.9% depending on where you are. If you want to be in charge of payments, Booking will verify the credit card being used, and then it is up to you, using a payment processor like Stripe or Square. You can even ask that guests pay on arrival, but at your risk if they don’t show up.
It is definitely more fiddly to set up a Booking ad than an Airbnb or Vrbo one, you have to get all the settings right so your rates are correct and correspond to the right cancellation policy, and it is not as easy to add a damage deposit or ask for a booking deposit. But it can all be done, it is a process of ticking and filling the right boxes.
And at the end of it, you will be on what seems to be the site with the momentum behind it right now.
You may have seen TV ads for Booking promising 10% off for people who use Booking with what seems like a very low level of frequency for such an amount. This is called the Genius loyalty programme and needless to say that 10% is borne by the property owner. You don’t have to be part of Genius, you apply to add your property to it. You will definitely get more booking interest, and be more present in search rankings, but will that 10% repay itself? Good question…
When things go wrong
Each of the OTAs offers different levels of protection for damage to your property by a renter. Or rather, they all sidestep the issue except Airbnb.
Airbnb offers two insurance programs automatically to each booking. Host Guarantee covers up to $1 million in property damage caused by a guest. Host Protection Insurance covers the host’s personal liability if for example a guest is injured in a property. Find out more about these here.
If you are successful in your claim, and there is a mixed bag of results reported online, this is theoretically an impressive level of protection for the owner.
Airbnb does not have a formal protection programme for guests, but since payment for a booking is not disbursed till the day after arrival, and a guest can walk out if the property is not as advertised, they are well protected for misrepresentation.
Vrbo has Liability Insurance up to $1 million on every booking processed through the site. This covers you if a traveller is injured in your property, and also if the traveller damages a neighbour’s property (for example water damage to the flat below due to an overflowing bath). Note that this does not cover you for damage done to your own property, unlike Airbnb’s Host Guarantee. That is a big deal.
What Vrbo offers for this is Accidental Damage Protection, but this is an insurance policy offered to travellers on booking, and they have to pay for it, so not something to count on. It’s really something that protects their damage deposit in the event of damage to the property.
Tripadvisor do not protect owners, but guests have Payment Protection which pays out up to $10,000/£7,000 if they find a rental property differs substantially to what was advertised, or they are denied access to the rental when they check in.
With Booking you are very much on your own when it comes to owner protection. They suggest if you are worried about damage that you get insurance or set up a damage deposit. But that damage deposit would not be arranged via Booking, it would be arranged direct with the renter. This does mean you do not have to get the approval of the site to claim on that damage deposit, but equally that lack of renter protection will deter bookings where a damage deposit is required.
As an owner, unless you exclusively use Airbnb for bookings, you really should have your own insurance in place that expressly covers damage and personal liability for a holiday rental stay where the renter does not have insurance.
Communication with guests
Obviously OTAs don’t want any bookings to leak from their site. So you won’t be able to contact a renter by email or phone at the rental enquiry stage. Nor will you be able to transmit your details in answering an enquiry as these are automatically blanked out.
However, if you do want to do this, you can get around the censorship easily enough by spelling our your number or writing your email without the @ or .com, etc. If you are caught doing this, you will probably be banned from using the OTA in question. Since there are not that many OTAs, and it may well be that only one or two really provide the bulk of your bookings, this is not something you should be risking.
And even if you do not get caught, one of the ways an OTA ranks you is by how often you convert an enquiry into a booking. If you are not converting through the site because you take bookings off-site, you will be demoted in the search ranking.
Once a booking is made, you will be able to see the renter’s email and phone number on Vrbo, and phone number only on Airbnb. So you can potentially turn an OTA renter into a direct booking if they want to return.
Something rental owners have always been keen on is the notion of vetting their guests before accepting a booking. Note that in many countries it is illegal to discriminate on grounds of age, gender, race, disability, religion, etc. Nevertheless, Vrbo allows you to set a minimum age for the lead renter.
OTAs do a certain amount of vetting of renters. Airbnb and to a lesser extent Vrbo want to foster the idea of a community. For Booking, as the name suggests, it’s purely about booking. It’s instant book only and there are no reviews of the guest.
The best at this, inevitably, is Airbnb. That said it is not a requirement to verify your ID on OTAs in order to make a booking enquiry.
Airbnb say that they perform background checks on both hosts and guests to look for criminal records, to the extent that they can – this is more applicable to US residents than elsewhere. In fact, it is fair to assume they only do this in the US.
In an Airbnb guest profile, you may see links to social media if they have added these, and guests can also upload government-approved ID to the site – this is the best layer of security for you as it links the guest to a real identity. You don’t get to see the ID, but you will see an ‘ID verified’ badge on their account. If they don’t have these, they will as a minimum have given Airbnb their name, address, date of birth, email and phone, as well as card details. You can specify in your Airbnb dashboard that you will only accept bookings from verified guests. Although this will reduce your bookings.
If the guest has booked through Airbnb before they are likely to have reviews from past hosts. Any negative reviews will be a red flag, but if you refuse a booking it will still count against you. If they are new to the site they won’t have any reviews, and then you have to take a punt.
The other OTAs do not take these extra steps.
On Vrbo the screening of renters is less advanced as a concept. You don’t see past reviews of renters, just the number of them and the average rating, if applicable. This is because owners are not asked to write a review, just to rate the renter for overall experience, cleanliness, communication, and adherence to house rules. Most renters don’t seem to have these. Another approval you see on some renter profiles is ‘Owner recommended’.
‘Verified identity’ means Vrbo has the renter’s name, address, contact details and date of birth, and they are satisfied that the have the person’s real identity. If there are no renter reviews, the guest may be labelled as email-verified (completely meaningless really) and/or phone-verified (ditto).
With Booking you can require as an owner that a renter be verified, meaning a valid address or phone number, as well as email and credit card. This is what Booking says about protecting property owners from bad guests, it’s a little opaque so best to quote direct:
Background checks: We ensure guests are screened against numerous global sanctions watchlists, so our partners aren’t put at risk when hosting.
Fraud scoring: We use machine learning models to detect fraud when guests are booking and take measures to protect your reservations.
Reservation risk: Even after the guest books, we still run additional checks and take action against bookings we know will be cancelled.
Guest blocking: We have multiple teams working to ensure that problematic guests are stopped from booking properties on Booking.
Insurance for hosts on OTAs
The best for when guests damage your property is definitely Airbnb. The Airbnb insurance product is called Aircover and is applied to every booking. This will pay out up to $1m for damage to your property, as well as for injury to guests. It also now covers damage by pets and for unexpected cleaning costs caused by guests. This puts Airbnb head and shoulders above the other OTAs when it comes to insurance cover for hosts.
Vrbo offers $1m liability insurance for hosts. This may sound the same as Aircover, but it is not. Vrbo only covers claims made by guests who are injured in your property, and damage inflicted by your guests to a third-party property such as a neighbour. It does not cover you for damage by guests to your own property, which is really what you want from host insurance. However, if you have decent homeowner’s insurance which covers guest damage already, then you won’t need it.
Tripadvisor and Booking advise you to have good homeowner insurance in place and do not offer any insurance for owners.
Which OTA to choose
So which short-term rental OTA is right for you? Airbnb, Vrbo, Booking or Tripadvisor?
The answer is suck it and see.
Since they are all free to list with, the sensible tactic is to list on all 4 and see what happens. After a year you can drop one or two if you get all the bookings you need from the others, or if you find you dislike some aspect of the way the OTA treats you.
I would not pay too much attention to other local owners who tell you that one or other of the OTAs get them all their bookings and the others are a waste of time, since you don’t know how they went about listing on each one. One wrong tweak could make all the difference. You should make sure that all your prices look the same to the potential renter across your listings. And you may want to manage your listings (and avoid double bookings) with a channel manager, but that is a topic for another day.