Key Insights

• In 2020, VRBO changed their damage deposit policies so that most guests will no longer be required to pay a refundable damage deposit for most bookings. Instead, the 'card on file' option will be the default and will only be charged if a claim is made. VRBO notes that this change will affect 95% of listings that previously required a refundable damage deposit, but "the change does not apply to anyone using a refundable damage deposit in conjunction with property damage protection," according to the VRBO website. This change was made in an effort to keep a property protected while creating a better guest experience.
• If VRBO is unable to collect monies from the guest for damages post-damage-claim due to the guest's card being maxed out, expired, or otherwise unusable, VRBO will still pay the claim to the host.
• Out of 100 customer sentiments about damage deposits analyzed, 27% expressed they were unable to receive a refund of a deposit they felt they were owed and/or were unable to receive the refund in a timely fashion/the time frame stated they would.

Introduction

Damage Deposits: VRBO Guest and Host Post-Booking/Post-Stay Experience

• When booking the stay, a guest may need to have a card on file or pay a refundable damage deposit upfront. This occurs at the time of booking and whether either of these options is required is determined by each individual host.
• A host also has the ability to require a guest to purchase property damage protection at the time of booking. Property damage protection serves as a type of insurance that covers potential damage/incidents at the rental unit.
• Across all types of damage deposits (card on file, pay refundable damage deposit, property damage protection) the host is the one who determines the amount required. The guest is shown the amount in the 'house rules' section of the property details page and/or during the checkout process before they officially book the rental.
• If the damage deposit type is the 'card on file' option, a guest's card will only be charged after their stay if the host decides to file a claim for damages. There will be no pre-authorization hold and the host has up to 14 days after the guest checks out to submit a claim, thereby giving them plenty of time asses the property.
• If the damage deposit type is the 'refundable damage deposit', the guest pays the deposit upfront when they book. If the host does not file a claim within 14 days of the guests' stay, the deposit is refunded to the guest. The guest's bank could potentially take up to 7 days to list the refund in the guest's bank account.
• The 'property damage protection' is optional for guests in cases where a host allows them to purchase this insurance in lieu of paying a refundable damage deposit. Guests are able to review the details of coverage before deciding to go ahead with this option during the booking process.

• In 2020, VRBO changed their damage deposit policies so that most guests will no longer be required to pay a refundable damage deposit for most bookings. Instead, the 'card on file' option will be the default and will only be charged if a claim is made. VRBO notes that this change will affect 95% of listings that previously required a refundable damage deposit, but "the change does not apply to anyone using a refundable damage deposit in conjunction with property damage protection," according to the VRBO website. This change was made in an effort to keep a property protected while creating a better guest experience.
• VRBO makes sure that guests are aware that they are responsible for damages. Awareness is given at multiple touchpoints before, during, and after the booking process.
• If a host opts to file a damage claim, they are required to provide a brief description of the damages. This description is then shared with the guest, strictly for their information. No photos or other evidence of the damages are required.
• If a host files a damage claim in cases where a refundable damage deposit was paid by the guest and the deposit exceeds the cost of the amount claimed, the guest will automatically be refunded the remainder of the deposit. The guest receives an email that notifies them of this refund. VRBO also encourages hosts to contact the guest directly, before filing the claim, to discuss the damages, the amount the host intends to charge for the damages, and to provide the guest with any evidence of the damages (i.e. before and after photos). VRBO notes that doing so can help prevent the chances that the guest will file a dispute. (Note: disputes are discussed in more detail below). This communication is done via VRBO's secure messaging platform, which also serves as a way to keep a record of the conversation. Likewise, guests are also encouraged to contact hosts to discuss damage costs.
• After a host files the damage claim, the claim will be processed immediately. Payment for the claim is then deposited into the host's account within 3-7 business days. Assuming the claim is valid, VRBO covers up to the maximum amount of the set damage deposit.
• To initiate a claim, a host must go through the following process: log into their VRBO account > select the listing the claim is for > click the inbox > select the guest's name > go the damage protection section > click report damage > enter the amount being claimed for the damage (the amount cannot exceed the damage deposit) > enter a description of the damage (message is sent to the guest) > click confirm.
• If a guest pays a damage deposit upfront, they will automatically receive the money back once their stay is over, provided the host does not claim any damages. It can take up to 14 days for the guest to receive the money back. Depending on the guest's bank, it may take an additional 5-7 days for the refund to appear in the guest's account.
• Hosts have the option of requiring guests to sign a legal rental agreement prior to their arrival. The rental agreement can lay out how the host expects the property to be treated. This can be done in addition to the host completing the 'house rules' section of the listing, which can lay out things like occupancy limit, age requirements, and allowance of children, smoking, and pets.
• Once a host files a claim, the guest receives an email notifying them that a new charge is being added to their stay. This email includes the host's description of the damage as well as a statement of when and how the guest will be charged for the damages. Once the charge is applied, the guest receives a receipt via email.
• If a guest does not agree with damage charges, they have the option to dispute the claim. They can do so by clicking the 'contact us' button that appears in the email receipt of the damage charges. If a dispute is filed, VRBO will ask both the guest and the host for more documentation surrounding the damages in order to verify the claim.
• If a guest is charged for damages and they had purchased the accidental damage protection during the booking process, the guest can file a claim with the policy provider and request a reimbursement for the damage charge. They will receive the reimbursement depending on whether the damages are covered under the policy.

Handling of Corner Cases Regarding Damage Deposits for Guests and Hosts (e.g. Expired Cards, Payment Options)

• If VRBO is unable to collect monies from the guest for damages post-damage-claim due to the guest's card being maxed out, expired, or otherwise unusable, VRBO will still pay the claim to the host.
• If a damage deposit refund is issued to a guest, the refund is returned via the same payment option the guest used as their original form of payment.
• According to the VRBO website, "if a booking was charged in a different currency, the payment and refund totals may vary based on currency exchange rates and bank-issued exchange fees."
• If a host files a claim, the charge for the claim is applied to whatever payment method the guest used during the booking process.
• Some customers have complained that they were unable to receive any refund if their original payment method was no longer active/valid (such as an expired or canceled credit card) because VRBO refused to send the refund to an alternative card/account despite the guest notifying VRBO of the issue.

Impact of Damage Deposits on Guest Booking, Sentiment, and Repeat Guests

• According to VRBO's website, the company's data has shown that "charging a refundable damage deposit upfront makes [guests] less willing to book," and causes them to feel aggravated when they see the charge on their bill during their checkout experience.
• An analysis of customer reviews regarding damage deposits has been conducted using reviews recently published on Trustpilot. During this analysis, a total of 100 customer sentiments were categorized and quantified in order to gain a quantitative understanding of the impact damage deposits have on guest booking, sentiments, and repeat guests. The results of this analysis have been added to the attached spreadsheet. A detailed breakdown of these findings is outlined below:
• Out of 100 customer sentiments about damage deposits analyzed, 6% expressed they felt the required deposit amounts were too high.
• Out of 100 customer sentiments about damage deposits analyzed, 14% expressed there were miscommunications surrounding deposit amounts and/or how they worked.
• Out of 100 customer sentiments about damage deposits analyzed, 27% expressed they were unable to receive a refund of a deposit they felt they were owed and/or were unable to receive the refund in a timely-fashion/the time frame stated they would.
• Out of 100 customer sentiments about damage deposits analyzed, 8% expressed they no longer trust VRBO after issues regarding deposits.

• Out of 100 customer sentiments about damage deposits analyzed, 7% expressed they would not book with VRBO again after issues regarding deposits.
• Out of 100 customer sentiments about damage deposits analyzed, 13% expressed complaints about VRBO's customer service regarding deposits.
• Out of 100 customer sentiments about damage deposits analyzed, 14% were telling other people not to use VRBO based on their experiences regarding deposits.
• Out of 100 customer sentiments about damage deposits analyzed, 10% expressed that hosts were misusing the deposit process.
• Out of 100 customer sentiments about damage deposits analyzed, 1% expressed bad user-experience during booking due to the deposit requirements.
• Despite these issues, VRBO still maintains an average rating of 3.7 stars out of 5 stars across 112,646 reviews in total, with 66% saying their experience was excellent, 14% saying it was great, 7% saying it was average, 4% saying it was poor, and 9% saying it was bad.

Research Strategy