Let’s start with what is a fee or commission? A commission is two things:

1. It buys the homeowner time. Time to spend with their family, traveling, dining out, hobbies, other businesses, or anything else that the homeowner would rather do than working at their investment property.

2. It pays the management company for those services that allow for #1.

According to the blog “A Breakdown of Short-Term Rental Management Fees” from the writers at Hostfully, they write:

“According to Denise Supplee, Co-Founder of Spark Rental, the fees for short term rental management is about 25-50% of the rent plus costs. Vacation rental owners who are also residential landlords probably just jumped out of their chairs seeing that figure (they’re used to seeing 6-10%). So here’s the difference: long term rentals are generally cheaper to manage because there are less turnover and involvement. On the other hand, a vacation rental requires regular cleaning and much more commitment (bookings, communicating with guests, paying attention to details).”

And we are all about details at InsideOut Properties. So, now that we know what a commission is and what its purpose is, why is it earned at the time of booking?

To answer this question, let’s work backward here.

The perfect guest stay means there are no issues with the house or amenities, the guest has no questions, the guest feels comfortable and happy in their accommodations, and the guest has all the information and tools they need, as well as, great recommendations for the area to make for a fantastic experience. So, basically, from the moment the guest arrives to the point where they check out, the property management team has done their job well enough that there should be no issues. And there are regular processes and touchpoints already put in place to follow up with the guest during and after the stay.

Now let’s take a step back to before that guest arrives.

The management company has been paying for the marketing materials and online ads for the property (as InsideOut Properties does), sending out quotes to multiple people, answering Facebook posts in several rental forums, calls, emails, website inquiries, and promoting the listing on various social media platforms. All of which the content is created, scheduled, posted, and managed by the property management company. They are managing the calendar, optimizing the pricing based on changing market conditions, sometimes making minor repairs to the property, and doing all the things that the homeowner expects of them to do to get the absolute most out of their investment so that they (the homeowner) can earn the passive income.

So, what happens when a guest cancels?

Well, not all cancellations can be avoided, especially during the current pandemic, but a homeowner can request certain booking criteria be put into place to reduce the likelihood of a cancellation occurring such as restrictive cancellation policies. Keep in mind, this will also deter many guests from booking as they will also be looking for a little cancellation flexibility during the current pandemic. Homeowners can request to have a super strict, non-refundable 60-day cancellation policy (a guest would receive 50% refund up until 60 days before check in date). This is the strongest allowed on the Airbnb platform.

Another option is to keep calendars blocked off until just within a certain period. For example, only allow bookings to occur for the following month, month by month. The issue with this is that large groups and family groups often have to plan far in advance, so if the property is large, it may be left empty as these groups have already booked elsewhere. This option primarily works with small, inexpensive, and pet friendly units that are very easy to fill last minute.

Even with certain parameters in place there will be cancellations and the property management team will have to start the process all over again of managing calendars, re-listing, marketing, optimizing rates again, answering inquiries, and trying even twice as hard to fill that vacancy because now the window to do so has been decreased. And even more so if it is a larger property.

Back to the commission question – the commission is earned at the time of booking because your property management team has been working hard at securing the booking behind the scenes. For any management company that is good at what they do, the easier task is attending to the guests needs, if any, once they arrive. The most labor-intensive part is completed once the booking is secured so when the unfortunate cancellation occurs, and before you say “but you didn’t do anything”, just keep in mind that the property management team is now back at square one with even more challenges to face. Even if the property does not get rebooked for the entire period that was previously cancelled, that team has invested twice the amount of time, skills, and effort to give the homeowner that precious gift of time that they asked for.


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