Risk Management Made Easy: Raising the Bar for Your Business

Susan Elliott-Smith
7/25/2019

Risk management doesn’t have to be an anxiety-inducing aspect of business — it can become a prime opportunity to build best practices to support every area of your vacation rental operation.

Four vacation rental management experts unpacked risk management topics at the 2018 VRMA International Conference (October 27-30, Las Vegas, Nevada), exploring everything from safety inspections to hiring processes, rental agreements and guest data protection. 

“We want to help raise the overall professionalism of the industry,” says moderator and panelist Cliff Johnson, chief commercial officer of Rented.com, the first online marketplace that helps second homeowners find, compare and choose the best professional property managers.

“There are many great managers who have worked in this industry for a long time who find it challenging to keep pace with evolving law and the rate of change in liability issues,” Cliff continues. “Building awareness of these topics results in less anxiety overall for property managers and homeowners, and ultimately yields a better experience for vacation rental guests.”

Cliff recommends that property managers make incremental adjustments to their existing plans rather than making sweeping changes. He suggests that managers spend time developing these areas of risk management:

• Owner agreements: Use clear language that avoids legal jargon in documents for owners and renters and makes the exchange easy to understand.
• Human resources: Develop and establish a clean hiring process with clear job descriptions.
• Data privacy compliance: Learn what’s required now and what’s coming next.
• Safety equipment and procedures: Beyond compliance with local ordinances, determine if your property is safe for guests.

Safety First

A dirty carpet, a clogged drain, a sudden, last-minute cancellation — while these things fill (and sometimes plague) a vacation rental manager’s day, do they deserve top priority? Cliff says no.

“Many managers prioritize requests coming from guests — who might value an amenity — or property owners — where income is the biggest priority — over common-sense safety,” says Cliff, adding that Justin Ford of A & A Vacation Rental Consulting, located in Kitty Hawk, North Carolina, drove home the “safety first” perspective during his portion of the risk management session.

Justin, a national vacation rental safety expert, former firefighter and U.S. Coast Guard safety inspection officer, discussed simple, practical steps managers can take to ensure guest safety, starting with a thorough inspection before each new reservation. This should begin with making sure smoke and carbon monoxide detectors are working — don’t run the risk that the previous guests pulled the batteries out and left them in a drawer while cooking a smoky dinner. Confirm that the home has emergency equipment, such as fire extinguishers and flashlights, with backup batteries, if necessary. Examine power cords on lamps, kitchen and entertainment appliances. Inspect gas and wood-burning fireplaces during cooler weather.

Of particular importance, check the area around hot tubs and pools — make certain that covers, fence latches and locks work properly. “Most guests are not going to check safety features on the property,” Cliff says. “They assume that the manager has already done it, so it becomes the manager’s responsibility to think for the guests.”

Owners and managers may contribute to the problem by sacrificing safety in favor of getting a nice photo or offering an amenity that appeals to guests. “It might look good in photos to have the hot tub right up against the deck on the third floor, but not thinking about the potential hazards of someone slipping and falling three flights is poor management,” says Cliff. “Think about safety, not just the aesthetic appeal.”

Human Resources to Support the Staff

Another way to de-stress staff is to help them know their roles and responsibilities; this was one of several points emphasized during the human resources portion of the risk management session led by Sue Jones, SHRM-SCP, SPHR, who is the owner of HR4VR, an Oregon-based HR consulting firm specializing in the human resource needs of vacation rental management companies.

Sue, who holds an MBA from Northeastern University, offered strategies for managers to establish a good hiring process. She recommended front-end measures, such as creating clear job descriptions and expectations for new hires, to protect managers from back-end headaches, such as coping with ineffective employees, misalignment with job descriptions and, ultimately, terminations. She also advised managers to develop and offer advanced training to ensure that existing employees have an opportunity for growth.

“The short-term pain of taking time to make your HR process more thorough and involved leads to long-term happiness,”

says Cliff, who can relate to this aspect, having managed a rapidly growing company and coped with filling needs as quickly as possible. “I thought that was a great takeaway from Sue’s portion of the session.”

Changing Privacy Laws

Cliff could also relate to the material presented by Jack Newkirk regarding changing privacy laws and implementation of the General Data Protection Regulation (GDPR) from the European Union (EU). Jack, territory system consultant for NAVIS, a provider of sales and marketing solutions to hotels, resorts and vacation rental management companies with offices in Oregon and Florida, shared eye-opening information on guest data protection, understanding what violations look like and what penalties exist.

The adoption of the GDPR in May 2018 established a legal framework of guidelines that impact how personal data is collected, stored, shared and processed, and empowered EU citizens to take total control of their data privacy, according to the NAVIS website. Despite being an EU regulation, GDPR holds implications for any business with European customers.

Organizations based outside the EU need to comply or face infringement fines. Failure to comply can also impact businesses before fines are imposed. Customers and partners may leave or limit how much they spend with a noncompliant company, seeing noncompliance as an inability to operate legally, serve them properly, respect their privacy and secure data about them, according to information from NAVIS.

“Because the GDPR is more than likely to become the uniform law, and because most managers already deal with guests from all over the world, it’s better to comply with the strictest requirements now,” Cliff advises.

It goes back to establishing best practices, Cliff states.

“This is an industry where there are a lot of informal ways of storing information. We see how many people have been victims of identity theft.

It’s not just a hassle to comply with the law, it’s securing the personal data of owners, employees and guests,” he says.

Capture It with a Contract

Cliff’s portion of the risk management session focused on owner agreements and making them align with how management companies run their businesses. “From my experience, it’s important to have a simple, plain-language agreement that clearly communicates the expectations of the manager and the owner. It makes it far easier to sign on new homeowners if you don’t include a lot of unnecessary legal jargon,” he says.

“Make certain that the agreement reflects the actual services the manager provides and expectations that they might have, such as when a home owner sells a home, what happens to the existing reservations and what is the responsibility of both sides?” Cliff continues. “Do the owners have to use the manager exclusively or — in the case of Airbnb — is it possible for the owner to make their own reservations and use the manager as a housekeeping service?”

Agreements should capture anything that creates friction between managers and owners.

“Most of our industry’s property managers are really dependent upon homeowners to build an inventory to sell to guests. Managers will sometimes tolerate a condition at the home that they probably shouldn’t in order to appease the homeowner,” Cliff explains. “Managers need to understand that they’re going to be on the hook as well when it comes to liability. Managers want to avoid any situation where negligence leads to a guest injury.”

Ask for Help!

A missing element in the industry is legal expertise, says Cliff, who notes that segments of the travel industry, such as airlines and hotels, have access to law firms that specialize in those areas.

“The vacation rental management industry is more fragmented, with changes that occur on global, national, state and local levels. Someone who’s an expert in all those spaces just doesn’t exist, and that puts more pressure on managers to stay up to date at least on local and state level issues,” says Cliff. “Attending VRMA International is critical for gathering information that managers need.”

Other resources include the four expert risk management panelists who Cliff describes as passionate about both their subject matter and moving the industry forward.

“We’re available to answer questions,” he concludes. “Don’t bury your head in the sand because there’s so much to do. Start with incremental changes that help advance your business. If you don’t know how to get started in risk management, reach out to someone.”

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