Vacation Rental Reservations: When Is the Right Time to Refund?

1/9/2018

As a provider of guest services training for both traditional lodging and vacation rental agency models, over the years I’ve become keenly aware of the similarities and differences. One especially notable difference is the impact of refunds. On the hotel side, when a decision is made to refund, the resort loses 100 percent of its profits for the room or suite. However, since vacation rental companies are essentially agencies for the owners, not only is the VR company losing its profits, but it is also forfeiting revenue on behalf of the homeowner. Therefore, the decision carries even greater consequences as it could cause the loss of future inventory if the homeowner does not support the decisions being made.

As a result, it is important to train those on the frontlines of guest service on guidelines regarding whether to refund a guest and what amount to give back.

First, though, training should focus on how to properly receive and respond to guest complaints to minimize the situations that lead to refund requests. Certainly, there are guests who I call “free stuff seekers” who seek out and document every flaw in the “process” or “physical product.” (More on them later!). However, experience shows that most refund requests come at the end of lengthy exchanges between ordinary guests who are what I call “just give me what I needers.” Most do not start out asking for a refund. Instead, they relay a request and start out waiting patiently for resolutions that are slow in coming, ineffective when delivered, and/or that lack follow-up to ensure satisfaction. Therefore, to minimize refund requests train your team to:

Welcome complaints as opportunities to resolve gaps in service.
Empathize and apologize. It may not be the company’s fault that the A/C goes out, the cable TV signal is lost, or that the hot tub pump is broken, but providing “validation” for the guest’s emotional response is a key to satisfaction. Train your team to use statements such as “I can imagine how frustrating this would be, and I apologize that it has occurred,” even if the issue is outside of their sphere of influence.
Promise a response time that you can at least meet and with some luck even exceed. Manage the guest’s expectations while also helping them make alternative plans. If it is going to take all day to get the A/C technician out, don’t say, “We’ll get someone out there as soon as we can” and leave the guest waiting. Instead, say, “Unfortunately it is going to be a while, and we will keep you updated on a more specific time. If you want to proceed with your plans for the day we can reach you on your mobile when it is resolved.”
Follow-up to close the loop. Once the staffer or contractor resolves the issue, reach out to the guest to ensure their satisfaction and if necessary, provide additional validation by repeating statements of empathy and apology.

When complaints are welcomed and properly responded to, and when guests sense care and understanding, refund requests will be minimized.

It is also a good idea to plan in advance for the most common problems that lead to refunds at your company. For example, if your rental company has a large number of homes with private hot tubs, it is inevitable that a certain percentage will stop working at some point. Consider purchasing some portable hot tub units that can be installed temporarily. Similarly, consider investing in portable one-room AC units that have become ever more affordable. Is Internet service notoriously unreliable? Consider purchasing the latest Internet hotspot hubs, which can temporarily be activated to power multiple devices. While these items will not be on par with the initial amenity, at least it shows a real effort to satisfy. If these items at first seem to be a substantial hard cost, take a close look at the number of refunds you issued in the previous annual cycle and estimate how many of those could have been prevented by these resources.

Regardless of how much we prepare backup plans and how good our staff is at empathizing and apologizing, there are always going to be situations that call for refunds. Some of these are of course obvious. For example, if a roof leak or water main break renders a unit uninhabitable for most of their stay, a full refund is appropriate and homeowners will most likely understand.

The challenges arise when the breakdown only affects part of their stay, or when it is an inconvenience not a full loss of use. This is when advance training and the establishment of guidelines proves to be of value. Here are some training tips to review at your next meeting:

Ask the guest what they feel would be a fair compensation. Very often, they will ask for even less than you might be willing to provide. On the other hand, the guest might be a trained negotiator who knows to start out by asking for more than what they are willing to settle for.
If they start by asking for an excessive (or full) refund, defuse the situation by indicating you’ll need to “check further with the team” and promise a specific call back time.
When you later respond to an excessive refund request, make a counteroffer on the low side, then offer to meet them in the middle.
When offering a refund, try to present it as being based on a rational formula. For example, if the A/C is completely out for one of five nights, point out that this is 20 percent of their stay and then show goodwill by offering a 25 percent refund of the stay.
Encourage staff to base their decisions on logic and not emotions. Otherwise, they might refund more than is needed to “the nice lady who was so polite and had a baby crying in the background,” and might offer less to the person who voiced his complaint in a gruff tone of voice and who skipped the pleasantries of business etiquette.
Notify your owners that your company has a well thought out refund decision-making strategy prior to the start of the next season, pointing out that having a fair and equitable policy will help protect the vacation rental company’s “brand” which will help all of the homeowners over the long term.

Finally, a few thoughts about those aforementioned “free stuff seekers.” Especially for larger companies with multiple offices, document for future reference the names of guests who make excessive refund requests that seem unjustified. Yet don’t let your staff become jaded and cynical to the point that they automatically think that any guest who reports a significant problem or lodges a complaint is out to scam the company out of a rent. Remind them that for every guest who starts out yelling and saying “This went wrong and I want to know what you are going to do for me?” there are several others who instead say “I’m so sorry to bother you at this hour, and I know it must be busy this time of year, but the A/C seems to have stopped working and the temperature is showing 95 degrees right now.”