Vacation Rental Protection | Turno Guide for New Hosts

Choose the Right Rental Property Bookkeeping and Accounting Support

Ximplifi — Fri, 05 Aug 2022 23:43:35 +0000

How Accounting Supports Your Business

Accounting means different things to different people, but it is certainly not a one-dimensional department.

There is the operational and administrative, day-to-day bookkeeping for the business, which involves accepting deposits from guests, transacting management fees, and paying out to owners, as well as everything in-between. This is what most managers picture first when they think of accounting, but there is a second part that is equally important.

The second part of accounting addresses the long-term view of what all those transactions add up to, reflecting how the investment and strategy are performing in the bigger picture. This includes aspects of accounting that produce information for budgeting and planning.

Accounting Skills to Seek Out

It can be easy during the first few years of a startup for bad habits and patchwork processes to start seeping into your accounting department, especially if it’s being done by only one person.

One of the key internal control procedures for accounting is the separation of duties. This means that no one person should handle a transaction from beginning to end, for example, bookkeeping, deposits, reporting, and auditing.

Sharing responsibilities between two or more people or having co-workers review critical tasks can help provide some controls against errors or fraud. But you still need to have someone with the right experience and skills to know how to manage the accounting for vacation rentals in the first place.

Certification

Each state has different requirements for accountants to become certified to work, but there are also continuing professional education hours that may be recommended or required.

The most common certification is the Certified Public Accountant (CPA), granted by the American Institute of Certified Public Accountants (AICPA). This license is a versatile designation for accounting professionals pursuing a variety of roles.

There are many other certifications that can also indicate an accountant’s level of expertise in a certain field.

Industry Experience

Trust accounting for short-term rentals is a time- and labor-intensive activity that occurs on a monthly basis. When that is coupled with the unique operational aspects of vacation rental management, it is a special area of expertise that not many accountants have.

Someone who understands the industry of short-term rentals specifically will be able to help you make strategic choices and provide insights based on relevant experience.

Accounting Experience

The fast-moving nature of the vacation rental industry requires extremely detailed accounting.

For hosts with multiple ventures on the horizon, you may have multiple business models that all need accounting support as well. Therefore, you will want a professional on your team who can perform a range of functions to support your near-term and long-term interests.

Technology Enablement

Whether you choose to keep your accounting services in-house or select a partner to outsource, the person who is at the helm of your accounting should be an expert in the software that your business needs today. Not only that, but they must also be able to implement new technologies as the needs of the business change.

This requires them to stay involved in both strategic and operational aspects of the business and be able to scout the market for current technologies.

If you choose to hire outside accounting help, make sure you ask what systems they are certified to work on and what types of integrations they can support.

This will tell you if they have capabilities that go beyond what you could accomplish in-house.

Types of Accounting Support You Can Choose for Your Business

For vacation rental startups, starting with a good foundation of support in your accounting processes is crucial.

Bookkeeper

Running a one-person show can really only work for so long. Some hosts are better to start off with an employee who maintains the company’s books (sometimes called a bookkeeper). This is the person assigned to oversee all the financial transactions administered by the business and help you draw insights from financial statements.

Accounting Consultant

What about going outside the organization? Your accountant doesn’t necessarily need to be an employee. After all, there are professional accounting consultants that you can hire on a temporary or retainer basis if you want to go that route instead.

This may be a good way for new hosts with little accounting experience to get started without being responsible for the expense of a salaried, permanent staff member.

Accounting Firm

This arrangement might work for a few years, but remember, bad habits grow quietly. Without proper oversight and careful workflows, small errors in accounting records or late filings can have serious consequences for property managers and owners. As your operational workload increases, so does the risk for human errors.

If you are concerned about absolute accuracy and compliance, you may want to consider an accounting firm to completely outsource these functions. With outsourcing, you don’t have to gamble on whether or not someone will have the right combination of skills. Nor will you have to make tradeoffs for what is most important to you.

Selecting a firm can be easier than hiring an individual because you can set higher expectations. Refer back to those accounting skills we mentioned, and quiz your prospective firms before making a decision.

Moreover, choosing an outsourced accounting firm isn’t like working with other vendors — it’s a partnership. Successful outsourcing requires a good working relationship and trust between the firm and the client. You should never settle for services that don’t satisfy 100% of your needs. If they don’t have the complete package, keep looking.

Vacation Rental Accounting Support Through Software

As an entrepreneur, you will likely start off wearing many different hats for your vacation rental business. If you’ve studied accounting, or have your CPA certification, you definitely have an advantage. But as we’ve demonstrated, trust accounting is not a hands-off process.

One way to start lean and still run efficiently is to choose the right software and automate every manual process that you can.

This is where resources like VRPlatform come into play. These tools receive PMS data, such as management commissions, guest invoices, and payments, and automatically record the proper entries in the accounting system. They eliminate the manual process of re-keying data into your accounting system to make tasks more efficient.

Design Your Accounting Roadmap

Using the information discussed here, you can start planning out how accounting roles will be assigned for your business and how that structure might change over time.

Remember, good accounting and bookkeeping processes are not a box to check. Your success as a vacation rental host depends on your ability to make the right decisions for your business, and you can’t do that without accurate and organized finances.

The post Choose the Right Rental Property Bookkeeping and Accounting Support appeared first on Turno.

Airbnb Horror Stories: Can You Afford Not to Know Your Guest?

SUPERHOG — Fri, 29 Jul 2022 05:32:00 +0000

Is Guest Screening Worth the Investment?

Renting out your home to strangers can raise more doubts than it does provide assurances, and the cons list can outweigh the pros list. It doesn’t have to be like this though, and investing in security measures now can prevent serious headaches and repeat stress factors down the line.

Guest screening is nothing new — the hotel industry has done it forever, and they’re not invasive or in breach of data protection laws. That said, it’s important to remember we’re not comparing apples to apples with the hotel industry and the short-term rental industry.

In the vacation rental industry, there tends to be a more hands-off approach when it comes to check-in and check-out processes. Since the pandemic, we’ve seen an increase in self-service processes, but with this, more risks have emerged. These risks may leave you with a heavy price to pay — and we’re not just talking about money.

The Real Cost of Guest Screening

When you look at your business costs and consider where the money is going out, also consider where the money is coming in and where the money could be coming in. Ask yourself: Are all the doors open for additional revenue, or are some closed because you’re afraid of the risks?

If you have some doors closed, get the right tools in place to enable you to open them. For example, if you block off your calendar during notorious holidays for parties, such as Halloween, you could be costing your business revenue. And this revenue could mean the difference between a good financial year and a great one.

Remember that not every Airbnb guest has the same risk factor, and these seemingly negative times of the year could actually be a scalable revenue source for you.

What You Could Be Missing Out On

If you choose to close your calendars during certain times of the year or from specific OTAs, you may be missing out on thousands of potential repeat bookings, word-of-mouth recommendations, good reviews — and increased booking revenue.

If you get cold feet and cancel a booking last-minute, you lose both revenue and trust between future guests and your business.

If you choose not to accept 1- and 2-night stays because they ring “PARTY!” alarm bells, you miss out on the revenue from these stays.

If you choose not to accept direct bookings because you feel there is less security and protection for you as a host compared to OTA bookings, you lose out on repeat and direct bookers. This can, in turn, bring in higher revenue since you’ll be avoiding OTA commissions.

If you choose to host and this results in hefty damages and repairs, your revenue will be affected. Not to mention, you may have to take your property off the market until repair work is done.

You get the picture.

By closing these doors because you don’t have the right toolkit in place, you’re essentially cutting yourself off from a goldmine of revenue. In reality, there are services out there to help protect and provide a solution to you.

The Right Pricing, the Right Solution

There’s no sugar-coating the fact that there are some bad eggs out there and, unfortunately, the rapidly growing vacation rental industry is susceptible to fraudulent activity and guest damages. This is where technology comes in.

An automated guest screening tech solution will save you time, money, and hassle, and you’ll be a step ahead of your competition by accepting bookings that others won’t.

Now, you can open those doors and welcome those “risky” bookings with confidence when using a guest screening solution.

Monetizing Trust and Safety

Of course, these tech solutions are another expense to add to your ever-growing list. Luckily, there are additional preventative steps you can put in place to protect your property.

Alongside using an automated guest screening technology, an effective way of building a strong sense of responsibility and accountability during a guest’s stay is to collect some form of damage deposit.

Calculating your deposit amount, how to implement the policy, and how you will reimburse the guest after the stay can be a tedious process. Instead, consider collecting a non-refundable damage waiver in place of a traditional refundable deposit. This way, you can ensure you’re protected and simultaneously monetize the security — and with minimal effort required.

Having this process in place removes the administrative headaches that can come with collecting and refunding a traditional deposit. Besides, if you’re going to be collecting a security deposit anyway, why not use it as an additional revenue stream for your business?

Additionally, say you need to repair your property’s drywall after a guest accidentally knocked a chair leg into it, creating an unsightly hole. Or maybe you need to replace your property’s espresso maker after it was stolen by a guest.

If your damage waiver doesn’t cover the full cost of the repair or replacement, there are guest screening solutions that also offer comprehensive damage protection. This way, even in the worst-case scenario, you’re covered.

Automatic Guest Screening Is Money Well Spent

Any good guest screening tech solution should help you answer the following questions with confidence on 100% of your bookings:

Do you know your guest?
Can you trust your guest?
What happens if something goes wrong?

Next time, instead of asking yourself if you can afford to invest in trust and safety for your business… ask yourself if you can afford not to.

The post Airbnb Horror Stories: Can You Afford Not to Know Your Guest? appeared first on Turno.

The Importance of Good Airbnb Accounting Practices

Ximplifi — Fri, 22 Jul 2022 22:50:15 +0000

Leverage Value-Added Accounting for Scalable Growth

Before we get into the details, take a moment to think about your business. What do you love about it? What is your vision for the future? You probably didn’t mention anything about reconciling accounts or tracking down receipts, and that’s okay.

Unfortunately, many rental owners overlook the purpose and importance of implementing good Airbnb accounting practices until things have started to take a turn for the worse. Luckily, just by reading this paragraph you already have more knowledge to prepare you for a successful financial future.

The key is to treat accounting as an asset, not a liability. With liabilities, you typically seek to minimize them, avoid incurring additional costs, and hope they don’t turn you upside down. With assets, however, you nurture them, invest in capital improvements, and use them to generate positive financial results.

By choosing to take this “asset view” of accounting, you can begin to leverage the tools and processes discussed here to help your vacation rental business run more efficiently.

4 Accounting Pitfalls to Avoid When Running a Vacation Rental

Below, we highlight common accounting pitfalls that short-term rental hosts face and offer advice on how to make the right decisions for your business.

Pitfall #1: Not Following Trust Accounting Practices

If you are managing or planning to start a short-term rental property business, it’s crucial that you understand the concept of trust accounting. It might sound like a way for wealthy families to split their inheritance, but as a practice, it simply refers to managing money on someone else’s behalf.

This is especially important if you do not own the property you oversee. In this case, as an intermediary that helps owners list their dwellings and handles money from guests, your role is to ensure that owners receive the correct payments by handling their funds appropriately.

You might be wondering, am I required to do trust accounting?

Many states regulate the use of escrow accounts to hold advance deposits and monies held on behalf of owners. If you are not using separate escrow accounts to hold these funds, “commingling” of funds occurs and can result in heavy fines and even loss of a business license.

While state requirements differ, several require two escrow accounts, one for advance deposits and another to hold “earned rentals” between the time of guest departure and the time of payment to the owner and property manager.

While this tracking can be tedious, good trust accounting practices early on can safeguard your business from unplanned deficits and help you improve owner satisfaction with timely and accurate payments.

To ensure that you follow the proper regulations using the right systems, you should always consult an accredited accounting firm.

Pitfall #2: Only Using Built-In PMS Modules for Accounting

Historically, the belief has been that if you want good trust accounting and owner statements you have to choose a property management software (PMS) with built-in trust accounting functions.

The problem is those systems are not tried and true accounting systems, aren’t very flexible, and don’t provide much in automation functionality or integrations with other time-saving applications.

Ultimately, company managers should choose a PMS based on its performance on property management functions, not a tradeoff of accounting capabilities. Why not select the best service to drive bookings, create an attractive website, communicate with guests, integrate with other software, and manage your different channels?

Trying to get the equivalent of a hole-in-one for your business software solutions seems like a good way to reduce overhead, but it is not sustainable nor efficient if you plan to manage more than a handful of properties.

Remember, treat accounting like an asset. Select professional accounting software to handle your financial data, not a PMS.

We typically recommend QuickBooks for small-to-midsize companies or Sage Intacct for mid-to-large companies. To automate the transfer of data from your PMS into your accounting system, opt for a tool like VRPlatform™.

Pitfall #3: Not Handling Property Expenses Appropriately

It’s especially important to draw the lines between different operating accounts when dealing with property expenses, or money spent on behalf of a vacation rental owner.

Managers who don’t consistently use the same accounts for property-related expenses will find it very tedious to go back and determine what they are owed. It’s best to choose one account to pay for expenses on behalf of the owner.

Pitfall #4: Not Deferring Rental Revenue

A key concept of vacation rental accounting is that rental deposits received in advance of a guest’s stay should be deferred.

Until the guest has checked in or completed their stay, that money should be held in a “Rents-in-Trust” escrow account and recorded as a liability (deferred income) on the balance sheet until the date of the guest’s stay, typically in a “Rents-in-Trust – Rental Deposits” account.

The reason handling funds this way is so important is because it protects your company in the event that the guest cancels, shortens, or is otherwise granted a refund on their reservation. By holding the money outside of your company’s operating account until the date it can be transacted, you mitigate the risk of having to pay back money you may have already spent.

In your accounting workflow, you would use a rental deposit invoice on the date the deposit is received. On the date of the guest’s stay, you’d use a rental invoice that details the guest’s charges (rental income, cleaning fees, taxes, etc.) and log a negative rental deposit to reverse the initial entry.

Use Good Accounting Practices to Run a Successful Airbnb Business

More so than other types of real estate, Airbnb hosts must have nimble processes in place, primarily because of the sheer volume and frequency of the transactions they manage.

At a bare minimum you need to ensure every dollar received is held in the right account and the proper amounts are paid out to the right parties, but that doesn’t even begin to help you achieve your own financial targets.

If you manage less than five properties, you might be able to make do with low-tech, nose-to-the-grindstone accounting. However, manually tracking money that flows through your property management system while trying to earn your own company a profit is a cumbersome process that only gets more complex as you take on more business.

The post The Importance of Good Airbnb Accounting Practices appeared first on Turno.

Understanding Short-Term Rental Regulations

The Turno Team — Fri, 15 Jul 2022 20:15:46 +0000

First Thing’s First: What’s Considered a Short-Term Rental?

Each city or county has varying definitions of what is considered a short-term rental. This will impact how you rent out your space, the types of permits you need, and what other local laws if any, may apply.

Type of Structure

Some areas do not allow entire single-family dwellings to be short-term rentals. Some definitions require the property to look and act like a residence in which someone lives.

In some cases, mobile homes, RVs, and boats are considered short-term rentals, while some government bodies do not accept this definition.

Length of Stay

In many parts of the world, the length of stay for a short-term rental is limited to less than 30 days. Other jurisdictions approve up to 120+ days a year. Note that in many locations, long stays (30+ days) are the fastest-growing length of stay.

Some jurisdictions also require that the property have a primary resident to prevent hosts who don’t live on the property from renting out a unit or entire property as a short-term rental. That said, these regulations are constantly being changed.

Examples of Short-Term Rental Regulations Across the Globe

With different regulatory dynamics across the world, it is important to understand the legal considerations for short-term rentals when you are planning to start your own Airbnb business. Below are some examples of the laws and regulations that govern short-term rentals.

United States

Destinations that place restrictions on short-term rentals include Washington D.C., Los Angeles, Santa Monica, San Francisco, Charleston, and New York City.

For example, San Francisco caps short-term rentals at 90 days, but the limit only applies when the host is not present at the property throughout the guest’s stay. In Los Angeles, rules note that homeowners can only rent out their primary residence up to a maximum of 120 days annually.

In Santa Barbara, short-term rentals are officially considered “hotels” that can only operate in designated areas, while in San Diego, short-term rentals are now prohibited in any area.

New York City has some of the toughest restrictions. To prevent disruption to residents and help prop up its hotel industry, New York limits most short-term rental stays to a 30-day minimum.

After a November 2019 referendum in Jersey City, the city enacted regulations for short-term rentals considered to be the most stringent in the U.S., allowing for only 60 rental days per year.

A new law in 2022 will make short-term rental properties located outside designated resort areas illegal in Honolulu. The city further increased fines for anyone violating the new regulations from up to $1,000 to up to $5,000.

Canada

In Whistler, short-term rental hosts and property owners must obtain a license for their business, and those who don’t, risk a $1,000 daily fine.

The property must also be zoned for tourist accommodation to be eligible for the business license. A property zoned in a residential area can’t be marketed to tourists for any length of time. Whistler takes it a step further and provides an interactive zoning map on its website.

Toronto’s short-term rentals are described as all or part of a dwelling unit rented out for less than 28 consecutive days. Hosts need to register with the city and are required to collect and remit a 4% municipal accommodation tax (MAT) on all rentals.

Europe

The short-term rental industry has come up against huge criticism in recent years for taking from the already stressed housing inventory in many markets.

Amsterdam, Barcelona, Paris, and Venice currently have restrictions on short-term rentals. For example, Barcelona issues 9,800 short-term rental licenses maximum per year and is under constant scrutiny by local housing activists to bring that number down. In Paris, hosts must register each home and have a 120-day maximum annual rental limit.

In 2021, the European Commission (EC) announced the short-term accommodation rental initiative, seeking a “more resilient, innovative, and sustainable ecosystem” for tourism including new rules for short-term rental services.

With the EC poised to adopt new rules in the third quarter of 2022, a European Union (EU) Host Action Plan seeks to ensure the benefits of short-term rentals remain while working with regulators to address negative impacts. A large part of the plan includes the establishment of an EU host registry and the enforcement of regulations.

United Kingdom

Ireland allows short-term rentals a maximum of 90 days per year for primary residences. Currently, these residences must be registered, and stricter enforcement is coming.

Hosts in London need to follow the 90-Day Rule, allowing them to rent their property short-term for up to 90 days per year unless they have express permission for extra time. Airbnb automatically blocks the calendars of all London listings once they reach their annual 90-day maximum.

Asia

In Japan, vacation rentals must be registered and can only be rented for up to 180 days annually. Additionally, short-term rentals offering less than 3-month stays are illegal in Singapore.

Short-Term Rental Regulations In Your Neighborhood

Legal restrictions on short-term rentals vary from city to city, so you must make sure there are no limits or rules against renting your home on a short-term basis, subletting, or any other form of renting in your area.

If you already own or rent a home you’d like to use as a short-term rental, check your lease or rental agreement, HOA covenants and restrictions, or co-op board regulations. In the same vein, if you’re in the market for a short-term rental home but haven’t yet signed off on the investment, carefully review the applicable documents to ensure hosting is permitted where you live.

If you’re able to and choose to rent out your property, expect to pay a processing fee, endorsement fee, local occupancy taxes, and other expenses. For example, hosts in the District of Columbia are required to pay over $100 for a two-year vacation rental license.

Short-Term Rental Licenses and Other Potential Restrictions

If you’re operating any sort of a business, including renting property, you will likely require a standard business license, just as you would in any small business. This is typically facilitated by the city you operate in.

Don’t forget to check other long-established community restrictions, such as parking and noise bylaws.

Airbnb’s Own Rules

The rental platform Airbnb has been facing a PR nightmare with reports of illegal parties. In 2020, they banned parties worldwide and introduced an occupancy cap of 16 guests mainly because of the rise in property damage and neighbor complaints.

To be a responsible host and meet the needs of the Airbnb community, keep these tips front of mind:

Be mindful of your neighbors: Provide a list of house rules to your guests to encourage them to be conscientious of those living around your property.
Prioritize health and cleanliness: Though you may not always prevent unauthorized parties and guests from leaving big messes, you need cleaners that can handle Airbnb’s 5-step enhanced cleaning protocol to maintain safety for the next guests.
Take safety measures: This includes providing emergency contacts for the nearest hospital, first aid kits, a smoke alarm and carbon monoxide detector, and directions for emergency exits.

The information in this chapter was accurate at the time of publication. We highly suggest that readers contact their local and regional authorities for the most updated regulations and potential changes.

The post Understanding Short-Term Rental Regulations appeared first on Turno.

A Crash Course in Airbnb Taxes for Hosts

Ximplifi — Fri, 15 Jul 2022 20:04:04 +0000

Vacation Rental Tax Legal Requirements

Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.

You may know that you’re required to obtain a general business license to operate short-term rentals. But in some U.S. states, you may also be required to have:

A Real Estate Broker License
A Property Management License
Other certifications

If you are forming an LLC, your state may require you to appoint a registered agent to serve as the point of contact between your business and the state government. This person will be responsible for receiving and filing tax and legal documents for your business.

Some CEOs choose to designate themselves as their own registered agent. But you can also elect a registered agent service to take on these duties for an annual fee.

To find out what types of registration are required for your business, you should contact a local agency that can provide information about licensure in your state or country.

Tax Liability of a Property Manager vs Owner

Say you manage vacation rental properties on behalf of a separate owner. In this case, you are not required to report on the owner’s income from guests. Also, you don’t have to report the reimbursable expenses you pay to maintain their properties.

What you do have to pay taxes on is the income, fees, and commissions you collect from owners.

Applicable Taxes for Short-Term Rentals

So what types of taxes apply to vacation rentals? Depending on the jurisdictions governing your specific rental properties, there can be several kinds of taxes to consider. These include sales taxes and accommodations taxes that are often labeled as tourist taxes, occupancy taxes, and others.

Most commonly used, the term lodge tax broadly describes taxes collected both from guests and owners.

Income tax, value-added tax or VAT, self-employed taxes, and goods and services tax may also apply depending on the jurisdiction and how the property is managed.

Understand Your Jurisdictions

Taxes don’t only occur at the state or federal level, Therefore, it’s important to know the specific rules, processes, and rates that apply in your tax jurisdictions. These may be at city, county, state, or other levels. Online, you can browse state guides and additional resources about lodge taxes for each state.

Collecting guest reservations using a vacation rental platform like Airbnb or Vrbo may affect how you need to file lodging tax returns. Therefore, you will need to determine how taxes are being collected through each property channel and ensure filings are handled appropriately and on time.

You may be required to file lodging tax returns on a weekly, monthly, quarterly, or annual basis. Again, this is depending on the jurisdiction as well as the number of revenues reported. Understanding the deadlines associated with these requirements and being able to meet them is the only way to avoid late penalties.

These fines can add up significantly, especially for hosts with multiple properties. How much you pay and whether it’s a flat fee or an amount that increases over time will both depend on each property jurisdiction.

Other Tax Filings

In addition to calculating lodging taxes, you will want to include deductions in short-term rental tax filings to help reduce the amount of taxable income reported.

One of the most significant deductions is vacation rental property depreciation, or recovering the cost of the property over its useful life, which the IRS assumes is 27.5 years for residential rental properties.

To help you estimate these deductions, look for an online vacation rental depreciation calculator.

The 1099 Is a Property Manager’s Friend

If you serve as the property manager and do not own the property, you’re also required to report certain information to the IRS. This formation allows them to verify taxes owed by the owner you work with. It is reported on Form 1099, which must be issued to each property owner and any contractor or professional hired to work on a property.

As of 2022, the U.S. only requires a 1099 if a vendor was paid more than $600. One caveat to this is that if you hire a company instead of a contractor (for example, a cleaning company rather than an independent contractor), there is no tax reporting requirement. If an independent contractor was paid more than $600, it’s reported on Form 1099-NEC.

The deadline to submit 1099s to recipients is January 31st after the year being reported. The same documents must be furnished to the IRS by February 28th.

Avoid scrambling at the beginning of the year to get all this information aggregated, calculated, and distributed. Use accounting software that can automatically capture this data and help you complete the forms accurately.

Keep Your Financials Organized

Navigating state and federal tax codes can be complex for businesses that operate in multiple states or countries. Also, there can be confusion about what kinds of paperwork and information business owners are required to send and report on.

Before you can sit down and start paying taxes, you need to have all your financial information in front of you and easy to review. If you are doing any accounting entries manually, one error or typo could create a lot of work for you when taxes are due.

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Guest Screening Process for Airbnb Hosts

SUPERHOG — Mon, 11 Jul 2022 20:21:00 +0000

What Is Guest Screening?

Guest screening is the process of assessing the risk posed by each potential guest through legal, non-discriminatory, and detailed checks.

This may involve asking guests to submit personal information, such as their name, date of birth, home address, and a copy of their official ID, as well as their mobile phone number and email address.

How Does Guest Screening Work?

With artificial intelligence (AI) and machine learning technology, the information provided by the guest will be processed and scanned in the background, extracting key information.

The purpose of this process is to determine whether the ID is stolen, fake, or genuine; it’s also meant to verify that the personal details provided match those on and associated with the ID.

The phone number and email address of the guest are then reviewed to see if the name provided for the booking matches the registered owner. Screening tools will also look at when the email account was created. This is to check that the account wasn’t created just for the booking.

After providing an ID, guests will be asked to perform a biometric or liveness check, usually in the form of taking a selfie or short video. To help reduce fraudulent chargebacks and protect against lost revenue and bookings, hosts may choose a screening provider that also verifies credit and debit card information.

Others may prefer to use a service that also does background checks, which can include checking criminal databases and terrorism watchlists.

Why Do Hosts Need Guest Screening?

By investing in an effective screening process,hosts will save money in the long run by minimizing incidents of damage and reducing insurance claims. Picture this scene:

You’re a new host and have decided to rent out your own home while you’re away on vacation. You’re having an incredible time with your friends and family. But, while you’re enjoying yourself, your phone starts ringing. You ignore it — you’re on vacation after all.

However, your phone doesn’t stop ringing. You check the caller and see that it’s your next-door neighbor. She sounds angry and you can hear the sound of loud, thudding music and police sirens whirring in the background.

Turns out, the guest who booked your place decided to throw a party, and dozens of people showed up. The worst part? They used a fake ID and a stolen credit card to book your property.

This scenario could have been completely avoided through intelligent guest screening. Guest screening is one of the best ways to spot red flags and protect you and your vacation home from the risks that come with online booking requests. It actively prevents problems from occurring, rather than just being on hand to sweep up after the damage has already been done.

1 in 20 guests admits they treat a vacation rental with less respect than their own home. On top of that, the average cost of property damage by guests is around $1,296. For these reasons, making sure you host only the most respectful guests should be at the top of your priority list.

Guide to Guest Screening: 10 Easy Tips

Learn 10 simple tips to help prevent troublesome guests from booking and stepping foot inside your property.

1. Know Your Guests

To guarantee your hosting experience is a positive one, make sure you know as much as possible about your guests.

Ask guests to clarify whether any additional guests will be joining them during their stay. If there are, collect all the details of these additional guests, such as names, email addresses, and phone numbers. Having these details will help in case of damage to your rental.

2. Do Your Research

Once you have their name and phone number, do a quick Google search. Check on social media platforms to see if they live locally or whether what they post online is a cause for concern for you.

3. Ask for ID

By asking for a guest’s ID, you can host in confidence knowing exactly who you’re renting to. Guests that are deterred and unwilling to provide their ID are often the ones that cause damage and problems for hosts.

Having a copy of the guest’s ID also helps if the guest performs any criminal acts on your property, such as theft, and you have to report them to the police.

4. Validate Payments

Vacation rentals are unfortunately a target for credit card fraud.

To make sure that cards are not stolen or fake, and guarantee that payments are made to you, make sure that guests pay 100% of the booking fee and any other payments you request upfront. That way they are processed immediately and you will know in advance if there are any problems, such as chargebacks.

5. Collect a Deposit

We all know that accidents happen, so protecting yourself is crucial.

In addition to validating guests’ credit cards, collecting a security deposit will also help you if you need to make a claim. By holding the deposit for 7 days after a guest’s stay, you can inspect the property and charge the guest if they have broken or stolen anything. There are automated, streamlined deposit solutions on the market to make this process easier.

6. Have a Rental Agreement

Have every one of your guests sign a rental agreement committing to your house rules and the standards that you expect of them when staying at your property.

By having a legally binding agreement, guests can be held accountable for their actions and will make processes — such as insurance claims or keeping the deposit amount — much easier for you as a host.

7. Know Your Area

Keep yourself aware and up to date on big events that might be happening in the surrounding area.

If you live in an area that hosts a well-known festival or is known as a place to party, be wary of one-night bookings and guests who live locally. These are often party bookings and should be avoided at all costs.

8. Monitor the Stay

By installing noise monitoring sensors, you can rest easy knowing that guests are treating your property — and your neighbors — with respect.

Make sure you let potential guests know that you use these products and be understanding when it comes to noise spikes. You can set your levels, and if guests reach those levels for a sustained period of time, you can step in and contact them to resolve and reduce the noise issue.

9. Keep All Payments on the Platform

If you are using a major home-sharing OTA, then keep all communications and payments on the site. If a guest tries to get you to accept payment outside of the platform or move communications, report them to the platform and decline the booking, as these are often scams.

10. Note Their Reviews

If you do use a major OTA, make sure you have a look at the guest’s reviews — both the reviews that hosts have left them and the reviews they have left hosts.

It’s always good to hear both sides of the story. But if you see they are unfairly critical of places they have stayed, then these are the guests you likely want to avoid.

Why You Should Use a Guest Screening Provider

There are many benefits hosts can enjoy by using a dedicated guest screening provider, including:

Increased Guest Accountability

By collecting guests’ details, if something does go wrong, you’ll have the appropriate information to get issues resolved quickly.

Deter Party Bookings and Fraudsters

Requiring guests to verify and provide their details is a major deterrent for those looking to take advantage of your property.

Add an Extra Layer of Protection

Prevent damage and problems from occurring in the first place by deterring risky guests from booking your properties.

Automate Previously Manual Processes

Gone are the days of having to manually review a copy of a guest’s passport. AI-powered systems can automatically read and verify IDs.

Give Yourself Confidence

By knowing that the person who has booked your home is exactly who they say they are each time, you’ll have that extra peace of mind that your home is safe and in good hands.

FAQs: Guest Screening Process for Airbnb Hosts

Will using a guest screening tool put guests off from booking?

Hopefully the bad ones, yes!

For anyone coming to your property without an ulterior motive, there is no reason for them to be put off by the verification process.

A quick Google search of industries using verification as standard will show financial services, health care, education, sharing economy, retail, gaming, and more. You’ll also see that the travel and hospitality industries have been doing it for years already: hotel check-in, airport security, and boarding a plane to name a few.

While there is more work needed to standardize guest screening in the short-term rental space, it is not a process that guests are unfamiliar with or should fear — unless they’re up to no good of course, in which case, you don’t want those guests to book with you anyway.

Does guest screening stop chargebacks?

While chargebacks are never 100% preventable, guest screening processes will help minimize them.

Is the guest’s data safe?

Yes; you are not in violation of any data compliances by screening your guests. It is a long-established practice in some industries (i.e., hotels) and is becoming a common practice in many more, including our beloved vacation rental industry.

If Airbnb already screens guests, why should I use a third-party service to do it too?

Airbnb, along with some other OTAs, may perform an identity check. However, ID verification is not part of their standard sign-up process for guests, and some OTAs don’t ever do it. Airbnb does offer background checks, but they’re not always available worldwide and depend on a lot of outside factors.

Remember: Airbnb’s (as well as other OTA’s) principal business is bookings, and their principle client is the guest. Third-party services offering guest screening and/or damage protection focus on the host as the principal client.

Guest screening providers work with you to make the screening process, resolutions, and claims process faster, easier, and more lucrative.

Can I use a guest screening and protection service through my PMS?

Yes. For example, SUPERHOG integrates with many property management software and is always adding more partners based on demand.

I already pay for a lot of services for my business. Isn’t this just another expense?

There are numerous costs associated with running your business successfully, which is why it’s essential to create the right tech stack. Guest screening and protection should always form part of your business tech stack. And don’t forget: The question should be reframed from “can I afford to?” to “can I afford not to?”.

Screen Airbnb Guests, Protect Your Vacation Rental

For liability, it is important to know as much as you can about the customers entering and leaving your property. A lot of time and money has already been poured into your vacation rental business, and losing anything due to a poor guest screening is not optimal.

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