ICYMI: * Property managers who list accommodations on Airbnb are upset that the company overrode their policies in response to the coronavirus epidemic and allowed travelers to cancel their reservations and get full refunds.
* They're unhappy they're having to bear the vast majority of the cost of the refunds, even though they didn't have a say in the decision.
* Many say their business have been hit hard by the change Airbnb made; some say they can only last a few months without the money they make from Airbnb, because it represents the bulk of their income.
* For many property managers, the money they make from the service goes to pay mortgages, utility bills, maintenance.
* Visit Business Insider's homepage for more stories.
Airbnb likely pleased lots of travelers when it announced earlier this month that it would allow customers to cancel reservations anywhere around the globe for the time being due to the coronavirus pandemic and get a full refund.
But in making that guest-friendly move, it infuriated plenty of property managers who offer accommodations through its service.
Hosts told Business Insider their bookings have been almost entirely wiped out following the change, as travelers have cancelled reservations en masse. Many of the property managers are entrepreneurs or small business owners for whom their Airbnb rentals are their main source of income. With the move, they charge, they're having to pay the price of a policy they had no part in deciding; indeed Airbnb's change to its cancellation policy overrode their own cancellation policies, many of which were much stricter.
"This is a free travel insurance policy at our cost," said Evan Lohr, who manages three Airbnb properties in Santa Cruz, California. "It's much harder for us. It's not really equitable."
An Airbnb representative declined to offer an on-record statement. Last week, in an open letter to its hosts, Airbnb's founders said the company was working "day and night" to come up with a plan to help them.
"The last few days have been incredibly challenging and confusing for everyone," the founders said. "We are going to get through this crisis as partners," they continued, "our success is dependent on the success of you, our hosts."
Airbnb overrode hosts' cancellation policies
Airbnb acts as a kind of eBay for travel accommodations, pairing travelers with property managers offering apartments, houses, and other places to stay in particular areas. The company typically allows hosts to set their own prices and terms, including those covering cancellations.
But Airbnb's own terms include an "extenuating circumstances" clause that allows guests to cancel in certain situations — even when hosts' policies otherwise wouldn't allow it. Initially, the company allowed property managers to decide how to handle cancellations due to the coronavirus outbreak.
As the pandemic spread around the world, though, Airbnb repeatedly modified its extenuating circumstances policy, giving guests increasing latitude to cancel their reservations. A little more than a week ago, it announced that it would allow all guests to cancel reservations if they were made on or before March 14 and were for bookings that were set to begin on or before April 14.
The company was under pressure to make some kind of move to accommodate travelers. Even before the disease was officially declared a pandemic, many people were feeling that it was unwise or unsafe to travel. Since the pandemic declaration, the US Centers for Disease Control and Prevention has urged Americans to limit their social interactions to prevent the further spread of the disease, and a growing number of states have ordered their residents to stay at home.
The hosts who spoke with Business Insider understood the seriousness of the outbreak and the reasons why travelers were cancelling. Indeed, many of them had already started offering full refunds to guests who cancelled, despite their strict cancellation policies.
But they were unhappy that Airbnb hadn't talked with them about how to handle the crisis, and that it essentially acted unilaterally. "Basically, they just cut our hands off," said Alba Jones, who manages Airbnb properties in Berkeley, Richmond, and El Cerrito, California, and another in Puerto Vallarta, Mexico. "We had no say in the matter."
Hosts are taking a big hit from cancellations
Airbnb takes about 12% of the amount that guests pay in the form of commissions and service fees. When guests cancel, the company is refunding those fees to them. But that means that about 88% of the money that's returned to travelers is coming out of property managers' pockets.
Many property managers have policies that only offer guests a partial refund if they cancel anytime after the first few days after they make a reservation. Given that Airbnb overrode those policies, many feel the company ought to absorb more of the cost of refunding the money to guests — or pass along some of those costs to guests.
"They just left hosts completely out to dry," said Linda Misner, who rents out a house in Tampa, Fla., on Airbnb. "There should have been some compensation for hosts that lost all this business."
Airbnb reportedly has some $3 billion in the bank. But given the sheer amount of bookings made through its service, and the fact that most of the revenue from them goes to hosts, its business model means it can't really afford to reimburse hosts for any sizable portion of their lost revenue without being in danger of running out of money itself in a matter of months.
So the company is passing that cost along to hosts. And Misner and other property managers say the hit they've taken since Airbnb made its cancellation policy change has been huge.
Lohr, who gets most of his income from Airbnb rentals, said the three properties he manages were booked through March and most of April. Most of those bookings are gone now, with many guests waiting until the last minute to cancel. Many of those cancellations happened before California announced a statewide shelter-in-place order late last week.
Before the outbreak, the house listed by Misner was booked for much of the following two months, she said. In recent weeks, there have been no new bookings and nearly all of her existing reservations have cancelled following Airbnb's policy change.
Meanwhile, Keith Dorsey, who gets about 80% 0f his income from managing a handful of Airbnb properties in Atlanta with his wife, said he's lost track of the number of cancellations he's received since Airbnb changed its policy.
"To maintain my sanity, I stopped counting," Dorsey said. "It was too much."
Mortgages aren't discretionary
What's worrisome to the property managers is that while their properties are no longer generating revenue, they still have ongoing expenses — mortgages or rent payments, utilities, cleaning costs, and maintenance. Travel is frequently a discretionary expense made with disposable income, they argue, and airlines, hotels, and other travel companies typically don't give full refunds for last-minute cancellations.
By contrast, the money the hosts make off guests' discretionary income goes to pay bills that are anything but optional, they say.
"My mortgage payment is not discretionary," said Victoria Kay, who rents out a room and the basement of her Knoxville, Tenn., house on Airbnb.
Some said they could only last a few months without their Airbnb income.
Dorsey's taken advantage of programs that have allowed him to push back his car payment and the payment of another loan. He also has some savings he can tap into. Even so, 90 days is about his limit for how long he can last without his Airbnb business.
After 90 days, "I would probably be facing an eviction myself," he said.
Last week, Airbnb sent a letter to Congress urging the body to offer loans and tax relief to property managers of short-term rental properties who list on its site and others. But several of the hosts who spoke with Business Insider were unimpressed with the company's legislative push. The loans and the credits wouldn't replace their lost revenue, they said. And Airbnb's letter seemed to be an attempt by the company to try draw attention away from how it had undermined their business.
"I don't think saying you're going to ask Congress to offer you some loans is a way to appease hosts who are losing everything," Misner said.
Got a tip about Airbnb? Contact Troy Wolverton via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.
* Read more:
* Airbnb is asking Congress to help out its hosts, after it just hit their revenue by overriding their cancellations policies due to the coronavirus crisis
* These numbers show how Airbnb's business could take a devastating double hit because of coronavirus cancellations
* The coronavirus crisis has exposed a crucial weakness in Airbnb's business model and it's likely to haunt the $31 billion company's IPO plans
* Airbnb is letting guests around the world cancel their reservations for a full refund and no cancellation fees, as the coronavirus pandemic continues to disrupt travel plans
SEE ALSO: How to cancel an Airbnb reservation without a penalty
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