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I have strict cancelation policy and smart pricing set.
I had a guest from Germany book for a 11 day stay in July (peak season for us). She was very pleasant and communicative. Two days before her arrival she messaged that she has covid and is very ill. She did not request a refund, but asked what to do next. I told her to cancel her trip on the airbnb site which would open up my calendar, and that if I was able to rebook that time, I would refund her via the resolution center. She promptly did that and was appreciative.
I just got a booking for 10 days that overlaps the dates of her stay by 7 days, but the âsmart ratesâ are lower now than when she booked, so instead of the (rounding figures) $2000 she paid, I am getting $1500 for the new 10 day stay, and two of those days are not in play for refunding her.
So what is fair to refund my German guest? I know I donât technically have to, because she booked after the change in Airbnbâs covid policy. However, I can afford to be gracious about this, and I appreciate her tone â not demanding and entitled, but politely inquiring. And there have been many times people have been gracious to me when they didnât have to be --so thatâs the story on why I am refunding her.
I could work with round numbers and refund her $1000, which is pretty close to exactly what I get from my new booking for the specific days she cancelled. Or I could refund her $1500, because my new booking only happened because she cancelled, and I still come out ahead. I canât refund her the full $2000 because I do have a strict cancellation policy for a reason.
I know Iâm overthinking this. Are there aspects to this that Iâm overlooking? Not sure how this works with taxes? What are the chances that an airbnb support staff will actually be helpful in navigating this?
Iâve never had to refund a guest before. Is this my next leveling up experience? (see recent post about unclogging a toilet).
First, I wouldnât refund anything until three days after the new guestâs stay is completed since until then you wonât have received the funds and know whether the new guest makes some claim for a refund against you.
Second, itâs an interesting question whether to refund the $1,000 or $1,500. If you hadnât raised the issue my reflexive decision would have been to refund $1,000. But you make a good point on the idea that but for the cancellation you would not have received the $1,500 stay. I think you could justify either the $1,000 or the $1,500 payment since youâre not obligated to make any refund, and the promise you chose to make related to the days she had booked and canceled. I think if it were me I would refund just the $1,000 amount unless I felt particularly rich or generous or felt more sorry for the guest.
Third, youâre probably assuming that the guest did not have travel insurance and might have been elsewhere reimbursed for some or all of the cost of stay.
Fourth, your raising tax issues is another thoughtful question you ask. I donât know the tax laws youâre subject to. I could imagine an argument that youâre not entitled to a deduction for what you give back because you have no legal obligation to make the payment. As a practical matter, in the U.S., I canât imagine that the transaction would become scrutinized by the IRS. I donât know how Airbnb would treat the payment for its reporting but if they didnât subtract the amount from your income I would think that you could do so on your tax return. I would assume that the refund you make would reduce your income or be a deductible business expense.
Fifth, I wouldnât expect insightful help fromAirbnb CS based on comments Iâve heard here.
âI would refund her via the resolution center. She promptly did that and was appreciative.â
Based on that you were able to recoup, approximately $1000 as it turned out, so send her $1000 and she would be double grateful. Always best to keep it simple, and definitely keep Airbnb OUT of the equation when possible.
I would not make any specific promise. Iâd wait until I received payment for the new guest, then do the calculation. You donât need to explain to them how you arrived at your totalâ just decide what seems fair and refund that
You pay her what you earned for the overlapping 7 days of her stay, not what she lost, but what you recovered during that 7 days of the 10. The other 3 days and anything else you earned from the next stay is not even remotely owed to her.
Really nothing is owed to her but since you told her you would pay her for what you recovered for her days that she canceled, pay her (only) for them. You certainly do not owe her a particular amount, that wasnât the deal. The deal is for what you recover on her days.
You can see the price breakdown for your new guest and add up the first 7 days, subtract the discount percentage that your current guest is getting (if any), then subtract your 3% host fee, and send her that amount.
As far as income goes, if you are in the US, if you just deduct the $1,000 from Rents Received Line 3 on Schedule E, your figure will not match what Airbnb sends on your 1099-K. In order to avoid any tedious back and forth with the IRS, even though you have retained documentation and can explain the discrepancy, I would probably list the $1,000 under Line 19 Other Expense and call it Guest Rebate or something.
If using Schedule C, you could put it under Returns and Allowances Line 2.
Regarding sales and/or lodging tax, if Airbnb has already collected and remitted the taxes, you would not have a way to reverse the payment and refund those to the guests as you are not filing them yourself. I can only do that for my direct bookings, as I have retained tax accounts in my name for that purpose.
For discussion purposes, not professional tax advice.
Thank you. Thatâs really helpful. The tax aspect is an area where I donât have enough experience or knowledge. I can see that Airbnb returned her taxes and various fees, so thatâs not part of my decision tree at all. But figuring out how to manage my taxes is another story. My accountant (DH) is a real stickler for letter of the law.
Good to know that Airbnb returns taxes with a cancellation under stricter policies, Iâve wondered about that. Iâm flexible cancellation, so the few cancellations Iâve had return everything.
I think this was already said in a more sophisticated way, but my simple mind saysâŚ
use the rate the new guest is paying per day less prorated commission (mine isnât always exactly 3% so Iâd check) x7
Have ABB refund that specific amount you calculated so you donât have to deal with tax implications. ABB will report fewer earnings and if the guest wants any more, such as ABB fees & taxes they need to work with ABB.
Sorry for the overlap in adviceâŚI think mine reads a little differently
And for the record I agree you donât owe her anything but life is like a circle, you reap what you sow, karma, do unto others, etc., etc.
Why do you use âsmart ratesâ?? I laugh when I see mine as sometimes they are 5 times what I charge and other times they are pitifully low. I keep the same rate all year, no arguments or problems !
I do exactly the same- my listing is the same price every day of the year. And I have never had any price glitching happen on my listing, which I think is more likely when a host is constantly fiddling with their pricing.
But I can also understand hosts wanting to maximize their income by upping rates during busy times of year and dropping rates to achieve full occupancy at slow times, or to fill empty dates. However, I think thatâs best done manually rather than by using Airbnbâs smart pricing, and Iâve heard that pricing apps like Wheelhouse are much more on-point than Airbnbâs pricing.
Full occupancy and ânot leaving money on the tableâ by being able to command higher rates on weekends or holidays or high season just isnât that important to me, and probably isnât to you, either.
Thank you âMuddyâ Iâm a people person and enjoy company so I could
never run a place remotely or charge a ridiculous price!
I go back to Airbnbs original idea that people stay in my home with me
Money is useful but luckily is not my âbe all and end all!!â
Mary
Yes, I have never had a bad guest, and the majority of them have been truly wonderful. That to me is the important thing as a homeshare host, not wringing as much money out of the gig as possible.
But I can also appreciate that for many hosts, their rentals are their sole source of income, so maximizing their profits is a priority for them.
Actually, I do have the German guestâs money. Itâs in my bank account. I also have the âreplacementâ guestâs money in my bank account. i am choosing to return a portion of the German guestâs money because my exchanges with her were exceptionally positive, and because I can. There is potential for her to book with us in the future, and I believe she would be an excellent repeat guest.
I am aware that I could have just ignored everything once I had her money and i could have âthe easiest guests everâ for those 11 days â a clean and empty apartment space. But part of my reason for running a bnb space in this apartment in my family home is to put the space to work. I donât like waste, either of space or of time or money. So by giving my first guest the choice to cancel and maybe be refunded if I could rebook, I was able to reduce waste. Thatâs my thinking, and I donât hold it against anyone who has a different perspective or makes different choices for their business.
