Airbnb Security Deposit: Should You Charge Or Not? 

 

Everyone is probably familiar with the concept of security deposits. If you rent an apartment or a car, you will most likely be asked to put down a security deposit to cover any possible damages. If you ruin the carpet or have a fender bender, the cost of those damages are deducted from your deposit. If no damage occurs, your deposit is refunded in full when you vacate the apartment or return the rental car. 

The same concept is now available for Airbnb hosts to consider. The Airbnb platform provides a way for hosts to require a security deposit in order for customers to book a particular vacation property. The question for hosts becomes whether asking your customers for a security deposit is a good idea from a business perspective. Here are some pros and cons to think about before making your final decision. 

ADVANTAGES

* Protects your property. The main advantage of having a security deposit is to protect you from paying for damages that may be incurred by your guests. Although Airbnb offers a host guarantee for some damages, it does not protect you again “reasonable wear and tear” against your rental. Security deposits can give you the money to cover minor damages such as broken dishes or torn linens. 

* Reduces insurance necessities. Although it's always a good idea to check with your insurance agent regarding what types of policies are needed on short-term vacation properties, requiring a security deposit may allow you to increase your per-incident deductible and thereby reduce your premium. If guests can cover the small expenses for minor incidents, you won't be out money but also won't have the hassle of filing a claim. 

* Minimizes unexpected expenses. If a guest causes damage during a stay, you may need to incur additional expenses that are not planned or budgeted. For instance, if a glass lamp is shattered, you may need to arrange for a professional carpet cleaning to ensure that no shards are left in the rental before another guest arrives. This type of expense can be unexpected for a host. 

DISADVANTAGES

* Increases potential customer inquiries. Since security deposits are not a typical component of vacation rentals, adding this to your listing may generate additional questions and concerns with not only customers but potential customers. This means that you will spend time explaining your security deposit policy, how it works and what it means to your customers. 

* May discourage bookings. Since some Airbnb listings do not require security deposits, you may lose potential bookings if you add this feature. Some people may be wary of additional charges that they cannot anticipate and may not want the bother of potentially haggling over what they perceive as smaller issues. 

* Adds confusion to booking process. Airbnb security deposits are different than most because they do not actually charge the customer anything before a claim is made. Most people are familiar with security deposits that are taken upfront and then refunded later. This confusion can cause negative reactions as well as additional questions and clarification. 

* Leaves a negative first impression. Some customers may feel that particular hosts don't trust them to leave their properties in good order. This can cause trust issues and start off the entire host/guest relationship on a negative footing. In addition, if either party is sensitive to this issue, this distrust can play out during the entire visit and into feedback session. Hosts can perceive guests as insensitive to their potential risks and expenses. Guests can worry that hosts will nickel-and-dime them on small issues. 

* Can lead to glitches in system. Although Airbnb states that customers are not charged a security deposit unless a claim has been officially filed, there are guests that have had pending charges on credit cards or other payment methods. If the system is not well oiled and streamlined, it can cause even more issues throughout the process. 

* Does not prevent court proceeding. Unfortunately, just because Airbnb has a host guarantee and you have a security deposit procedure in place, that doesn't mean you're immune to court proceedings. In some situations, guests may cause enough damage that your security deposit does not cover all the repair or replacement expenses. 

 

Typically, security deposits are collected from the party before final contracts are signed. For example, you may be required to pay a $500 deposit on an apartment plus the first month's rent before you are allowed to move in. Or, you may be required to provide a credit card number and have a security deposit charged before you are given the keys to a rental car. 

The Airbnb security deposit process works differently. When a guest makes a reservation on a property that requires a security deposit, nothing is initially charged to the guest. If, and only if, a damage claim is made within 14 days of the customer's check-out date will the security deposit be charged. 

In addition, the host must adhere to a verification process before funds are actually paid from the customer to the host. If damage has indeed occurred, the host must take pictures of the damage as well as provide receipts for the replacement and/or repair action that was taken to remedy to situation. The host must then contact the Airbnb resolution center to finalize the payment. 

If there are questions or concerns, the host can choose to work directly with the guest to find a mutually acceptable solution or rely on Airbnb professionals to serve as a moderator. 

Just under two-thirds of all Airbnb hosts currently require a security deposit, and the amounts of the deposits vary widely. If you decide to require a security deposit, you'll have to determine the amount based on the value of your property and belongings. In general, the deposit should remain below 20 percent of the booking price. 

FINAL DECISION

The final decision on whether or not you should require a security deposit is really a personal decision for the host. You'll want to weigh the different variables including the value of your property, the location of your rental, the competition in your area, the monetary value of all things considered, and the potential for added hassle and for possible lost bookings. 

As in most situations, there isn't really a right answer that can be applied across all Airbnb properties. Take these considerations to heart and make the best business decision for your particular situation.