Airbnb Security Deposit: To Charge or Not to Charge? [COVID-19 Update]

A security deposit gives vacation rental owners a sense of security. As a host, you want to protect your Airbnb property from any damage. And, in case something happens, you want all the repairs in your rental to be covered. All this sounds reasonable - but, is charging an Airbnb security deposit, in fact, the right decision for your business?

As a vacation rental owner, you are aware of the fact that renting is not a no-risk job. As much as you try to maintain your property in good condition, accidents can happen, and things can get broken or damaged. Adding a security deposit to your listings as a measure of security will ensure that any damages, breakages or lost items are taken care of.

As with many things, adding a security deposit to your Airbnb property comes with a list of pros and cons. Read on to understand the advantages and disadvantages of charging an Airbnb security deposit better.

What Is an Airbnb Security Deposit?

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An Airbnb security deposit is a set amount of money that is collected from guests to cover damages to the property that occurred during their stay. The security deposit is refundable if no damage was done to the property.

Airbnb allows hosts to set up a security deposit to cover minor damages. For example, if guests break glasses while staying at your property, you can charge them for the deep cleaning expenses. Having a security deposit in place will allow you to deduct the cost of the deep cleaning from the amount. The guests are charged for the damage, and you don’t have to spend your money to fix the problem.

What Is the Difference Between the Host Guarantee and Security Deposit?

Although charging a security deposit is optional, it is important that you understand how it differs from Airbnb’s Host Guarantee.

The Airbnb security deposit covers damage to the property, i.e., “reasonable wear and tear.” The Host Guarantee provides a protection coverage value of up to $1,000,000, for “rare instances of damage.” A security deposit doesn’t have to be in place for the damages covered by the Host Guarantee.

How Does an Airbnb Security Deposit Work?

All security deposit claims are handled through the Airbnb website. Airbnb ensures that guest payments are protected and that hosts are properly compensated for damages made to their properties. Security deposits cannot be collected outside of the Airbnb website.

When guests make a reservation, they are not immediately charged for the deposit. The host must submit a claim in order for the guest to be charged. Hosts have 14 days from the guest’s checkout date to make a security deposit claim in the event of damages to the property. They must contact Airbnb’s Resolution Center and provide evidence of the damage. The evidence should include photos and receipts for the repairs.

What Amount Should I Charge for an Airbnb Security Deposit?

Currently, about 59% of Airbnb hosts require a security deposit. Deciding whether to charge a security deposit is up to the individual discretion of the host. Airbnb doesn’t recommend a specific sum. Hosts need to determine the security deposit amount on their own.

From reviewing what Airbnb hosts have reported on several forums, there seems to be no set amount for an Airbnb security deposit. Though, a common theme seems to be that the security deposit shouldn’t exceed 20% of the total cost of the booking. On average, hosts are charging anywhere from $100-500 per booking for their security deposit.

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What Are the Problems Associated With a Security Deposit?

While a security deposit might be a good way for hosts to protect themselves and their properties, there seems to be some downsides as well.

  • Guests Worry About Surprise Charges

    Some hosts worry that charging a security deposit will actually deter guests from booking their property. This may be true based on what some hosts are saying on the web. One Airbnb host on Reddit reported that he received a lot of questions about the security deposit from guests who were new to Airbnb.

    These guests wanted to know whether the security deposit was charged up front or if it was included in the booking price. In fact, this host believes that some guests decide not to book because they think that they will be charged the security deposit up front. The guests, however, will not be charged up front. This is stated on the Airbnb website. The security deposit amount is refundable, if no damages were made during the guest’s stay.

  • Adds Confusion to the Booking Process

    Since charging a security deposit is optional, adding it to your listing may elicit more questions from potential guests. You will have to invest more time in explaining how your security deposit policy works and what it means for your guests. As a result, the booking process can end up seeming more complicated, making travelers less likely to book.

  • Airbnb Security Deposit Creates Trust Issues

    Charging a security deposit makes some hosts appear as if they are less trusting of their guests. This is due to the fact that hosts aren’t required to set an Airbnb security deposit. An Airbnb host reported that she has a regular guest who won’t book with hosts who charge security deposits.

    The guest says that she wants the host to trust that she will leave the place clean and free of damage. According to her, a host who charges an Airbnb security deposit is picky and looking for a way to claim it as an extra source of revenue.

  • Complaints About Pending Charges

    Although Airbnb’s official help pages state that guests are not charged for the security deposit unless a claim has been made, some guests are saying otherwise. Several people have reported that Airbnb has created pending charges for their payment method for a security deposit. This gives hosts a bad reputation since it seems that they’ve given false information to their guests.

  • Hosts May Still Have to Take Guests to Court

    Having a security deposit in place doesn’t prevent court proceedings. Some hosts may still be forced to take guests to court if neither the Airbnb Host Guarantee nor the amount they charged for an Airbnb security deposit fully covers the repair or replacement expenses.

Although adding a security deposit to your listing sounds like the right thing to do, you must take all this into account when deciding if it is the best option for your vacation rental business. Reviewing both the positives and negatives of having an Airbnb security deposit in place can help you get a better understanding of how beneficial, or not, it can be for you. 

To figure out the best approach to ensuring that your property is well protected, consult with your insurance agent. That way you will be sure that you’ve made the right decision and that you have adequate coverage.

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UPDATE: Charging an Airbnb Security Deposit During the COVID-19 Outbreak

After the World Health Organization has declared the coronavirus outbreak a pandemic, there has been a rise in the number of hosts concerned about the future of their vacation rental businesses. 

Due to the global health emergency as a result of the COVID-19 outbreak, the travel industry is experiencing a temporary slowdown. During times like these, there are certain aspects of your business that need to be adjusted to maintain its growth.

The current situation requires all hosts to be more flexible and ready to adapt. The first step is to remove any obstacles that can deter travelers from making a reservation with you. That said, not charging a security deposit may increase the number of bookings, and that is why you should at least consider removing this option. In addition, you might want to consider setting a flexible cancellation policy to attract more guests. 

As a vacation rental manager, it is your responsibility to take extra precautionary measures during the pandemic. To ensure a safe environment for both you and your guests, it is crucial that you, too, practice social distancing, and handle your business remotely. Investing in vacation rental management software will help you run your business in the most efficient way from a distance.

iGMS vacation rental software can help you have full control of your business and complete your day-to-day tasks stress-free. Automate your business and increase the efficiency of your operations with our all-in-one vacation rental management software. 

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