Chargebacks, COVID, and Vacation Rental Managers

Wes Melton
7 min readMar 16, 2020


What an unbelievably tough situation professional vacation rental managers find themselves in this month.

Mixed information, stats that seem confusingly mild given the social response, less-than-helpful guidance from the CDC, a surprising lack of toilet paper, and social media platforms limiting what can be shared around this virus, all sum up to a really difficult situation to professionally navigate.

Broadly, we’ve watch the travel industry take an immediate hit to the tune of many, many billions, while other industry segments are starting to see large spikes in financial losses.

A few choice travel stocks:

Given the charts above, its not difficult to understand why United, for example, has modified their change & refund policy 4 times over the past week.

Property Managers serve multiple masters

The rub for Property Managers is especially interesting to consider as their financial business models have more than one stakeholder, making refund decisions all the more difficult to navigate.

If you’re unfamiliar with how the business model traditionally works, Property Managers(PMs) essentially have two sets of customers.

Customer 1 is the Traveler who booked the stay.

Customer 2 is most commonly the home Owner who owns the home the PM is managing that the Traveler will stay in.

Effectively, PMs are caught between a rock and a hard-place when it comes to refund policies around Coronavirus related cancellations.

Do they give in to the heated threats from travelers wanting refunds even though their vacation destination hasn’t had a single case of COVID-19 reported yet?

Or do they stand their ground because the home-owner is insistent they don’t refund a single dime?

The traveler only cares about their own well being.

The homeowner only cares about their own financial well being.

No one seems to care about the Property Manager’s well being.

Additionally, the Property Manager understands it’s not as easy as picking one of the two masters to serve.

For example, if they give in to the home-owner since that relationship seems to be the longer-lasting engagement of the two and they don’t refund any attempted cancellations, it could put their ability to process credit cards at risk.

How you might ask?

Largely, a chargeback rate (which doesn’t consider any wins….) over 1% can result in penalties/probation from the credit card brands at minimum, and at worse, it could get their entire merchant account revoked thus harming their entire business — possibly irreparably — not just their relationship with a single homeowner or traveler.

The unfortunate reality of chargebacks

As business owners, we tend to be a very justice-oriented people, placing a lot of value on what seems “fair” and “right”. However, I’m not sure ‘fair’ and ‘right’ really exist when we’re dealing with chargebacks.

The unfortunate reality of chargebacks is that no one likely ever told you the truth about who is really responsible for managing disputed charges.

Spoiler alert: It’s not the credit card companies. It’s you, Mrs or Mr business owner.

Having recently spent time with an incredible payments consultant with a very historied purview of the payments industry as a whole, they were the first person whoever helped clearly communicate the void of responsibility I felt the credit card brands had always had in this process.

So here it is succinctly:

“Credit Card brands do not feel they are in the business of enforcement.”

^^ That is a very important statement and about a reality that we all need to understand.

Whether we agree that it should be that way or not is irrelevant. It’s the reality we are operating businesses within.

They (the card brands) largely believe enforcement can happen through other avenues, like small-claims court, for example, if you feel a traveler has defrauded you.

So in summary of how the card brands see the world:

Credit Card Brands = Platform to process money/transactions.

Business Owner = Enforcer of policies, by all legal means available.

So which master should a Property Manager serve?

What if I told you there was a super-secret, hidden, third master?

The third master in this equation is yourself.

You the property manager who has likely worked themselves nearly to death multiple times.

You the property manager who likely stepped out of another career in faith that this whole thing would work out never realizing how much incredible work it would be.

Few people understand (like actually understand) the operational hell that a management business really is to run well.

So as we consider the potential impact of COVID-19, as a Property manager there are of course a ton of potentially scary questions. Like, how will you make payroll? How will you make lease payments on limited reserves coming out of winter if you’re in a beach destination? Will there be a summer season this year?

All real, very valid questions with potentially daunting answers.

I feel strongly, however, that the best master to serve in this scenario, is your own brand.

How to run a great brand in the midst of chaos

Step One: Understand the rules you’re playing within.

If you refuse refunds, you will likely watch a slew of chargebacks flow in that you will likely lose, for example. Those are rough terms of engagement, but that doesn’t mean you have to roll-over and take it either.

A great brand can handle these tough scenarios by having a plan, which is step two.

Step Two: Make a plan.

Failing to plan is planning to fail. So let’s plan to succeed.

Here are some creative options we are already seeing the larger travel companies employ:

  • Cancel the stay but give credit towards a future stay within the next 12 months. If they agree, get them to sign something saying they agree. This may help bridge cash flow issues until this blows over.
  • Give a partial refund, but let them use the remaining balance towards a future stay.
  • Refund the rent but not the fees.
  • Refund the fees but not the rent. (If you can pull this off, it may help offset your owner’s frustration).
  • Credit the stay, and offer a 10% discount on whatever they rebook.
  • Credit the stay and offer an upsell for free.

The list of possible options is likely as long as the mind is creative, so sit down with a notepad, and come up with as many options as you can.

The more options you can put in front of a customer, the more likely you will be to have a better outcome.

Step Three: Set the expectations with your homeowners, now, not later.

Calmly, professionally, honestly, and kindly tell your homeowners what options you are presenting to customers, let them know that given the escalated nature of this situation you are not entertaining policies on an owner-by-owner basis. Thats too much focus on the wrong place.

You need your team focused on negotiating the best deals with the traveler you possibly can, and that requires you have the full arsenal of options to use with every single one.

This will likely upset some owners, but its important to emphasize that you’re in a partnership, and that while its unideal for all parties involved, you must take the reigns in order to do what you can to avoid a disaster scenario.

Step Four: Communicate kindly, but be real.

Empathy is still powerful in a lot of circles. It might be an affective strategy to tell both travelers and customers how rough this situation is for you too.

Perhaps, by being vulnerable (which is not a traditional business strategy), you may establish some level of common-ground for a mutually acceptable refund/credit/payout scenario to be negotiated.

Step Five: If all else fails, refund the stay.


That is a horrible outcome, but its going to have shorter-term consequences than if you refuse the refund and the transaction gets disputed.

Remember, even if you fight and win a chargeback, it still counts against your chargeback ratio. Thats right. Even if you won every chargeback that came in, if your chargeback ratio went over 1%, you could still lose your merchant license. Ouch.

The best way to win a chargeback is to prevent it.

Stay long-term focused in the midst of short-term pain

It can be so difficult in situations like this to really make level-headed decisions with your long-term future in mind. The ability to be objective is largely stripped from you.

Difficult as it may be, it is still necessary for you to ultimately ‘win’ and protect the brand you’ve worked so hard to build and get to this point.

That requires long-term decisions, even if you have to fight your own fear tooth-and-nail.

My recommendations are as follows:

  • Make the decisions an incredible brand who truly loves their customers would make. It won’t always be clear what those decisions are, but I believe customers will ultimately reward you.
  • Get other trusted peers involved. If you’re dealing with a tough decision, get someone on the phone you trust and let them give you their opinion. People are so willing to help when you ask for it.
  • All hands on deck. If you haven’t experienced fall-out from COVID yet, that doesn’t mean you won’t. I suggest you start pivoting to disaster mode now so you’re much better prepared to handle it when it comes.
  • Get rigorous around your own operational spending now. Even if this whole thing blows over a week from now, you will still be glad that you started saving your resources so you could better weather the storm.

In situations like these there often are not ‘right’ and ‘wrong’ answers. Often times there are only ‘the best decision you could make in the moment’.

Thats okay. Give it your best shot. Stay on top of whats happening. And let’s all bind together as a community of excellent professionals to help each other weather this storm.