Listing Short-Term Property Rentals on Expedia vs. Listing on Airbnb

December 7, 2018

Blog #3 (1)

March 1, 2017


Expedia is a global brand that almost every traveller has interacted with at one point or another. Founded in 1996 as a division of Microsoft, it has a market cap north of $5 billion. The company controls a ginormous amount of global booking brands including, TripAdvisor, HotWire,, Orbitz, Trivago and HomeAway, which it purchased in 2015 for $3.9 billion. Expedia also operates one of the largest affiliate networks in the world, with over 65,000 partners. For short-term rental operators who are set up on Airbnb, VRBO or, Expedia can offer additional exposure and an untapped market. As a long-established travel company, it has the potential to reach different demographics and more traditional clients. But be warned: if you're listing and operating on the platform, Expedia can be daunting and overwhelming. And in terms of payment processing, it can be downright complex. 


So, let's start by comparing how Expedia handles payments vs. how Airbnb does it. With Airbnb, a client browses through listings, goes through the photos and host reviews, then decides to make the booking. As far as the guest is concerned, they're always interacting with Airbnb, the facilitator for the transaction. They enter their credit card into the platform directly and Airbnb makes sure to process the payment and collect the money at the time of booking. On the guest's credit card statement, it will always show as "AIRBNB 14158005959 GBR", removing any confusion as to what the transaction may have been. For the host, who is playing the service provider, it really simplifies the game. There's no need to worry about credit card fraud or chargebacks because Airbnb is responsible for facilitating the transaction and paying out hosts. The commission is 3%, which is slightly higher than what other payment processors are charging (Stripe 2.7%, Square 2.5%, Moneris 2%, etc.), but the simplicity makes it well worth it. The host gets paid to their preferred payout option (direct deposit or PayPal) automatically 24 hours after the guest has checked in.


With Expedia, the process is much more complicated. Expedia offers the guest two payment options: "pay now" or "pay later". With the "pay now" option, the guest will be charged directly by Expedia, which will validate the credit card, collect the payment and send the booking confirmation to the hotel. For the hotel, it's slightly different than most traditional payment processors because the payment comes through as "Expedia Collect". The hotel will need to bill Expedia directly for the guest's stay by charging the "Expedia VirtualCard (EVC)". When billing Expedia for an "Expedia Collect" reservation, Expedia will make the "Expedia VirtualCard (EVC)" visible to the hotel on the day of check-in, so that the hotel can charge the amount of the reservation through its own credit card processing system. The amount available on the virtual card will be the total after subtracting all of Expedia commission and booking fees. Meaning you'll bill for the amount of money the hotel is owed. The hotel will still eat up the charge of the credit card processing fee as agreed with the provider. As far as the guest is concerned, the transaction on their credit card statement will show up as "Expedia", removing any doubt as to which vendor it might be, therefore reducing the possibility for chargebacks. 


The other Expedia payment option for guests is to "Pay at Hotel". At the time of booking, the guest will provide their credit card info to Expedia, but they will not be charged. Expedia will send a reservation confirmation to the hotel and block those dates from the availability. On the hotel side, this presents a plethora of challenges. First, the operator needs to log in through the Expedia Partner Central and find the reservation to confirm that all the credit card details are there and complete (sometimes it comes without the CVC code). The second step for the hotel is to check the legitimacy of the credit card by running it on their terminal. But how much should they charge? That's defined by the terms set up by the operator on their Expedia listing. Typically, it's for the deposit amount, between 10-30% of the total reservation cost. The remainder of the payment should be processed at the time of check-in or a few days prior. To the guest, the transaction on their statement will be displayed as the business registration provided to the credit card processor. So, if "Hotel XYZ" is operating under a different business name such as "XYZ Holdings", it can cause confusion to the guest and result in a chargeback. In the case the card is invalid, the hotel will need to hit "mark card as invalid," which will make a request to the guest to provide a new form of payment. Within 72 hours of the reservation confirmation, the hotel can choose to decline the reservation completely, thereby cancelling it.


How does the hotel pay Expedia their commission and fees you ask? Expedia conveniently sets the hotel up with direct debit (seriously, there's an Expedia employee who does this full-time), and they withdraw the money directly from the hotel's bank account on the 5th of every month, invoicing for the previous month. In the case of a cancellation or modification by the guest, it's up to the hotel to inform Expedia of the change or cancellation by "reconciling" the reservation manually, otherwise, the hotel will be billed!


What does all of this mean for short-term rental operators listing on Expedia? We need to have a full understanding of how these intricate payment systems work because, unlike Airbnb, Expedia needs to provide the hotel with the cardholder data. This means they're saving that info on their servers, making Expedia a prime target for attackers to breach. Because of this security issue, Expedia is bound to be "PCI Compliant", following the "Payment Card Industry Data Security Standard (PCI DSS)". So with the Hotel Collect option, Expedia exposes the guest's credit card to the hotel for only three days after booking, so it's up to the hotel to validate the card, process the deposit and either keep the credit card on file using their own PCI Compliant system, charge 100% of payment at the time of booking, or rely on the guest to provide a new valid card at the time of check-in. 


Hotel Collect payment poses tremendous risks to short-term rental businesses. Since the hotel is responsible for running the credit card, it's important to also check the guest's ID to reduce the risk of credit card fraud. As a safeguard, at the time of check-in, the operator should process the damage deposit and any additional fees (i.e. cleaning or parking fees). Unfortunately, few short-term rental operators have the ability to meet their guests in person to charge credit cards at check-in. And if you're operating at scale, payments can easily get out of hand. There's the risk of missing a payment, or worst, credit card fraud and a damaged unit.


So how does a short-term rental operator process Expedia payment like a pro? First and foremost, you must take precautions to reduce fraudulent reservations. Fraudsters usually try to book same- or next-day reservations, so removing the ability to book those will reduce the number of scams. For best practices, we recommend that you set up your listing to accept bookings at minimum three days in advance. Next, change your payment terms to "100% collected at the time of booking". The safety advantage here is that you're running the guest's credit card only once, therefore the hotel does not need to be PCI Compliant or pay for any such software. In the case of a chargeback from the payer due to stolen cards, it leaves enough time for the operator to catch on. Also, not only does the operator save on processing time (running the card twice wastes time), but they can guarantee payment for their inventory in advance, removing any uncertainty or risk of losing revenue. You'll be paid prior to providing the service—who doesn't like to get paid right away?


If we want a streamlined automated short-term rental operation, we're left with only one issue: charge the damage deposit and incidentals prior to check-in. But this will be covered in a separate blog post, so stay tuned. 


Update: You can now set up all properties to enforce Expedia Collect payments!