Finance

Advance payment

A portion of the total rental amount which the guest pays in advance of their stay.

Advertised price

The price per night that a rental manager or channel is showing to the traveler.

Amenity fee

An extra amount guests pay an owner or property complex in order to access certain amenities, such as tennis courts, golf, beach chairs, etc.

Bank transfer

Payment method whereby one party (i.e. the guest) sends money to the other (the host) directly via their bank account.

Booking fee

A fee that some agencies or websites charge guests for booking through them.

Break-even point

To break even on an investment property is when monthly rental income is enough to pay all the operating expenses and bills associated with ownership of the property.

Breakage deposit

Also known as damage deposit. This is a refundable sum of money (typically around $200 or 10% of the rental rate) which a property owner collects from their guests in addition to the total booking amount. The deposit guarantees that guests return the property in the same condition they found it. In case of damages, […]

Cancellation fee

Typically a sum of money the guest must pay if they cancel a reservation after the cancellation deadline has passed.

Channel fee

A commission that a third-party distributor charges a property owner for listing their vacation rental on their website.

Cleaning fee

A one-time fee hosts charge guests to cover the cost of cleaning their property after guest departure. Read more

Custom fees

Any additional fee that is unique to a property. For example, most properties will have a cleaning fee, but only those with hot tubs can charge a “hot tub cleaning fee”.

Damage deposit

Sometimes called a breakage deposit or security deposit. This is a refundable sum of money (typically around $200 or 10% of the rental rate) which a property owner collects from their guests in addition to the total booking amount. The deposit guarantees that guests return the property in the same condition they found it. In case of damages, the property owner will make appropriate deductions from the damage deposit.

Damage protection insurance

A product that the traveler purchases, usually when paying for their booking. This one-off insurance cost is around $50 to $100 per stay and is bought instead of leaving a damage deposit.

Damage waiver fee

A damage waiver fee is a prepaid, non-refundable fee included in a rental home’s total price that covers accidental damages to your property during the guests’ stay. Read more

Default rate

The standard base rate for your property that will always be applied, unless there is a seasonal or weekend rate.

Down payment

Partial payment guest makes at the time of booking in order to secure a reservation, usually a percentage of the total amount.

Equity

A homeowner’s financial interest in a property. Equity is the difference between the fair market value of the property and the amount that is still owed on its mortgage.

Escrow account

An account -operated by a trusted third party- which contains and holds payments between two or more parties during a transaction.

Exit strategies

A predetermined plan that takes into account everybody’s interest in a joint ownership arrangement. An exit strategy gives a business owner a way to reduce or liquidate their stake in a business and, if it’s successful, make a substantial profit.

Expenses

Offset (an item of expenditure) as an expense against taxable income. For vacation rentals, deductible expenses can include repairs, maintenance, cleaning, insurance, marketing costs, accounting fees, property supplies, vacant rental property and depreciation to name a few. Read more

Fair Market Value (FMV)

An estimate of the market value of the property that is based on what a knowledgeable, willing, and unpressured buyer would likely pay to a seller in the market.

Fixed-rate/fixed-term mortgage

Fixed-rate mortgages have an interest rate that stays the same for an agreed period of time.

FSBO (For Sale By Owner)

When a homeowner chooses to sell a home by himself or herself rather than go through a listing agent or company.

Global Distribution System (GDS)

A computerized network system owned or operated by a company that enables transactions between travel industry service providers, such as airlines and accommodation.

Gross Booking Revenue

The total retail value of transactions, recorded at the time of booking. Bookings include the total price due including taxes, fees and other charges, and are generally reduced for cancellations and refunds.

Guest fee

Additional guest charges beyond the initial price. For example, a guest fee can refer to a service fee, cleaning fee, pet fee or extra person fees.

Installments

Breaking up payments into equal, partial payments.

Investment property loan

A loan that funds the construction of a property to be sold or leased out.

Invoice

A document which helps guests keep track of their expenses and can be also used as proof of payment. Read more

LIBOR (London Interbank Offered Rate)

A benchmark interest index used for setting the rates of various adjustable-rate financial instruments.

Markup

A price increase on certain channels, typically to guarantee revenue profit on third-party sites which charge commissions.

Merchant of record

The entity or party that is authorized to charge the guest’s credit card for the booking.

Net rate

The total amount that a property owner receives from a distribution channel (such as Vrbo or HomeAway) after the commission has been deducted.

Non-refundable rates

Typically lower rates that have special booking conditions. For example, guests will still have to pay the full price if they cancel, make changes or don’t show up. In other words, they will not receive a refund in the event of cancellation.

Online payment service

Fast and convenient web-based payment services, e.g. PayPal, that allow automatic money transfers over the internet, or directly from a credit card and/or personal checking account.

Owner revenue

The amount of money the property owner receives after the vacation rental manager takes their commission from the total revenue.

Payment Gateway

A payment gateway is a service that allows merchants to accept payments made by credit card. The term refers to both the card-reader devices we see in retail stores and the payment processing portals used in online stores. Read more

Payment method

The way by which a guest makes a payment to the host.

Payment processor

Also known as “payment gateway”. It’s a tool that collects and processes payments.

Payment scheduling

Splitting booking amounts into two or three payments, instead of charging 100% at the time of booking. Subsequent payments will be charged from the guest’s credit card automatically.

PCI compliance

Payment Card Industry compliance is a set of standards and guidelines for companies to manage and secure credit card related personal data during and after financial transactions. PCI compliance is required by all card brands.

Per Person Sharing

Per person sharing is the price each guest pays when sharing a room. PPS ensures that the space is not taken advantage of or overcrowded with more guests than is approved by the owner. Read more

Pet fee and deposit

A sum of money beyond the total rental rate which covers the stay of any pet and costs associated with it (i.e. cleaning). Pet fees are non-refundable, but pet deposits should be refunded if no damage has incurred during the stay.

Pool heating fee

An extra service charge vacation rental owners and property managers can charge to guests who wish to heat the property pool or hot tub.

Portfolio financing

The act of funding a property by using one’s portfolio or a part of it as collateral.

Price per guest

Pricing strategy where rates differ depending on the number of guests staying.

Pricing structures

A system of offering different rental rates for different rental seasons.

Property management cost

The total amount of expenses involved in managing a rental property.

Quote

The price for a reservation offered to a potential guest and customer.

Rack rate

The official or advertised price of a room or property per night, on which a discount is usually negotiable.

Reservation deposit

An amount of money (usually equivalent to one night’s stay) collected at the time of booking which validates the rental contract. The purpose of the advance deposit is to guarantee a reservation, and the full amount is applied to the guest’s bill upon check-out.

Return On Investment (ROI)

A performance measure used to evaluate the efficiency of an investment (or compare the efficiency of a number of different investments). To calculate the ROI of a vacation rental, the benefit (or return) of the property is divided by the cost of the property.

Return On Revenue (ROR)

A performance measure used to evaluate the profitability of the company based on the amount of revenue generated. It compares the amount of net income generated for each dollar of revenue.

Revenue

Also known as “income”. It’s the total amount of money generated.

Revenue management

The use of analytics to track a vacation rental (or group of rentals) and their performance over time. This helps the owner or distribution channel to maximize revenue and growth.

RevPAR

RevPAR is a measurement made to calculate the overall performance of your rental properties using the metric system. It works to assess the availability of rentals and the average rate at which they are filled. Read more

Sales tax

Most states in the US require people who rent out their vacation homes to charge and collect state sales or lodging taxes on the income they earn from these short-term rentals. These taxes are collected by the state, county and/or city, and like all sales taxes, they are paid by the guest, not the host.

Security deposit

See damage deposit.

Sweat equity

Contribution to a venture in labor rather than funding.

Traveler fee

See guest fee.

VRM commission

A fee that is charged by a vacation rental management company to the owner of the rental. This is usually a percentage of the rental revenue rather than a specific amount.

Weekend pricing

Pricing strategy where you add different rates per night for Thursdays, Fridays, and Saturdays.

Wire transfer

Also known as "bank transfer". Payment method whereby one party (i.e. the guest) sends money to the other (the host) directly via their bank account.

Yield management

Yield management is the process of making frequent adjustments in the price of a product in response to specific market factors, such as demand or competition. Businesses use yield management in the travel industry as a pricing strategy. Read more