I have a short term rental condo in Maui and I was recently doing the financial analysis for the property for tax purposes. When I asked the property management company for the financial statements, I found that there was a “Reservation Fee” that the property management company in the amount of $50 per stay. I wasn’t aware of this reservation fee and I felt that it was unethical to charge the client this amount without my knowledge and more importantly, I feel that I should also be entitled to this fee in some fashion. I checked my contract agreement and I did not find any mention of this reservation fee. I was even thinking of going to a lawyer to review the situation to see if there are grounds for financial claims. I know they are doing this for all of the units they manage 500+ units so I even went as far as to imagine this being a class-action law suit against this company. Does anyone have experience or thoughts on this?
I am a real estate broker in Maui and am very familiar with short term rental management companies as my wife runs one. The $50 "reservation fee" is extremely common and as far as I know all companies charge it. This usually covers credit card processing and the cost of the reservation system the manager uses. This should be passed on to the owner as revenue.
With that being said this should have absolutely been disclosed to you in the contract and breakdown of fees. You mentioned you are with a large management company so I am assuming you are with Destination Resorts, Aston, or Outrigger. If that is the case it would be wise to explore other management options as there are many alternatives that charge a 25% management fee and will bring you a higher Gross Rental Income for your property, which will improve your bottom line tremendously.
If you have any questions I am more than happy to discuss in further detail with you. Feel free to give me a call or shoot me an email anytime. Mahalo.
Patrick ,to be clear, the management company charges 23% on top of this newly found "reservation fee". They charge this fee to each booking for every client. Most units average around 5-6 bookings per month so that means they are getting about $250 - $300 per month per unit in the "reservation fee" alone. They also pass the credit card use penalty to the owner instead of eating it themselves.
In your estimation, since this was not disclosed to me in the contract, do I have grounds to sue(along with the other owners)?
Yong- I am sorry that you have had to go through this.
I just wanted to let you know that there are other managers I know in the area that have been much more transparent in their pricing (based on feedback I have received from the Hawaii vacation rental owners that I have worked with in the past).
If you are ever interested in exploring other management options on the island, send me a message or give me a ring, and I would be happy to see if I could make an appropriate introduction.
Andrew, thanks for offering. I understand that 23% pretty common for short term vacation rentals, correct? Do you know what your property management company is charging?
At the moment, I wanted to see if this is common practice and/or if I have some kind of legal claim here. Based on the responses, I'll likely look for another property management company.
They charge a 25% fee on Gross Rental Income. The "Reservation Fee" is paid by the guest and becomes part of your gross revenue. The manager eates the processing fee. The manager gets their 25% cut of the gross revenue including booking fees. I would be happy to chat with you further about it if you'd like.
You would have grounds to sue in my opinion but i'm not sure it'd be worth it in the end, as you should have been receiving these reservation fees as revenue all along.
Don't sue; it's not worth the hassle. Terminate your contract and find another firm.
AA Oceanfront in Kihei charges 15% of gross rentals with no check-in fee. Property management companies are a dime a dozen and there's another brokerage out there that would appreciate your business.
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