If you’re looking at taking direct bookings or just moving away from the high commission structures of Airbnb or booking.com or VRBO. Or all the main OTAs, then you’re going to need what they call a payment processor for your short-term rental. Most of us use Stripe, but what most of us don’t understand are all the little nuances and fees that can get tagged on.

To each and every transaction. And so this week we’re gonna break down everything you need to know about Stripe, when you need to use it, and also how you can save some serious money if you are connecting your Stripe through a PMS program, like Host Away or guesty. Stay tuned.

Let’s break that all down.

smart short term rental hosts are quietly saving an extra 30% on top of every single stripe transaction as long as they have their stripe connection set up the right way.

So let’s just start off with the basics. What exactly is Stripe? Well, Stripe is what we call a [00:01:00] payment processor. So they process credit card payments or payments in general, and they’re also a payment gateway. So they are the middleman between a service being charged, which would be your short term rental reservation, and the guest making that reservation.

 But most of us in the short term rental industry are using a different payment gateway to connect with Stripe, and that is our PMS program, our property management software program. So I’ll get to that in just a second.

But in general, Stripe is used more commonly than any other payment processor out there because, well, multiple reasons. Last year alone, they transacted more than $1.4 trillion, trillion with a T. So they are the biggest player in the space for quite a lot of reasons.

They make it easier. They have the protections there. They allow you to charge. Deposits. They help facilitate the whole process. And yes, they also integrate with most of the property management software platforms [00:02:00] that we’re using in the short term rental space.

So even though Stripe can act as the payment processor and the payment gateway, most often we’re using a different payment gateway. And what is a payment gateway? It’s basically the middleman between the processing. And the transaction. Most of us are using a property management software platform. We use Host Away.

With my team, we’ve managed over 50,000 guests, over 200 properties in a lot of different places. So we’ve learned a lot. And one thing I bet you didn’t know, well I’m gonna save that just for a second. It’s gonna save you a lot of money. So even though Stripe can act as a payment gateway, most of us don’t have that setup because that would mean that we need to figure out how to connect our property management software program directly to Stripe. And yes, Stripe does have all these tools for developers to make that a reality.

But that means you need a developer. You have to know some coding. You have to be able to connect with the back end of their software. 

So most of us take the easy road, [00:03:00] including our team, and we use a property management software platform. We personally use Hostway. And so Hostway is now acting as the payment gateway. They’re taking the credit card, but Stripe is processing it. So it’s the connection between our service and the actual processing.

Most of you know that Stripe charges a transaction fee, at least I hope you do, right? 2.9% plus an additional 30 cents per transaction. That is the most common, but your property management software platforms also adding a full additional percent on top of that, meaning that that transaction fee is now.

3.9% and the additional 30 cents per transaction. So 1% basically of all of your gross revenue from Stripe transactions, it’s getting charged by your property management software platform, and they like to call it a application fee. Essentially, this is their charge for doing all that backend programming to connect Stripe.[00:04:00] 

To your property management software platform to make it easy for you to take those direct bookings or easy for you to take bookings from Google or any sort of online travel agency, which requires you to handle your own payments.

Now, I think this is quite sneaky, right? Because if you look at your financial statements, you might see that there’s a. Processing fee per reservation, but you don’t see this application fee unless you actually go into Stripe, open up each individual transaction, and then scroll down and open up the payment fees.

It’s labeled in there.

So I’m gonna come back to that in just a couple minutes. An alternative option that you can use to help save on that application fee and drastically reduce these transaction costs. But before I do, I want to just talk about the proper way to set up a Stripe account because most of your PMS programs, whether you’re using hostfully or guesty or Host Way.

They all provide the option for you to create a Stripe account [00:05:00] directly through that platform, directly through your PMS software, but you don’t wanna do that because that basically limits that account directly to that property management software platform.

 Meaning that if you decided you wanted to switch your property management software in the future? Well, unfortunately you wouldn’t be able to. So it’s just as easy to set it up on Stripe and it doesn’t require a lot of time. You can literally set up an account in just a few minutes.

You log in, you provide some personal details, whether you’re setting up the account under a business or under your personal name. Then you’re going to link it to a bank account. You’re going to end up with a username and password, and that username and password is what you can link directly into your property management software.

And by doing it the stripe route first, that means that you have full flexibility with that account if you decide to change software programs in the future.

 And one other thing that most of you don’t really fully understand when you first get started with Stripe is [00:06:00] that there is the possibility for chargebacks, meaning Stripe might handle a payment on your behalf.

A guest stays at your property. Maybe there’s some sort of issue with it. The guest disputes it, and that’s what’s known as a chargeback, and there’s a right way to handle those. And there’s a wrong way to handle ’em. First of all, you need to know that they exist, right? And you need to make sure that you monitor that.

Now, this isn’t very common. I mean, this is a very, very small percentage, but when it happens, it, it really hurts, right? When someone actually stays at your property and then they dispute it, it really hurts. And so we want to make sure that we’re disputing it in the proper way. There is a dispute charge.

It’s not that big. It’s like $15. But basically there’s this process that you enter into directly with Stripe. So this isn’t gonna be within guest deer, within your property management software platform, but you need to go directly to Stripe and you’re, you’re going to provide evidence for that. So our team, we’ve been managing lots and lots of properties for a really long [00:07:00] time.

We’ve got this dialed in. This is the way that we handle it. First of all, we have an official invoice. It’s got Corley, our business name on there. Uh, we have our rental agreement signed, which we attach. It’s between the guests that reserved our property. We have all of the communications between that guest, including any sort of phone calls.

So all of our phone calls are recorded. They get turned in transcripts, and we use all of that for evidence as well. So even after managing 50,000 guests are probably much more than that now. We only have roughly a 30% success rate. Uh, now I know that doesn’t sound too great, but 

 remember the, these chargebacks aren’t that common, but when they do happen, you wanna make sure that you’re on top of it. There are deadlines. You wanna get all that information in as soon as possible, that’s gonna help boost your chances of winning that dispute.

A couple other quick notes on Stripe. It’s not available in the whole world, even [00:08:00] though they’ve done trillions of dollars in transactions. Uh, it is primarily a US based system. If you’re looking for something outside of the us. There are other options, of course you have PayPal. Go to your property management software’s marketplace, see what payment options are available, and hopefully you have one that integrates with an international payment processor.

Remember, they’re very likely will be exchange fees, uh, and some other little details that you want to take note of.

All right. without further ado, how do we save on this application fee, this additional 1% that our property management software platforms are charging us because they’re acting as is payment gateway. Well, we could simply choose another payment gateway. So our company has decided to go with charge automation, that 1% fee, they’ve dropped all the way down to 0.15%.

Remember, this is on the gross amount of that reservation. And so especially for you property managers out there, if you have [00:09:00] a larger portfolio, this really adds up 1% essentially on top of your whole stripe transactions or on top of all of your Stripe transactions. So again, we’re still using Stripe. We’re still using, in our case host away, but we have a different payment gateway. That’s the connection between our property management software and Stripe, the payment processor. So check out charge automation if you’re curious.

There are other options out there. I’m gonna break down just a few of them for you here. And you might be thinking if Stripe’s done 1.4 trillion in transactions in the last year, they’re the biggest player, why would I choose another payment processor? So we’re talking about payment processors here, and there are several reasons.

So one we already talked about, and that’s if you’re doing a lot of international transactions or if your properties outside of the US, stripe may not even work there. And so you’re gonna need to find an alternative. F. Another reason might be that 2.9% charge [00:10:00] that Stripe is charging Most hosts, now I say most hosts because they are negotiable.

If you’re doing over $250,000 a year in revenue directly with Stripe last time I checked anyways, then they are negotiable and they can work on those rates with you.

Another reason why you might decide to use a different payment processor is based on their payout schedules. So remember strip’s processing the payment, they’re collecting the money. You have a bank account routed to it, which it’s gonna send you, but they may have restrictions on there. Maybe they don’t pay you the same day.

Maybe they require that you have a reserve amount there. Let’s say a guest has. Or ask for a refund? Well, if they, if Stripes already paid the money out to you, then they don’t have any money left to refund the guest. So sometimes there will be requirements in terms of holding a balance in your Stripe account.

You also want to consider how easy it is to integrate that payment processor into your PMS platform. So Stripe, for [00:11:00] example, is really easy. It’s one of the biggest ones out there. And so like I said, you basically just put in some details.

You get a new username, password, and you plug that in. Other ones might not be so easy, they may charge you less of a transaction fee. They may have more protection in terms of chargebacks or fraud. They may. Cover international payments, but they might not integrate so easily. So I’ve got a few suggestions for you to check out if you were shopping around or you just want to get a little bit more detail before connecting a payment processor.

One option would be Braintree. One of the nice things about them is they actually integrate with PayPal as well. There’s another one called authorize.net, and from what I can tell, this one is integrated with most. PMS platforms already. So again, remember, go on your software, check that marketplace, or maybe they’ve labeled it, integrations.

Look for payment processors, see what options you have.

[00:12:00] One other option you might wanna check out would be ascent. And remember, you’re not tied to a payment processor, right? So if you decided that one of these other platforms was gonna work better for you, but then you uncover something like an application fee or some sort of hidden charge that you didn’t know up front, well, you could simply disconnect and you could connect a new one to it.

So it’s not like your payment processor needs to be permanent, but it is a really important piece of your short-term rental operation, right? I mean, this is the way that you’re going to collect payments for a platform that doesn’t collect those for you automatically.

 Airbnb, we know collects payments automatically. booking.com. Can they have their booking.com payments program, but it depends on where your property is, depends on how long you’ve been with them. VRBO also has both options. So they do have their own payment gateway set up, uh, and payment processing, but you can also use Stripe through them as well.

So I hope that gave you a little bit more insight. If you’re using a property management software platform [00:13:00] already, I highly encourage you to jump over to your Stripe account, look at those transaction fees, see if you have that application fee on there.

And if you do well, then check out another program like Charge Automation or one of these other recommendations. 

 I hope that gave you a little more insight and hope you have a fabulous week.