The Ultimate Stripe Guide for Vacation Rental Hosts

If you're looking at taking direct bookings or just moving away from the high commission structures of Airbnb or Booking.com or VBO, 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 going to 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 Hostaway or Guestie. 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 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. 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 that we're using in the short-term rental space. So even though Stripe can act as a 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 Hostaway 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 going to save that just for a second. That's going to 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 including our team and we use a property management software platform. We personally use Hostaway and so Hostaway 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 platform is 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 is 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 back-end programming to connect Stripe 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 going to 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, they all provide the option for you to create a Stripe account directly through that platform. But you don't want to 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, you wouldn't be able to. 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 that there is the possibility for chargebacks. 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. Now, this isn't very common. I mean, this is a very, very small percentage, but when it happens,

it really hurts, right? 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 going to be within guest or within your property management software platform, but you need to go directly to Stripe. You're going to provide evidence for that. Our team, we've been managing lots and lots of properties for a really long 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 Cororsley, our business name on there. 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, we only

have roughly a 30% success rate. Now, I know that doesn't sound too great, but remember these chargebacks aren't that common, but when they do happen, you want to make sure that you're on top of it. There are deadlines. You want to get all that information in as soon as possible. That's going to help boost your chances of winning that dispute. Couple other quick notes on Stripe. It's not available in the whole world, even though they've done trillions of dollars in transactions. It is primarily a USbased

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 softwares marketplace. See what payment options are available and hopefully you have one that integrates with an international payment processor. Remember, there likely will be exchange fees 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 this 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.15%. Remember, this is on the gross amount of that reservation. And so, especially for you property managers out there, if you have a larger portfolio, this really adds up 1% essentially on top of your whole Stripe transaction. So, again, we're still using Stripe. We're still using, in our case, Hostaway, 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 going to 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, and that's if you're doing a lot of international transactions

or if your propertyy's outside of the US, Stripe may not even work there. And so, you're going to need to find an alternative. Another reason might be that 2.9% charge 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, Stripe's processing the payment. They're collecting the money. You have a bank account routed to it, which it's going to 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 asked for a refund. If Stripe's 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. Stripe, for 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 and 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 Brainree. 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, go on your

software, check that marketplace, or maybe they've labeled it integrations. Look for payment processors, see what options you have. One other option you might want to 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 going to 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 terminal operation. 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. VBO also has both options. So, they do have their own payment

gateway setup 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 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 I

hope you have a fabulous week.