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The 10 most common security issues in the STR industry

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As COVID-19 drags on, people are itching to travel again—but not to hotels. Instead, rural short-term rentals have seen a surge in demand as travelers book domestic stays. According to AirDNA, as of June 2020, U.S. vacation rental bookings were up 20%, compared to the same time last year. But not all short-term rentals have bounced back. Urban locations, similar to hotels, are much worse off than in 2019.

The current state of affairs has left property managers in a perplexing situation. Regardless of whether they’re experiencing a windfall or scraping the barrel, property managers are trying to recoup as much revenue as possible. But with revenue comes risk, especially in urban areas where demand is low and property managers are forced to accept guests they normally wouldn’t. Without the proper processes, these kinds of reservations can turn into security nightmares.

The best way to protect your business is to learn about the threats and how to avoid them. Here are 10 short-term rental security issues you should be aware of right now:

1. Chargebacks

Chargebacks are a real headache. Not only do they drain time and resources, but you get hit after the guest has stayed in the property. While some chargebacks may be warranted, the ones you want to look out for are when a fraudster tries to book your property using a stolen credit card. If successful, the fraudster gets a free stay and you end up paying a refund to the victim.

2. Parties

Parties have become an increasing concern since the start of the pandemic. With regulations causing closures and limited hours among bars and nightclubs, late-night parties have started to spill over into short-term rentals. Many of these parties are thrown by professional planners, going as far as booking a home and then charging guests cover to get in. These parties cause property damage and are major conduits for spreading COVID-19. Having that many people at a private residence breaks city bylaws and endangers your neighbours and building staff.

3. Property Damage

In the short-term rental industry, you have to be prepared for a certain amount of upkeep. Furniture gets old, floors get scuffed up and amenities break. But damage caused by parties and careless guests is vastly different from wear and tear. These kinds of expenses add up fast and typically aren’t included in your budget. Your business can't afford to funnel resources into frequent repairs.

4. Theft

Guests with sticky fingers can cost you a lot of money, especially if it’s a recurring problem. While it's unlikely a guest will walk out with your entire bedroom set, electronics like TVs are an easy grab. These kinds of items are expensive. You’ve already paid to furnish the property once, you don’t want to have to do it after every stay.

5. Credit Card Fraud

Criminals looking for a free stay may use stolen credit cards to book your property. Beyond causing chargebacks, a guest who infiltrates your property using a stolen card could lead to worse incidents, such as parties, damages and, of course, criminal activity. Once they're inside, there's nothing and no one to keep them accountable.

6. Identity Fraud

Occasionally, criminals will try to infiltrate your property using a fake ID. If they gain access, they may use it for illicit purposes, such as parties, selling drugs and, in extreme cases, sex trafficking. The use of fake IDs to book short-term rentals has become more of an issue recently as platforms such as Airbnb have upped the age restrictions for booking an entire home to 25.

7. Squatters

Since the start of the pandemic, many property managers have transitioned to offering longer stays as people look for temporary housing. While it’s convenient to have your property booked for a month straight, it does bring some risks. Due to the flippant nature of the rental market right now, once a guest settles into your property, they may be reluctant to leave, instead claiming tenant rights. These are squatters, and they can be difficult to get rid of, losing you revenue for every night they stay in your property.

8. Liability Issues

The well-being of your guests should always be a priority, but sometimes guests will try to take advantage of you. For instance, if a guest catches COVID while staying at your property, they may try to sue you. Even if there’s no basis for a lawsuit and it’s clear the guest is trying to make a quick buck, situations like these can tie up time and resources dealing with the case in court.

9. Mystery Guests

Every once in a while, you’ll come across a guest who’s trying to evade identification. They may book properties under a fake name on OTAs or they may have a friend book for them. These types are tough to catch. If it’s a friend booking, it will look like a legitimate transaction. But once they’re inside your property, the fraudster has zero accountability and you have no idea who they are or what their intention is. This is a common ploy among younger guests looking to throw a party.

10. Criminal Activity

Criminals have been known to book short-term rentals, using them as a base of operations for drug dealing, weapon smuggling and sex trafficking. While this type of incident is rare, it’s the most dangerous. Once criminals have infiltrated your property, you need to report the incident to the police. A criminal with the key or passcode to your property, will continue to enter whenever they want. Even if you change the locks, once a criminal is familiar with your process of operations, it becomes much easier for them to break into your properties. This puts you, your employees, your neighbours and your building staff at risk.

How to prevent common security issues

The best way to protect your business from security issues is to Know Your Guest. Similar to the concept of Know Your Customer (KYC) in the financial sector, Know Your Guest refers to the process of verifying the identity of your guests before they enter your property. This means you’ve vetted your guests to the point that you feel comfortable giving them access to your property and trust that they will respect your house rules and terms of service.

With thorough and proper guest screening, you can validate the guest’s ID and credit card, to make sure they're not fake or stolen, and find any discrepancies in their reservation. For example, what does a couple need a three-bedroom house for? Or why is a guest traveling for “business” on the weekend? If the details don’t make sense, follow up with the guest for clarification.

Beyond guest screening, to make sure you’re protected, purchase general liability insurance and personal property insurance. This will save you having to pay out of pocket for any major incidents. One small slip in security can cost you a lot of money. Make sure you trust the people booking your property.

Learn how to screen your guests