VR OWNERS AND MANAGERS: A RENTAL COLLECTIVE AT WORK ACROSS THE WORLD
Not so long ago we were told, yes told, that we would all be on performance and commission booking systems soon and subscriptions, although present, would need to be part of the Book Now process. Guests want it, end of story! Get in line.
The forums globally from HomeAway to Yahoo to LinkedIn were alive with speculation and argued one way and another and still do. City destinations and resorts often come down in favor of this trend, but regional owners and managers in traditional holiday destinations are often the ones who are vocal and are objecting. Disconnects, higher fees, short cancellation policies, delayed payments, not much to be thrilled about really!
I am pretty sure we all know that this drive is not just about what the customer wants however. Why would there be thousands of pages of analyst and shareholder reports detailing the opportunity with upsides. The numbers are quite simply bigger at 100% of the market on commission bookings. Add in the extras and money retention and it is simply driven by the bottom line.
This push started with raising tariffs and continued with a proactive PR campaign based on the statement that “95% of guests want to Book Online”. This is a broad statement to make in an industry with several million independent businesses where it is hard to collate information, take polls and understand the trends. As managers we suffer many of the same issues but on a larger scale. There is light in the tunnel however as you will see later below.
In the manager world, I know some of those companies with very large inventories have seen performance bookings as a way of diluting out the competition in listings and have the technology to do it, whilst investing heavily in alternative marketing strategies. Many large managers (think “Interhome” with over 30,000 on HomeAway) have aggregated thousands of listings from other suppliers and simply re-marketed them. How hard is it to be seen in this situation as a lone sole subscriber? The answer is, very hard unless you pay a lot more! Now imagine these properties not booking and generating no income. When that happens the marketplace suffers as well!
There has been little in the way of facts of course and this can only be gleaned from analysis and research, not just speculation. The analysts who have spent so long multiplying 365 nights by a rental value and taking 10% are seeing things in a different light these days – vacation rentals are not city hotels. A report recently published by EVERCORE ISI paints a slightly darker picture for the marketplaces in its drive towards monetization.
This report published on April 6th should be of interest to all owners and managers of vacation rentals and is well worth a read. It predicts a growing resilience to the marketplaces squeezing more profits from the booking business! The online hyperbole by a number of the PR companies is, as predicted, somewhat unfounded! Much of what AVROA members stand for is not surprisingly also shared by hundreds of thousands or others!
One of the most interesting elements of Evercore’s analysis is the following, I quote:
“Priceline and TripAdvisor appear well positioned to claim a piece of the growing vacation rental market, with a few caveats. The advantage they each possess is that they can deliver exceeding levels of demand and performance as the industry itself moves from a subscription-based model to one that is paid for on the basis of cost-per-action.
However, performance (as measured by conversions) is still a function of selection, where localized supply-demand characteristics favor more scaled VR players, such as HomeAway and Airbnb. Second, ~2/3rds of the vacation rental market tends to be FRBO (“For Rent by Owner”) which is an inherently tougher market to penetrate where technology tends to be lacking and owners are more loathe to tripping commission fees as they essentially manage the front desk.”
Skift.com who commented on this report has rather humorously summarized it by saying:
“those pesky vacation rental owners who are loathe to start paying commissions and often prefer to deal with guests directly and offline.”
As you can see, the owners who colloquially run their own front desks are not playing ball as easily as predicted.
This means there is essentially a wave of resilience to the monetization of a booking by the marketplace that is much stronger, in fact, than what hotels faced and although not a cohesive wall of organized resistance, it is a common thread of discontent.
There are many forces at work to deliver this model: they are guest influence with endless security and best price messages; they are booking management systems that want you to channel to commission marketplaces (they get a cut) and payment providers who may offer better deals. This is far from over but does provide time for everybody to address their own positions and create strategies independently or together.
As a manager we have to represent hundreds of owners which is no easy task, but we love inquiries and speaking to guests. Unfortunately we have to compete with the Goliaths as well and the marketplace pressures. Our methods are relevant to size but the ethos is the same. Some of our non-exclusive owners have arrived on our doorstep due to the changes and a lack of market awareness. We know the challenges an owner may face daily in what is becoming an overcrowded market with advice and pressure from all quarters.
Perhaps it’s time to take a leaf out of the marketplace books and adopt the same messages and approach. Frictionless websites with direct inquiries/contact and messages that enforce going direct with an owner (or manager come to that) gives you a) peace of mind b) the best price c) the owners contact details d) the most local knowledge e) that the property actually exists. Add in a secure payment method and the difference is close to zero.
Add in the fact that there is ample room for listing websites as can be seen from the reports and the fact that the power is in the inventory controllers hands and what goes around may well come around again!
We may not all be in the same place, but we are a rental collective at work across the world!
Discovery Holiday Homes
The views and opinions expressed in “In My Opinion” articles are those of the author(s) and do not imply endorsement by The American Vacation Rental Owners’ Association.
If you have an opinion you would like to share submit your article to firstname.lastname@example.org
To learn more about AVROA visit: www.avroa.org