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Free Rental Guide!
Learn what it takes to rent your vacation home and maximize your rental income.
Forbes last month featured an article characterizing TripAdvisor as Homeaway and Airbnb’s “most formidable and sophisticated competitor”, which “has been quietly gaining on both of them, and may just be on the verge of becoming the vacation rental business’s next 800-pound gorilla, especially when it comes to the luxury market.” Amy Hinote at VRM intel, however, notes that, “As any industry participant or observer will testify, nothing could be further from the truth.” The media misinformation offers a useful lesson for professional vacation rental managers (VRMs).
Here’s a summary of Amy Hinote’s key points:
- “The actual numbers tell a very different story than the Forbes article”, she writes, and shows a chart of vacation rental listing growth for 2011-2016 so you can see for yourself TripAdvisor’s lackluster performance compared to Homeaway and Airbnb. She adds, “Over the last two years, as a result of a lack of executive-level understanding of the industry, poor technology integration and an internal loss of key talent, TripAdvisor’s performance has fallen short for its suppliers in revenue, service and support.”
- “TripAdvisor’s FlipKey was the preferred channel for professional vacation rental managers up until 2014”, when the company attempted to integrate FlipKey into the TripAdvisor platform. It didn’t go so well and triggered a lot of complaints from vacation rental professionals, many of whom ended their relationship with TripAdvisor.
- HomeAway does not view TripAdvisor as a threat. Its stock value has decreased significantly and its “growth in the vacation rental sector is well below that of key industry players”.
Hinote offers an additional insight highly relevant for vacation rental managers: Homeaway, Airbnb, TripAdvisor, and Booking.com “are all moving forward by working off of market assumptions that have yet to be proven”, including:
- Extra fees charged to travelers or suppliers
- 24-hour cancellation policies they are pushing but suppliers often cannot withstand
- Lack of communications.
With respect to the latter point, Hinote writes (bold emphasis added), “All of these channels … are operating under the assumption that travelers book vacation homes in the same way that they book hotels. In actuality, data shows that vacation rental travelers have questions when booking a large vacation home with up to 12 bedrooms that necessitate a vehicle for communications between the homeowner/manager that these platforms are trying to eliminate.”
Our Take
VRM intel notes in an editorial: “Besides misleading the public, one problem with false reporting in the vacation rental industry is that investors, venture capitalists, analysts and startups are hungry for information about the industry and use these articles to make investment and development decisions. As a result, startup pitch decks are littered with bad information, and poor investment decisions are made.”
This is an important point, but the key takeaway for vacation rental managers, in our view, is this useful insight (bolded above) for how to compete with the dominant distribution channels.
We’ve posted before on the need for vacation rental managers to not become over-reliant on the giant distribution channels for bookings.
And in our post “What Every Vacation Rental Manager Needs to Know (But the OTAs Aren’t Confessing)”, we noted that, while the large online travel agencies are, as Hinote notes, trying to eliminate communications between renter and supplier, “Professional managers who do not give up control of their inventory to OTAs can benefit from higher conversion rates resulting from a better shopping experience and the ability to provide best rate guarantees when booking direct from a rental management company not encumbered by OTA agreements.”
We pointed out: “OTA middlemen sometimes appear not to understand that the property manager doesn’t just take a booking in exchange for a key and clean the property on departure. Vacation Rentals are not a commodity sale. This misperception minimalizes the services that are regularly performed by professional vacation rental companies to a function of caretaking, rather than recognizing them as managers of guest services and experiences that are essential to the vacation rental industry and which will become increasingly important if vacation rentals are to be recognized as a preferred accommodation type by travelers.
“Not only are OTAs overrated as ‘necessary’ for booking conversions, but according to the American Hotel & Lodging Association’s (AHLA) comprehensive study on distribution channels, OTAs do not create demand or raise overall occupancy. Rather, OTAs shift demand from one market or property to another, capturing a middleman fee in the process. This raises costs to the rental property managers. These costs are then passed to the property owner and, ultimately, to the consumer in the form of higher rental rates.”
We concluded, “Booking a property for a vacation is more than a real estate transaction or booking. If the vacation rental industry becomes reduced to the process of booking a property for an accommodation through a third-party OTA, professional vacation rental management companies will be providing a disservice to guests, property owners, our businesses, and the future of the industry.”
The Forbes article notes that vacation rental suppliers can compete with the hotel industry on price. Forbes cites a TripAdvisor survey showing that “67% of travelers planned to stay in a rental in 2016, up from 59% in 2015 and 52% in 2014. As for the reasons behind the growth, the same survey showed that affordability, location and amenities were travelers’ top three reasons to choose a rental.” For example, booking a two-bedroom home may be considerably cheaper than booking two hotel rooms.
That’s a benefit of vacation rentals that property managers can emphasize in their marketing, along with the fact that booking a vacation rental is not like booking a hotel. While TripAdvisor and the other distribution channels may be trying to eliminate communication between renters and suppliers, vacation rental managers can capitalize on the fact that travelers will want to be able to communicate with someone who actually knows the property. The uniqueness of each property, unlike hotel rooms, means that travelers will have questions only owners or property managers can answer for them.
VRMs must manage the OTA channels they choose to distribute inventory through. Rate parity between channels is on the horizon, but should never be agreed to in the terms of use between the manager and the channel. Don’t agree to provide channels all your supply or all your dates. Use channels to fill hard to sell dates, not your peak season inventory.
In addition, vacation rental managers can offer best-rate guarantees. As managers across the industry adopt this practice, travelers may use the OTAs to find a property, but then instead of booking through that channel turn to the supplier’s website to get a better rate by booking direct.
Don’t forget to leverage and promote your brand. The rental guest is your customer, not the OTAs’. Make them a loyal advocate of your brand, returning to book direct for the best value, customer service, and vacation experience.
Most importantly, require that you are the merchant of record! Most regulated states require that managers deposit rental payments into trust accounts in advance of arrival and occupancy of the rental property. Managers must be the merchant of record to ensure that owners are paid. Without credit card charge authorization and card numbers on file, you may have unpaid cancellation and damage charges and will have no recourse for charge backs.
And while the giant distribution channels may have enormous investment capital behind them and can pay to dominate search, local vacation rental management companies can still compete for organic traffic and maintain the advantage of being discoverable on the map in Google search results.
In sum, while use of OTAs may be a necessary component of vacation rental managers’ business, managers should be careful not to become over-reliant on them for bookings and leverage the key advantages they still maintain to compete for direct bookings, which are better for managers, owners, and—most critically—for renters. Use the channels to your benefit, and don’t fall victim to media misinformation and channel hype!
Jeremy loves the northern Michigan outdoors, and his hobbies include hiking, biking, exploring, and photography.
Alan R. Hammond is the founder and Managing Director of Holiday Vacation Rentals and Birchwood Property Management. He has served as a Director, Officer, and Treasurer of the Vacation Rental Managers Association (VRMA) and holds the Certificated Vacation Rental Manager (CVRM) designation. A recognized industry leader, Alan is featured in the book The Rental Game: Winning with a Professional Vacation Rental Team by Maureen Regan. Read more....
