Listing sites answer to stubborn managers & instant booking

A 10 minute read about the vacation rental industry’s latest acquisitions (Airbnb, HomeAway, Expedia, Accor) and what this means for owners & managers.

It’s some while since we posted on the industry at large as we have been busy crowdfunding and launching new partnerships. After a period of quiet, the sector has woken up again with some interesting news.

It’s nothing new that listing sites are removing direct contact

The Expedia acquisition of HomeAway created a lot of noise and pain across the industry in 2016, but moved on regardless, as anticipated and is now old news but still a strategy of loathing on many forums and Facebook groups. Without revisiting this in any detail, the overarching understanding at asset level management and ownership is that the major corporations have closed or are closing the door on direct connections and communication. We have written about this before.

Jeremey and Alan Hammonds excellent article reviews the situation and the impact this is having. It’s well worth a read!

No matter how this happened, we have all been wondering how the big 5 will attempt to enter the high value, seasonal booking market with its complexity and natural desire to avoid charges and lack of guest vetting. To date it has struggled and no end of modelling has served to bring it to heel!

Which is better? Lot’s of short-term stays or one large booking?

Airbnb, copied by HomeAway for its guest service fees, knows that the lower the value, the shorter the stay, the more city-centric the destination, the higher the number of bookings. But ask yourself which is better:

10 city breaks for 2 nights each at $50 per night ($1000) and say 10% overall income ($100) or 1 villa booking for $5,000 at 20% ($1000)? The villa is likely to well managed and there is only one transaction, one person to deal with and a brand delivery opportunity if luxury villas can be supplied en-masse.

Why have listing sites struggled to convert everyone to instant booking?

This is similar to getting all HomeAway owners to be on instant booking. It hasn’t happened, 24 hours or more is still needed. Why is this?

Onboarding inventory so that it is all in real time, with automated checkout has been hard.
Mediate the communication, which is even harder when people are flying distances for longer, spending more money and want detail and extra services. Guests and owner or managers get frustrated.
Owners and manager use multiple uncoordinated channels, from OTA’s to independent specialist travel agents, to direct marketing, PPC etc. Multiple enquiries can occur and the best value proposition for the manager or owner will generally be accommodated.
Seasonal destinations are easier to directly market and are family orientated so more data and information needs to be available. Channel managed data and OTA’s are simply not good enough.

In the short term, brute force just hasn’t worked on these lucrative businesses. The leakage is too great and the type of guest is a different proposition.

What’s their answer? Buy into the business…

If you can’t force the change, then buy into existing models and develop these through knowledge, reach and financial muscle.

As we all know, Airbnb recently splashed out and bought LuxuryRetreats.com for $200m. That’s 4000 properties (not all exclusive) at $50,000 per property! Compare that to Expedia, buying HomeAway for circa $3200 per property! Which market is perceived as better value even though many of the LR properties are on HomeAway.

LR does not have organic brand power like Booking.com, its PPC and reach via other channels, referrers and agents and is primary element of the booking chain. Airbnb brings brand opportunity. Their traffic maybe 20% of Booking.com’s but it’s still a major player (similarweb.com).

As of today, almost 25% of all their properties are on HomeAway (724) and the booking values can be very high:

The booking values can reach: $20,000+ per night and HomeAway are only making $399 on each. Nowhere near as much as say one week or $14000 (10% commission).

Accor hotels and Travelkeys is a similar proposition, except one understands hospitality and the other e-commerce! The latter can bring “on the ground” opportunities, the former will no doubt attempt to push instant bookings as soon as possible across its network under an Airbnb Lux brand. It’s not just about the brand experience, it’s about the income opportunity. It is a different sales proposition so expect some new Airbnb brand experience visions.

Accor is very active in this market and has taken further positions in the market: 49% in Squarebreak and 30% in Oasis Collection.

The luxury market is all about brands. Does Airbnb have a luxury brand?

The luxury market is as much about brand as online business and this is where the hotel chains can gain the upper hand over e-commerce businesses.

Airbnb still has the shared room, “stay like a local” image it firmly established as its key marketing message. It’s not a high-end, week away, chef included, and car from the airport brand!

We also still have high street travel agents in this instant booking age, why? Trust, knowledge and comeback is important in this sector and this is managed not simply by images and vacuous on-site messages but by people with offices, faces and on the ground organisations locally.

What will managers do?

If you manage a small portfolio of luxury villas, for example, you have been used to conversations & probably excellent conversions thanks to a personal service and communication, and you will manage the business in detail at a local level.

If your business is respected locally, well managed and lucrative, expect invitations to these growing brands to be a “partner”. This comes with growing demands to ensure they are the priority business channel and your service is second to none.

Beware, however, as each of these sites want instant bookings, it reduces leakage, leechage, reduces admin and increases more cost effective revenue opportunities for them. To be a partner, you may need to be very compliant.

If your business is a less luxurious, middle of the road portfolio, then you will need to compete at a higher level online as there will be an increased spend on luxury marketing with middle of the road border/edge case properties at special prices.

The challenge of all managers/owners who also want and need control is exposure and this lies at the end of every conversation. Guests are generally oblivious to the machinations of booking. Liabilities, process, support lines, knowledge of who they are dealing with and the best way to save money is far beyond many.

What’s next?

Being a manager or owner who is exclusive to any large, impersonal corporation is very dangerous. Having all eggs in one basket, that is growing with eggs from other hen houses, does not make sense.

Oversupply is absolutely vital to OTA’s, which is why so many owners are now seeing little interest on their listings and the best booking properties (price-wise, reviews, fast response times, images information) probably constitute 70% of all bookings as they are pushed into view.

“Guestucation” (guest education) and online tools

This is where the next wave of technology will appear as the Unicorns and Antelopes focus on hoovering up the second string of brands, the first was the traditional listing sites. Metasearch engines do this to a certain extent but their inventory is also controlled by the corporate suppliers, so nothing more than an OTA in disguise. All competing for Google favours and brand awareness. (2014 Article – A cry from the Wildnerness)

A world where comparative and direct transactions, with guaranteed trust and insurances built in, is surely the next disruptor.