I have spent more than a decade in the hospitality industry learning and sharing how to capture more direct bookings with lower acquisition costs. Although much has changed in that time, one thing that has stayed consistent is the effectiveness of online travel agencies (OTAs). Even 12 years ago, I used OTAs to augment my business. Using these channels allowed me to sell six to eight weeks during the summer and over the Christmas holiday period. Even the days adjacent to the sold-out periods were a great time to grab new business, despite commissions of 25 percent at that time.
Many things have changed in the past decade but probably nothing more significant than the cost of running a vacation rental company. The arrival of “Big Box” companies with low transactional fees has limited what the industry can charge in commissions. If that weren’t bad enough, there’s been an explosion of property management companies emerging based on the idea that property management is an “easy” business to start. This has resulted in pay-per-click (PPC) costs skyrocketing by as much as 200 percent in some markets, making it difficult to be a profitable property manager.
With PPC costs seemingly out of control, you might wonder why I continue to support investing in OTAs.
The answer is simple. I believe the cost to acquire a new guest using PPC has reached levels that mirror the cost to capture a guest via an OTA. The recent third-quarter earnings calls with Expedia and Booking.com confirmed this. They have the same problem that property managers have, but there is a clear difference—their budget is bigger. One vacation rental manager recently told me her PPC costs had increased 190 percent over an 18-month period. I remember a time when I would barely spend $1,000 per month on PPC. Today that wouldn’t even make a small dent in the available spend for that area.
But not all OTAs are the same. Let’s get into the costs of the different OTAs.
Vacation Rental Sites
Vacation rental sites, such as Vrbo and HomeAway, have several types of fee options. With commissions varying between 8 and 12 percent, these sites are less expensive than the hotel-style OTAs.
One thing to keep in mind is Vrbo and HomeAway attract and market to guests already selecting a vacation rental accommodation. These are not new guests to the market or the category. Also, branding the property manager isn’t typically allowed. This category has a much smaller billboard effect (more on that to follow).
Hotel-style OTAs typically charge commissions between 15 and 18 percent. Although quite a bit more from the outset, this investment is geared toward new guests because these channels are actually converting hotel guests into vacation rental guests. They are doing inline advertising in hotel searches to sell those travelers on vacation rentals. These are the new guests you’re looking for.
And then there’s Airbnb. I believe their brand has become so strong it now falls into the same category as hotel-style OTAs with regard to driving new business. And the real kicker? Airbnb guests are loyal to Airbnb. Capturing these guests once and then owning them (the harder part) is critical. However, because the cost to obtain these bookings is lower, owning the guest might not be as important as it is with hotel-style OTAs.
how does one hack these channels to get the most out of them?
1) Remember: Listings Are Ads
Pay attention to what the ad says (aka, the title/headline) and what the photos represent. A direct connect from a property management software system (PMS) can result in something like “Condo 2bedroom OF.” And believe it or not, I have seen a toilet as the lead photo in more than one advertisement on an OTA. It takes an experienced resource to build out high-converting ads.
2) Billboard Effect
64 percent of vacation rental guests start with a search on an OTA, yet only 6 percent book on that channel. Although that’s a sobering statistic, the reality is most travelers prefer to book direct. One of the real benefits of OTAs, if done properly, is using the listing for branding. There are several opportunities to brand the listing with hotel-style OTAs. I’m not going to lie, though. This takes some effort on the part of the property manager. Some channel managers brand their own company rather than the property manager. If a listing brands the channel manager, the property manager is missing the billboard effect benefit completely.
3) Effective Inventory Management
Many property managers block out availability during sold-out times. This hurts the organization more than no bookings in the high season—it also affects shoulder business. Be strategic with this channel. Make sure to utilize restrictions, such as minimum stays and closed to arrival, to fit within the overall channel strategy. Don’t just close out dates unless you want to lose potential bookings.
4) Getting the Price Right
There are so many things you can do to ensure inventory is priced right, is available, and fits sold-out periods. Companies need to understand how their rates compare to their competitors.
5) Get on the Same Page as your Guests
A lot of confusion comes from using automated emails from the channel. Property managers have the ability to customize (and brand) these communications with guests. It is important that property managers set clear expectations with guests about what they are getting with their bookings.
6) Turning Guests into Fans
The OTAs are good at owning guests. There’s an opportunity for property managers to do this, too, by building relationships with guests before they even arrive. Guest communication through hotel-style OTAs is allowed, and you should take advantage of this benefit.
7) Capitalizing on Reviews
It’s a fact that a lack of reviews can hurt bookings. Use the templates within the hotel-style OTAs to encourage guests to leave a review, and respond to reviews as quickly as possible, especially if the review is negative. This is an opportunity brand yourself and talk about what makes your property different that is not part of the listing/ad.
8) Cost Sharing
This is a scary idea, but is it possible to share any of the OTA costs with the owners? Many property managers are doing this. How can you educate the owners on how things have changed for the business and how they can benefit if they participate in an OTA channel plan? Some managers have used a branded brochure to educate and share why this channel is a valuable investment.
9) Using a Channel Manager
Yes, it costs more, but the right channel manager can help strategically plan everything mentioned above. A direct connect is perfect for those companies that want to dabble in this line of business, but if you want to be strategic and focused on growth, having the right partner can make all the difference.
OTA websites garner millions of views every day. Data tells us exactly how guests shop for vacation lodging, where they go, and how they book. Those paying attention to these channels will see more bookings and higher revenue.