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Education

Trust Flow Matters

Trust Flow Matters
mm
Vince Perez
July 10, 2019

Expedia’s recent revenue miss is flushing out the true state of OTAs as it relates to our industry. Doing away with the HomeAway brand is a clear indicator to Wall Street that Expedia is attempting to keep up with Airbnb, which is sucking all the air out of the room. Of significance was the drop in bookings and slowing growth rates for Vrbo. HomeAway seems to be following the TripAdvisor playbook from years past . . . and getting the same results.

If we have learned anything from the decline of TripAdvisor, it’s that the OTAs do not care and will always do what is best for them. Rightfully so, because they have investors to answer to. The relationship with vacation rentals going forward is purely transactional.

While the OTAs continue to drive visibility into our space, the performance is continuing on a downward slide. We no longer have to wonder what the motivations are and the impact it will have on our businesses and the vacation rental consumer. Introducing pricing mechanisms to force price parity does not benefit independent vacation rental organizations that are performing well, particularly when there are multiple “arbiters” looking for margins rather than guest satisfaction.

As Airbnb gears up for its impending IPO, it has become clear that it is looking at the “bundled travel” opportunity. This brings it head-to-head with Expedia. What is interesting is to see how Airbnb brands the vacation rental space. With the acquisition of Luxury Retreats, investment in Lyric, and now hiring Apple’s former retail chief, the lines between hotels and vacation rentals are about to blur. Couple the above-mentioned chaos with the lack of transparency for the vacation rental traveler and you have created a perfect storm that independent vacation rental professionals can use to create a stronger bond with travelers. The goal should be to make the OTAs incremental to your business, not your business dependent on the OTAs.

The formula for success remains the same: Always use the distribution that makes sense for your business while making investments in your brand with an eye on retention. Use the OTAs to build your brand and stop building theirs.

Traveler Fees and Price Parity

In Europe, Airbnb is already making traveler fees optional by pushing the burden onto the owners and managers. This will force Vrbo (formerly known as HomeAway) to adopt the pure Expedia model. Owners (RBOs) will not be able to compete as costs escalate, creating more inventory opportunities for branded PMs. However, PMs will have to raise rates for consumers, whereas the OTAs will blame the PM (by pushing the “option” onto the PM). It will be interesting to watch what happens to inventory when disparate rate parity models collide with no traveler fees.

PMs have lost trust in the OTAs while recognizing they must work with them. Travelers understand that they are not getting their questions answered and that they are not receiving the best value. There is no greater indicator of this than the success of the hotel #bookdirect campaign.

Hospitality Is the Core of Our Business

We are just getting over the hangover of the past few years, and the insanity continues with the latest rounds of capital and acquisitions. We are the pie and everyone wants a bite. If we have learned anything over the years, it is that trusting your process is what ensures long-term viability. If you are reading this article, you are either an established, successful company navigating your way through the chaos; a company dependent on the OTAs for your survival and looking to change; or an up-and-coming company looking to learn from history.

For our vacation rental business, there is one true north that has allowed us to continue to make business decisions quickly as market conditions change. We never allowed “all in one” systems to take over our business. We view our property management system as part of our technology set, not the most indispensable part of our business. We favor technologies that allow us to manage and optimize our guest marketing and operational data. Technology is an enabler and not a differentiator when it comes to delivering on guest excellence.

Regardless of size, you must always maintain the maximum flexibility on your side. As OTAs become more centralized, and property management systems attempt to become the next OTA, it behooves your company to be well positioned for the coming disruption, which will open up more opportunities. One trend we will see that is favorable to vacation rental managers is that RBOs who would not have considered using a PM are now engaging. When the switch to pure commissions happens—and it will—they are the low-hanging fruit. Be prepared and have a plan to drive more direct bookings, but never lose sight of your core.

Google, Marriott, and the Next Gold Rush

I believe that these two entrants to our industry will be transformational and the best opportunity for independent brands to “ride the wave” to more direct bookings and repeat business. At a minimum, this will accelerate the next level of fragmentation that is well underway. As independent operators, now is a good time to define your standards and make sure your brand is wrapped around those commitments. Google and Marriott will make up for the lack of performance from the OTAs and move our industry in a direction that, if you are well positioned, will allow you to grow (if that is your goal) or become one of the dominant brands in your local destination. The biggest benefactors of this trend will be independent operators in the leisure and destination markets, particularly those in “drive to” markets.

Independents Find Their Strength—The Trust Flow Begins

For those property managers who have survived the constant policy changes, bait and switch tactics, and threats of “off-platform” bookings, they have a new sense of urgency. As an independent vacation rental operator, I am a firm believer in the independent brands. Many are family owned and operated and have been servicing groups and families in leisure destinations for years, even generations. These brands have given vacation travelers a sense of belonging in their communities. These hardworking entrepreneurs form the basis of a “trust flow.” These trust flows were in place before the OTAs arrived and will only be strengthened by our ability to execute on service excellence and add value to these relationships. The open nature of the internet gives us an opportunity to innovate and drive change.

Driving these changes are regional associations of vacation rental professionals who understand that short-term thinking does not solve long-term problems. These member-driven associations have grown organically at a local level and are now expanding into other states. Here are the common threads shared by these non-affiliated organizations:

  • Strong leadership that understands the challenge and the value of business
  • Transparent code of ethics and standards for the membership
  • Volunteers that lead by example and provide support for members

The members of these associations form the building blocks of the next-generation trust flow that will level the playing field and bring vacation rental travelers the value and service they have come to expect. This trust flow will reach the vacation rental traveler in a transparent and honest way. These members understand that they are the key stakeholders in this industry. This trust flow would not have been possible without first earning the trust of the vacation rental traveler and the trust of our owners.

Marketing beyond the OTAs

All the OTAs are now centralized platforms (hide the data) and will battle it out for the travelers’ dollars, yet their leakage rates will be the same because they are not set up to answer the travelers’ questions. In the coming age of “one click” search, independents are uniquely positioned to answer the questions vacation travelers are asking. There are many advantages to being a local operator that OTAs can never replicate. To capitalize on the coming opportunities, you must play to your strengths in the form of unique content and always offer the best price.

One of the challenges has always been to determine how these travelers will find these independent brands through all the clutter.

What if there were a marketplace that used the strengths of these brands in a decentralized fashion that always served the best interests of independent vacation rental professionals and travelers? A marketplace that truly served the vacation rental ecosystem through transparency and leveraging collective strength at a local level? As megabrand operators (consolidators) and now hotels come into the industry, the ability to market these independent vacation rental brands on their own becomes more challenging and expensive. These marketplaces represent not only the great regional vacation rental brands that have built this industry but also the great organizations behind them. All these brands have a compelling story to tell, working together as independents through the marketplace is a cost-effective way to amplify the brand’s messaging to vacation rental travelers while remaining independent and deciding their own course.

This also distinguishes the difference between these marketplaces and listing sites. Just like Vrbo in the early days, your brand’s equity was used to build Vrbo’s brand equity, not yours. This model has not changed. This is not to say you should stop using listing sites, particularly regional ones that deliver value through transparency (shared data and not merchant of record). Just be aware that brand equity only goes one way. In the marketplace, brands always flow to the stakeholders—and always will.

I think one of our members and respected industry veterans, Betsy LaBarge at Mt. Hood Rentals, summed it up best:

“A key component to a #bookdirect strategy is to implement an integrated marketing plan utilizing several channels to communicate with guests Northwestays.com is a valuable channel we use to maintain our brand identity and direct potential guests to our website for bookings. We have found in our data that guests who book direct (especially in phone calls) have a higher average stay value than other reservations.”

Where to Find These Marketplaces

NorthwestStays.com (Assn: Northwest Vacation Rental Professionals–NWVRP)
Covers: Canada (west), Washington State, Oregon, Idaho, Utah, Wyoming
Contact: info@nwvrp.org

CaliStays.com (Affiliate of NWVRP)
Covers: California and Baja California
Contact: bookdirect@Calistays.com

GreatHawaiiStays.com (Affiliate of NWVRP)
Contact: Northwest Vacation Rental Professionals, info@nwvrp.org

NortheastStays.com (Northeast Vacation Rental Professionals–NEVRP)
Covers: Canada (east), Maine, New Hampshire, Massachusetts, New England, Vermont, Connecticut, Rhode Island, New Hampshire, New York/New Jersey
Contact: Northeast Vacation Rental Professionals, northeastvrp@gmail.com

Associations interested in joining our network should contact marcom@fetchmyguest.com.

Related Items#bookdirectairbnbapplebetsy labargecalistays.comexpediaFeaturedgooglegreathawaiistays.comhomeawayluxury retreatslyricmarriottmt. hood rentalsnevrpnortheaststays.comnorthweststays.comNWVRPonline travel agenciesOTAsrent by ownerstripadvisorVacation Rental industryvacation rental managersvince perezVRBO
View Comments (4)

4 Comments

  1. Nick Marshall says:
    July 23, 2019 at 10:01 pm

    Great post Vince. Your point that “travelers…are not getting their questions answered” because they cannot speak directly to an owner or PM when they enquire through one of the major platforms is the Achilles Heel of those giant organisations. I can also second the point made by Betsy LaBarge that bookings made by phone have more value because (for us) they usually involve longer stays.

    Like Tom, though, I do not understand why owners will be disadvantaged. We run a regional listing site and manage enquiries and bookings initially through our website and then mainly by phone. We negotiate, manage the invoicing, the payments and follow up with the review request. The big listing sites do not do the key part of this – answering questions, negotiating and selling.

    What we are really talking about here is the inherent limitation of automation and scale. Scale is great for advertising but our business is still very reliant on person to person conversations. A three minute phone call can prevent a lot of problems and builds trust.

    We do not manage our listed properties. Consequently we do not take on absent owners unless they have a responsible housekeeper in place. Our owners are all locals who do a great job managing their own properties at far less cost than we or any other manager could do it. Yes, their costs are going up as guest fees are dropped and the commission model takes over but that cost is going to affect PMs too.

    Reply
    • Vince says:
      July 24, 2019 at 2:32 pm

      Hi Nick,

      I think we are in agreement. In my comment to Tom I stated “economically *challenging* to RBO in the future.” This is not your model, at least not how you describe it.

      Cheers,
      Vince

      Reply
  2. vince says:
    July 23, 2019 at 5:50 pm

    Hi Tom!

    Thank you for taking the time to read the article. Your question probably deserves it’s own write up…..but here is the short version:)

    The comments are based on trends we see within our networks (and at local level). PM’s strength has always been their brands. Successful PM’s are utilizing all available tools to promote their brands to drive direct bookings and bring some balance to their distribution. RBO’s have no brand, no content and no leverage. Their costs will continue to rise as all OTAS’ go to a full commission model and price parity tries to take hold. The aforementioned are just two factors of many that will make it economically *challenging* to RBO in the future.

    Cheers,
    Vince

    Reply
  3. Tom Goodman says:
    July 23, 2019 at 4:27 pm

    Hi Vince,
    Thanks for the great forward thinking article. However I am not sure I understand why “Owners (RBOs) will not be able to compete as costs escalate, creating more inventory opportunities for branded PMs.” and later reiterated “One trend we will see that is favorable to vacation rental managers is that RBOs who would not have considered using a PM are now engaging.” I understand all OTAs going to commission model but why would that drive RBOs to us PMs?

    Reply

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Education
July 10, 2019
mm
Vince Perez @https://twitter.com/staysgroup

Vince Perez expertise spans across multiple disciplines in the hospitality and technology fields. Prior to his successful technology ventures, Vince was a respected executive in the hospitality industry serving in Senior Executive Leadership roles in Operations, Sales and Marketing for premier companies, including Japan Airlines, Nikko Hotels and Hyatt Corporation. Vince is a partner with Beach House Rentals, a thriving vacation rental management company located on the California Coast. Vince is also the founder of Fetch My Guest (www.fetchmyguest.com), the only autonomous marketing automation platform that gives independent vacation rental professionals complete control of their brand, marketing and guest life cycle resulting in more direct bookings. Fetch My Guest is the underlying technology that powers the Stays Group, the largest network of independent vacation rental brands in North America that is driving the #bookdirect revolution. The members only cooperative marketplace delivers on the promise of transparency, quality and the trust our members have earned over the many years in their respective communities. Vince is a regular contributor to VRMIntel and Short Term Rentalz publications. Vince has also been featured on “Sarah and T” and Cottage Blogger podcasts. Vince is also a regular speaker at industry events including; Vacation Rental World Summits, VRMIntel Live, Northwest Vacation Rental Professionals, VRMA events and the Book Direct Show.

Related Items#bookdirectairbnbapplebetsy labargecalistays.comexpediaFeaturedgooglegreathawaiistays.comhomeawayluxury retreatslyricmarriottmt. hood rentalsnevrpnortheaststays.comnorthweststays.comNWVRPonline travel agenciesOTAsrent by ownerstripadvisorVacation Rental industryvacation rental managersvince perezVRBO

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