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
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, firstname.lastname@example.org
Associations interested in joining our network should contact email@example.com.