Future proofing your vacation rental

As we start the year, it is a good time to be aware of a looming threat to your vacation rental business, and for you to know you can future proof your business.

It may not occur to vacation rental owners that the large benign rental marketing websites like Homeaway and Airbnb that deliver us a steady stream of bookings today have a dark side. They can just as easily squeeze us and leave us high and dry without a business.

What if the big websites we use like Homeaway and Airbnb were to drop us to the bottom and jack up the fees needed to get to the top? It is already happening in places and it will happen more.  It could cripple us.

But there is good news, the small folks can thrive, as I will tell you later in this article.

First, let’s understand how the landscape of vacation rentals is changing.

The changing holiday rental landscape – the big picture.

About 5 years ago with some amateur tinkering, my little Treetops rental site was able to dominate my local keywords on Google. My little website ranked 1 or 2 for years for ‘accommodation wye river’. With a little ingenuity I was also able to get a lot of bookings from Google Adwords.  It was payday for informed opportunists like me playing on Google.

No longer

Now the larger websites are sweeping away opportunists like me from the Google results. They dominate our entire industry.

As Google changes the rules about content, making it more complex, the larger websites are investing to rank higher. They invest heavily in Google adwords advertising. They invest heavily in search.  They have whole SEO teams, content writing teams, social media teams, paid search teams. Top consultants help them solve the latest problems. Homeaway has 1900 employees, Tripadvisor has 2400 employees., Airbnb has 1300 employees, all with plenty of staff in specialist roles working to get them to the top of Google.

Don’t just accept what I say, test it.

Have a look at the top results for a Google search for your keywords. (eg ‘accommodation los angeles’, ‘accommodation sydney’, ‘accommodation yourtown’)
Chances are the top results on Google will be dominated by the likes of Booking.com, Homeaway, VRBO, Agoda, Tripadvisor, Expedia, Trivago, Hotels.com, Stayz, Airbnb.  These are the big players.

Offline – TV advertising of accommodation websites

Not only do the big websites invest online, suddenly they are investing heavily on TV ads all over the world, as you have probably noticed.   In the USA alone in 2014, Expedia group invested $356M, Priceline/ Booking.com invested $61M, Tripadvisor $30M [ref Skift]. 2015 will be similar.

Get ready for change – and pain

As the industry grows, there are more of us owners competing for a small number of top spots on these large websites. The websites are under pressure to increase profitability. The prices are already increasing to be listed near the top, and are likely to increase further.

Website models can change quickly. In 2014, many businesses were caught flatfooted when Facebook changed its algorithm.  Overnight it reduced their exposure to ‘friends’, and later offered a fee to increase exposure.

Homeaway is already moving from fixed listing fee to pay per booking. It has also said it will use its ranking as a weapon to move the vast majority of listings to online bookable within 2 years. (see the CEO interview by Skift)

That is, whatever is happening now is likely to change, and chances are you will to have to pay extra.

Airbnb has a low 3% charge for owners (and about 12% service fee for a guest) while it is in viral growth mode, but I have a hunch there will come a day when fees will increase. Booking.com already charges VRs a commission around 12%.
Vacation rental owners need to keep alert to increasing charges – and have a defence ready.

The good news – there is a defence!

As a small VR owner, you actually have a huge advantage over the big guys.

It can be summarised in one word – INTIMACY.

As owner of your own rental, you have the privilege of many touch points with your guests, each of which can help you grow the bond with your guests.

Think about it.  You answer their enquiry, take their booking. Maybe greet them and later check all is well, and possibly contact them again after their departure.

The big sites can only do some of this and then only through automation. You can do it in person and build a relationship they can only dream of.

In a future world of high guest acquisition costs, a repeat guest is extremely valuable.

We need to change our mindset from acquiring to repeating.

In the current world, our booking sources look like this:

Current rental sources

 

In a new world we will be wise to increase the number of repeat bookings dramatically:

Better way to source bookings

Do the big websites fear this defence? No, they realise that only a few motivated and savvy owners will adopt these defensive measures. [ Is that you reader?]

The rest will meekly follow the herd, totally dependent on the big website rules.

For some owners, repeat business is already the norm. Several years ago, I asked a good local operator Jenny which website gives her most new bookings.  She replied that she really didn’t know or care!  She then went on to explain that over 90% of her guests are repeat guests or referrals.

At my Sea Zen rental I have a guest who fell in love with the property and the experience, keeps coming back several times a year and has been responsible for friends and family coming to stay. One person alone is responsible for about 5 bookings per year, cost of acquisition – zero. When she comes we pull out all stops to make her stay enjoyable.

In a future world where acquisition costs could be $100 per booking, this repeat guest could be worth $500 per year in saved booking fees, maybe $3000 over a lifetime.

Future proofing your vacation rental business

In future proofing your business, the road to rental mastery is one of encouraging repeat guests.

You need to have a plan for repeat guests, where:
• You form a relationship with your guest before and during the stay.
• You make each touch point a delight.
• You find ways to make that stay more memorable.
• Most importantly – you implement a simple email marketing system to keep in touch

The jury is still out on social media systems as to whether they are cost effective. They are ‘wait and watch’, but there is no doubt that right now, email marketing is effective.

As always, the key to rental mastery is knowledge.

In future articles I will explain ways of retaining guests and how you can set up your own (free) email marketing system.

In the comments, tell me about your cost of marketing and guest acquisition. Is it steady, decreasing or increasing?

Here is to your rental mastery!
Rex Brown, Holiday Rental Mastery
PS If you find this article useful, please forward it to a colleague in the rental industry.

{ 22 comments… add one }

  • Nancy McCardell January 23, 2015, 2:29 pm

    Thank you. loved your article. I have lots of repeats. Am booked every month in 2015 to December. I am on VRBO but am working on a web site. Love meeting the guests and being in this business. Check out my site VRBO listing 324269.
    Nancy

    Reply
    • Rex Brown January 23, 2015, 7:22 pm

      You obviously are doing brilliantly at attracting repeat guests Nancy.
      For the benefit of our readers, what are the top 2 things that you do that keeps bringing your guests back?

      Reply
      • Nancy January 24, 2015, 12:14 am

        It is difficult to name only two.
        1. Attachment to welcoming after commitment with instructions for gate entry, reserved parking space, getting to unit door and personally meeting guest.
        2. Personal thank you note after stay with coordinated business card & note stationery.

        Reply
        • Rex Brown January 24, 2015, 2:25 am

          Aha. It looks like there are lots of things that you are doing that many owners are not routinely doing.
          I would want to be one of your guests!
          We may tease these out in future articles.
          Thank you for sharing your experience Nancy.

          Reply
  • Nick Marshall January 23, 2015, 2:44 pm

    While I absolutely agree with your thoughts on retaining guests to future proof against the push by the large online listers to leverage their middle man position via online booking systems, I think there will be a reaction in one form of another.

    The holiday rental industry is highly competitive and there is little room for added costs by way of higher commissions. Paying more for greater visibility must have a cost effective limit. For any given area there is a limit to the number of top spots available because of webpage/above the fold space constraints. The limit is probably about 10 – the same as Google’s organic listings – with a super premium for the top 3 or 4.

    In theory, demand could be so great for those spots that a lister could charge what it wanted but in practice there is a limit set by what the customer wants to pay for a holiday rental because that limit sets the amount an owner can afford to pay in commission.

    Already, there are many owners complaining online about the poor return they get for an enhanced Platinum (or whatever) listing. The weakness of the online automated model is exactly described by Rex’s use of the word intimacy. The large listers fear intimacy because if the customer and the client get together before the booking has been made and the commission has been extracted – their business model sinks.

    The other big issue with online booking systems is calendar synchronization. Without real-time synchronization, there would have to be a lag between online booking and confirmation to prevent double bookings because so many owners are on several listing sites. This may be ok for some but the younger generation want instant confirmation.

    The one thing that is constant is change. The market is dynamic and one set of changes/innovations begets others. I do not think that owners should be put off from building their own websites despite the difficulties of being seen. It may not always be that way.

    Reply
    • Rex Brown January 23, 2015, 7:43 pm

      You are spot on in your comments Nick. I’ll take them one at a time.
      You mention a natural limit on what owners can bear to pay. The subtle impact of high listing costs is that those with large payoffs can still afford to list high, eg the manager of many properties, also those with high prices/ high margins. It will squeeze the small owner, hence the importance of intimacy and repeats.
      In a patchy world, I believe in doing the right thing. I get enquiries from Stayz that translate to bookings from my own online booking button, but I always pay the commission to Stayz, as they are the ones who brought me that customer. Stayz is fantastic for my business.
      Calendar synchronisation is a big challenge for the small holiday rental owner with multiple listings. If someone can come up with a tool for updating multiple calendars, they will make a fortune. That said, there are a few synchronising platforms like Siteminder (which I use part of functionality), but they don’t integrate across all platforms – not yet anyway.
      There is definitely a place for own website – for many reasons such as a free Google Places/ Maps listing, and many more – I will post on this at another time. BUT, websites can be very expensive, and not to be treated as a simple exercise – for example I’ve been hacked 3 times!

      Reply
  • Fraser January 23, 2015, 2:59 pm

    Hi Rex,

    Thanks for the informative article. We have a Holiday Home just over the border in Robe, South Australia. I have seen the costs associated with listings overseas and i was shocked, so i completely understand what you are saying. That said 98% of what i am getting through Home Away seems to be spam calls, although AIRBNB has shown great success. Best of all, people are starting to notice our own website and we have had quite a few bookings directly through that now. Im now thinking how i can refine my post stay contact after reading your article.

    Have a great long weekend!

    Cheers

    Fraser McEachern
    Villa Malmo
    Robe, South Australia

    Reply
    • Rex Brown January 23, 2015, 7:52 pm

      Hi Fraser, we had a lovely visit to Robe a few months ago, one of our all time favourite places, up there with New York as a feel good place – love the crayfish too!
      Interesting that different places have different standout booking websites. It is always a good idea to network with your local competitors and compare notes on what websites are working best in your area.
      Yes working on the post stay contact will bear fruit long term.

      Reply
  • Thibault January 23, 2015, 3:36 pm

    I can’t wait to read about your email marketing strategy!
    As sites like Airbnb hide the real email address of the guest, I have to be smart to get the guest’s actual email address. But sometimes it very just impossible.
    Best regards from Bali – Thibault

    Reply
    • Rex Brown January 23, 2015, 8:00 pm

      I hope you will like the email marketing strategy in coming posts – it is simple and hard and easy and fun. Stay tuned!
      Loved your guest appearance on my hero Heather Bayer’s podcast – VRS030 – for anyone who wants to listen.
      In a future article I will invite folks to share their tactics for capturing guest emails in a world of deliberate obscurity – I can think of 4 right now! My goodness this is an exciting industry!

      Reply
  • Danka January 23, 2015, 4:09 pm

    Another great article Rex. I’ve only started in the industry but have already formed relationships with many of my guests -a. because that is my nature, and b. because everything you say is valid – repeat business is low cost and you have guests that you know will respect your property. What surprises me, is that “not all owners” would do this – especially those with a large database of customers!!!

    Thank you

    Reply
    • Rex Brown January 23, 2015, 8:03 pm

      You’ve raised a great point Danka – guests that know you well will respect your property – another advantage of intimacy. From what I have seen of your business (and that is another story for another post!), you have a level of closeness with your guests that many in the industry will never have – a great personal skill.

      Reply
  • Rob January 23, 2015, 6:31 pm

    Always love reading your articles Rex & totally agree with you. However, while we all do have our repeat clientele I still think the websites that you mention will always dominate. Don’t forget we all try & achieve a high occupancy rate to get the maximum out of our homes. While my homes are listed on about 5/6 websites there are only 2 that are easy to control & generate the most for me. The rest come in dribs & drabs & you have to work hard to achieve the booking. Their customer service is shocking & their websites are complicated & are set up where they have control. In the end if their fees increase ours have to also.

    Reply
    • Rex Brown January 23, 2015, 8:09 pm

      So yes Rob the big sites will always dominate, but we can also thrive as small operators.
      My story of Jenny who is always full of repeat guests is very real. It shook me to the very core when I first spoke with her, and so inspirational. It does work!
      As I mentioned elsewhere, it is a good idea to network with competitors to find the websites that work best – like the 2 you’ve found – and avoid the angst of the duds!

      Reply
  • Aldo January 23, 2015, 7:04 pm

    Thank you Rex. We are all concerned. Flipkey (Tripadvisor) has already started behaving badly and others are doing the same. Your suggestion is extremely appreciated and we should all be investing heavily in our repeat guests. Any marketing has to have a more personal feel if we don’t want our past guests to feel inundated and opt out of any mailers. I look forward to further posts on the subject.

    Reply
    • Rex Brown January 23, 2015, 8:12 pm

      I hope you will find the post on email marketing useful. Stay tuned!

      Reply
  • Nancy January 27, 2015, 12:18 am

    Great article Rex!
    We avoid using AirBnb because for us the 3% fee is too much. Our rates are higher and comparing it to Homeaway’s current structure (and the fact that we book out 44 weeks a year) it doesn’t make sense for us. I know it’s not a great advertising strategy but we only rent through the Homeaway sites for now, but recognize that we are at their mercy.
    That being said, I totally agree with your thoughts about repeat clients and can’t wait to get up to Jenny’s numbers in the coming years. I think to do so, we are also missing another important opportunity, building relationships with other owners in our area. Normally, we have a mindset to compete against each other, but I am currently in talks with a few of my connections to start an “Inner Circle” so to speak to create strength in numbers. Our focus will be on shared annual marketing strategies, a referral system, sharing of resources and knowledge and a shared social media system.
    Since I have built up and branded a large following of social media, I will have the opportunity to be rewarded with a “membership fee” for my work in spearheading this venture. It may go so far as to have our own brand badge like an “owner’s badge” that we use so guests can identify a vacation rental that will provide them with caring hands and one on one customer service that will exceed the large rental companies. I will let you know how it pans out in the coming months.

    Reply
    • Rex Brown January 27, 2015, 10:30 am

      Yes Nancy, I think the task for all of us is to get to Jenny’s repeat guest numbers!
      I like your work on an ‘other owners in the area’ group working together.
      I look forward to hearing how it goes.

      The point about which advertising/listing website to use arouses passions in all of us – To Airbnb or not, to Homeaway or not, to booking.com or not. I’ll not open that pandora’s box just yet – a topic to have some fun with in future!

      Reply
  • Fleur von Mengersen Wells February 12, 2015, 11:15 am

    Always a great deal of content in your articles. Thank you for starting to create a road map for the small RV’s to give us direction and stimulation to travel further and forward in our small business endeavours. The Woolworths business model is a hard nut to crack.

    Reply
    • Rex Brown February 12, 2015, 12:28 pm

      Yes, good point, the big business folks like Airbnb are just like the big grocery chains like Woolworths. Each dominate their industry.
      It is just so wonderful though to realise that we have the upper hand in the vacation rental business!! By being so close to our customers we can have those close relationships that are impossible for the big impersonal chains. That is why I urge all small owners to start email marketing to past guests in their own personal style.

      Reply
  • Rex Brown September 5, 2015, 4:46 pm

    I received a comment from Kate from New South Wales concerned with changes to some listing sites like Stayz and Wotif, particularly after their sale to bigger online travel sites.
    Rather than change Holiday Rental Mastery to an advocacy role, I have used my relationship with Stayz to pass on Kate’s concerns to the top level of Stayz.
    As changes to the large sites take place there will be problems and opportunities for owners. I will make some suggestions in a future post.

    Reply
  • B Stock February 24, 2016, 6:43 pm

    Do you have a channel manager? What would you recommend?

    Reply

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