By now, everyone should be aware of significant changes afoot with some of the bigger channels; changes that have been trending for some time and are continually encroaching on property manager profitability. The most notable example is a recent announcement from HomeAway stating that they plan to proceed with:
– A 25% increase in the cost of listing subscriptions
– New fee applies to users that work with integrated softwares
– A 10% fee for bookings made through different channels, but that HA believe derived from a guest that was previously considering the same property on their site.
Why is an excellent channel like HomeAway, used by most vacation rental managers, charging its clients to use tools that don’t affect them directly? Why is HA getting a fee for bookings made through other channels? And how do they get this information? How should vacation rental managers react?
Only HomeAway can speak for HomeAway, but here is our take on the broader trends:
Our industry has undergone dramatic change. As leading channels have become global powerhouses, the growth they became accustomed to is no longer achievable through client acquisition alone. Instead, they therefore seek ever increasing share-of-pocket from their existing user base. Sometimes this is done through optional value added services. Other times changes are being imposed in ways you may not like, but have no control over.
“The property” is the core to everything. As the property manager, you should be in a prime position, but that position is being challenged. Your profitability is not what it used to be and will struggle to hold up going forward. We think it’s worth taking stock of this trend and what you can do about it.
Here are some things to consider:
– Commissions and transaction fees everywhere: A small percentage here, a bit more there and all of the sudden, it’s too much.
– Unwanted charges: Different service providers have different fee structures, but they should feel right for you. You should not have to pay for services you do not need to get those that you do. And be leery. There really are no free lunches in life. If you are being inundated with ‘free’, you are paying a price in ways you may not realize and might come to regret later.
– Business independence: Is your business fully under your control or is it increasingly shaped by policies of service providers you use? Do you feel your service providers consider you their client or have they made you their ‘product’ and your clients their clients? If it’s the latter your business future is not in your control.
– Data Privacy and Protection: Whose data is it, anyway? If a channel brings you a guest, then arguably the data is theirs in the first instance. But how sure are you that client data for business you get through your own means or through other channels is not being exploited by other unrelated channels or tools you use?
– Incumbency: Breaking up is hard to do. Do you feel trapped by the tools you use or are you free and able to stop using them whenever you want to?
– Diversify your channels: Commissions vary by channel and not all channels even charge them. Use a healthy mix of channels so you can compare their costs and services. At the end of each year, drop or replace the lowest performing channel(s).
– Have your own channel: Property manager websites are back in style and, thanks to modern designs and evolved technology, they are more powerful and effective than ever before. If you don’t have one, you need one.
– Protect your independence: Policies matter, so be vigilant. If a dominant channel may offer access to a marketplace you consider indispensable, use that channel. But use others as well. Use an eclectic mix of channels that vary not just by brand, but also by company, by fee structure, and by other policies. This will save you from becoming too dependent on one dominant provider or one prevailing model.
– Fight for your profitability: Don’t pay commissions or transaction fees unless it’s necessary and cost-effective. Many channels still operate on a subscription basis, but also make sure the software you use comes from an independent provider that does not also charge commissions. There are plenty providers out there offering good services on a fixed fee basis.
– Avoid traps: In addition to commissions or software that exposes your data to third-parties, other traps include lock-in contracts and complex systems that can be hard to get out from under once you’ve invested too much time in them. Ditto for your website. Make sure you know whether you own your website or your software provider owns it. This may be important to you if you ever decide to leave them.
As the Vacation Rental market matures, different providers are increasingly chasing the same properties, the same travellers, and the same booking revenue streams. That in effect means they are looking to cut into your profits. Many will use their dominant market positions, as well as technology that provides them with far greater insight than you may realize, to do this.
Protect your interests and you bottom line by understanding these drivers and making choices accordingly about how market your properties and what tools you use to manage them. And ask yourself: Are you currently partnered with the right providers and players?