nvestopedia defines racketeering as “the act of offering of a dishonest service (a “racket”) to solve a problem that wouldn’t otherwise exist without the enterprise offering the service.”
While it’s a stretch to accuse the big vacation booking sites of being racketeers, there certainly are some similarities. By buying up and consolidating booking sites (for example, Expedia buying HomeAway/VRBO), the big sites are seeking to monopolize the vacation rental industry and seize the customer relationship, which they then can hold over the heads of homeowners to force compliance with unfavorable policies (for example, taking commission on the rental).
Consequently, if a homeowner fails to comply with each wave of more demanding policies, they’ll see their ad placements decline, decreasing their inquiries, bookings and revenue stream.
If not racketeers, then definitely bullies. In fact, certain hotel chains, such as Hilton Worldwide, are refusing to bow to such unfair demands. Instead, they’re fighting back with direct booking campaigns, investing in bold advertising to show travelers that they can get the best deals by booking rooms direct. These hotels are in effect refusing to cede their customers’ relationships to the Expedia, Kayak and Airbnb. Rental homeowners should likewise refuse such treatment.
3 reasons why homeowners must stand up to the bullying of the big booking sites:
1. Travel spend is up, but bookings are down
The vacation rental market is worth $30 billion annually. Furthermore, there’s room for growth with the economy steadily growing, wages beginning to increase and people spending more on travel. Yet, few homeowners are benefiting from this upswing because of changes to the way booking sites operate.
TripAdvisor states that 10% of rental listings acquire more than 75% of vacationer traffic. Meanwhile, 90% of homeowners are left vying for the remaining 25% of travelers. Why? Because the major booking sites have created algorithms that reward ad space to homeowners with the highest number of bookings on their site.
Let’s say you’re a homeowner and you’re leveraging multiple sites and/or channels to get your rental in front of the widest possible audience. This seemingly makes sense, right? In fact, due to the algorithms of the big booking sites, you’re actually more likely to be decreasing your chances of generating new bookings. It’s a catch-22 – you either see your ad space go up on one booking site, but be limited to that site’s total reach; or you try to expand your total reach across a lot of sites, just to find your ad space diminish across the board.
As a result, homeowners feel as if they have only two options:
- Pay huge commissions to get traffic on the big booking sites
- Try to circumvent policies and hope travelers find your listings through other channels
Neither scenario is good for homeowners.
On the one hand, if you agree to succumb to the big percentage demands to get decent ad space, you’ll then be required to charge travelers a higher rate, cut into property managers’ margins and/or decrease your own revenue.
If, on the other hand, you try to sideline the big sites by opening alternate paths to booking, you risk reduced listing traffic, bookings and revenue.
Fortunately, more homeowners are opting for the second option, which in turn is paving the way for alternative sources of traveler bookings. These new sources enable homeowners to retain the customer relationship without requiring commissions or limiting where the homeowner lists their rental.
2. Allowing the travel site monopolies to own the customer relationship undermines the customer experience
Sadly, private vacation-home renting is becoming a hotel-like industry. Ninety-five percent of travelers book through portals they’ve used in the past. Homeowners are therefore forced to depend on these channels if they wish to develop the customer relationship and generate repeat business.
This gives the big booking sites a great deal of leverage to draw more marketing dollars from homeowners. Consequently, the big sites come to own the relationship with your customers, and you must pay them a hefty sum to not destroy it.
And with this middleman firmly established between you and your customers, you lose the ability to cater to specific customer needs and the flexibility to provide personalized deals, packages or promotions.
But none of this matters to the big sites, because they’ll still get their cut. And in the customers’ minds, it was the homeowner who didn’t provide the good service.
3. Losing the customer relationship decreases your property’s security and profitability
The flip side of the coin is no better. Losing direct access to the customer limits the homeowner’s ability to vet its renters. In most cases with the big booking sites, homeowners completely lose the ability to contact guests before check in.
Take AirB2B for example; even though this rapidly growing tech company (currently valued at $25.5 billion) does in fact allow homeowners to contact potential renters before booking, it still places substantial limitations on renter-vetting discretion. The Airbnb website clearly highlights these limitations:
“While a host may have, and articulate, lawful and legitimate reasons for turning down a potential guest, it may cause that member of our community to feel unwelcome or excluded. Hosts should make every effort to be welcoming to guests of all backgrounds. Hosts who demonstrate a pattern of rejecting guests from a protected class (even while articulating legitimate reasons), undermine the strength of our community by making potential guests feel unwelcome, and Airbnb may suspend hosts who have demonstrated such a pattern from the Airbnb platform.”
While protecting the rights of all classes of people is vitally important to any community, such limitations greatly reduce the degree to which homeowners can vet potential renters and ensure the security of their property.
Losing control over who rents your home means far more stress and decreased profits (due to more out-of-pocket expenses relating to damages). This is all while homeowners are paying significant commissions just to get the bookings.
This transition to a hotel-like business model will see homeowners gradually lose control over the customer experience as they lose control over their income. Adding new expenses due to lost security with commission rates of up to 40% will be detrimental to many homeowners.
For the above reasons, it’s imperative for rental homeowners to stand up to the big booking sites seeking to monopolize the industry. By circumventing such sites, homeowners won’t only be maintaining their own margins, they’ll also be ensuring better customer experiences, which is important for the entire industry to thrive.
Steps homeowners can take to regain the customer relationship
1. Invest in management software
Many homeowners feel anchored to the big booking sites simply because such sites have a few tools that help with organization. While these features are helpful, it’s important to understand the real cost of using them. After adding up commissions, decreased bookings, expenses due to bad renters and lost repeat business (all consequences of using the big sites), these tools lose much of their luster.
There are many good rental management software vendors out there to choose from. Check out Streamline, Rentivo, Virtual Resort Manager, and Kigo.
2. Set up a website and a merchant account
If you want to own the customer relationship, you must make sure you can do business without any middleman if needed. This means customers must be able to locate and contact you directly if they need to. Moreover, you must have the ability to take payment from the customer directly.
Fortunately, creating a website is easier than ever with vendors such as Wix, eHost and Weebly. And as far as merchant accounts go, Square and PayPal are great starting points.
3. Find new sources of customers
Having your very own website customized to your properties’ unique values is great – you won’t regret it. But let’s be honest, you’ll never be able to generate the traveler traffic, inquires and bookings you need through your website alone. You’ll still need to leverage specialized travel outlets.
It’s generally a good idea to diversify your marketing between local sites in your immediate region and national sites that don’t encumber your revenue or the customer relationship.
There’s a couple up-and-coming booking sources specifically developed to address the homeowner challenges discussed above. Sites such as Tripz.com are a great alternative to the big booking sites, just as supportive to the homeowner community as they are to travelers. A few key features you should look for in such new booking sources include:
- Direct bookings with no commission fees
- Integrations with the property management software to add control and streamline the processes of vacation rental marketing, booking and management
- No booking fees for travelers
- Website-based platform – i.e., no additional software
Remember: Your home isn’t a commodity, it’s an experience. And it should benefit the traveler and the homeowner.
Travelers don’t rent from homeowners to feel confined to a hotel atmosphere. And you don’t rent out your property to feel like a minimum-wage-paid hotel employee. Yet, this is what the industry will eventually turn into for travelers and homeowners alike if homeowners don’t resist the bullying of the big booking sites.
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