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Rental Marketing Partnerships – Yes, No, Maybe, don’t know?

Written by Discovery Holiday Homes Team on

The rental market is on an implosive collision course of sizeable proportions and has seen many significant changes in a few short years. The outcomes are not known but we need to be ready as the tidal wave of investment backed companies heads our way! The following is a commentary on the way we see the market and its development.

As short a period as ten years ago, this very fragmented market was serviced by many small companies who marketed, booked, managed and cared for owners of holiday homes or second homes. The Internet flourished, paper advertising gravitated to online promotions with all its advantages and a number of now well know sites began to develop a good and loyal following. Names such as “Owners Direct” and “Holiday Lettings” were well respected enquiry generating directories. Each had its own strengths and focus. Owners and agents received cheques through the post; people spoke in whispered tones on the phone, said “please” and “thank you” and were happy to return! All was at peace with the world.

The term “perfect storm” is probably well suited to the last 10 years in this industry. On one front we have had an increase in cheap flights, a change in holiday habits, access to easy money with the joy of buying second homes, plus an acceleration of technology and interest in the hospitality business. Throw in an economic collapse and the brew is ready!

Put all this together and what results: an oversupply of inventory, a reduction in holiday spends and consolidation and aggregation with technology and finance pushing the boundaries of distribution. With this the level of customer service has reduced significantly.

Once upon a time a visitor may have found a lovely cottage on their favourite site or catalogue, called the owner or agents, had a long chat, found out the details and paid their deposit by cheque long in advance of their holiday. They would arrive and leave on a Friday or Saturday and return. This still happens of course, but is changing rapidly.

Nowadays a visitor is more likely to select their holiday destination in a more expansive and aggressive manner and one that all owners and agents have needed to address.

  1. A search on the Internet, via a web browser or mobile device in multiple destinations and compare the local facilities, flights and overall rental prices.
  2. They may wish to stay shorter periods often at the last minute and in mid-week, possibly multi-destination.
  3. They will enquire on several properties via email simultaneously to get the best rates and check terms and co-ordinate it with their timetables. They will review the genuine and the fake reviews on a number of sites
  4. They will barter or increasingly demand a price that fits their budget based on recommendations from money management experts!
  5. They will see if they can get a better deal from an alternative agent as the property has been easy to find via Google.
  6. They expect 24 hour phone service.
  7. They expect to pay via credit or debit cards and get instant confirmation
  8. They are now beginning to expect hotel cancellation policies!

So how we are all coping with the changes and where are we all being pushed?

Advertising

The aggregation of the main listing sites initially caused few problems and allowed extra enquiry distribution. HomeAway Inc. bought and continues to buy big sites and consolidate them (Owners Direct, VRBO etc.). Now rates have increased substantially with the various tariffs and packages promising more exposure. PriceLine, with TripAdvisor, Flipkey, Holiday Lettings and now Niumba have been heading in the same direction.

The major change in progress is a move to taking bookings online on an owner or agent’s behalf, rather than supply enquiries. Any move into the money flow is only to increase revenue for shareholders and this means the money must come from somewhere! This can only be the owner agent or manager.

Imagine if Rightmove.com decided they would actually start selling houses and decided to cut out the agents rather than take money for advertising.

Online Bookers

Now add in the pure Internet marketing plays established via new funding, or the new kids on the block. These businesses are all about bookings and inventory. Not many truly understand the industry at toilet cleaning level!

Wimdu, Roomorama, AirBnB, HouseTrip, Tripping.com (now) are just a few, but between them have hundreds of millions to spend. The first port of call of course is getting something to sell! No doubt you have had the calls!

Most of these companies add a margin only or add a margin/booking fee and take a commission.

The Hotel Booking Companies

Now the hotel industry is beginning to plateau in developed countries the rental market has been targeted. Booking.com has made a significant play and this can work in cities with fast booking centres at lower values but struggles with rural, longer term business at higher values. Late Rooms, Travel Republic, Expedia, they are all at it!

Travel Agents

Via the GDS system and the Internet they can access all of the above and is not a new thing, but they can consolidate travel opportunities, even if the trend has been to personal direct scheduling and booking.

Distribution – Complexities and issues.

All the large enquiry and booking companies have realised the value of distribution and through investment in technology often feed the same inventory across multiple sites, so an individual property can be found on 30 or 40 sites. Very few of these sites have been set up to accommodate the initial owners or agents tariffs, discounts, cancellation policies, picture formats or detailed information! Channel managers often sit in the middle which also confuses the issue. This extra layer of distribution also signifies a commission or fee percentage split and less money to spend on customer interaction.

The net effects of distribution on this scale are sizeable to a company who actually contracts an owner and is the final link in the chain:-

  1. A property may be displayed on 30-40 sites. Many will simply copy the exact content and names. A visitor may find many of these and enquire across all of them. The detail questions may cause a lot of extra work.
  2. Depending on tariff structure a visitor may simply go to the cheapest or the one that answers the fastest or has the best payment solution or is in their native language.
  3. If availability isn’t accurate more time wasting enquiries will occur.
  4. The contractor or owner who once made 90% of all bookings now needs to invest significantly in technology and payment solutions or lose margin and cash flow to maintain the status quo.

So do owners and agents enter the very complex world of distribution and partnership management or not? Or do they go it alone and fight the tidal wave, or make a judgement call by working with companies who have the same ethos and working principles.

Some have found it very worthwhile to attract overseas foreign speaking visitors, some have had no bookings from 10’s of sites and it’s an admin headache, some have to wait for ever for their money. Some swear by it!

There are a few things that these larger companies cannot accommodate or provide and this is a personal service and a deep understanding of an area, a property and knowledge of the industry and a visitors expectations. The hotel booking model is much easier in cities, but the vast majority of rentals lie elsewhere and hence a longer stay at a higher value begs more information, especially travelling in family groups with all their vagaries.

The old adage of the collective being more powerful than the individual still remains true and we are keen to work with responsible, pro-active partners, who believe in customer service and visitor satisfaction and invest in the results.

This concept aligns itself with the large multinationals, but the need to feed shareholders and take more money from the shrinking pot is not necessary. The collaborative approach in itself can create a successful cooperative if it finds a critical mass. Certainly the extra exposure from these channels can be used to best advantage but the control need to remain with the property owners and their representatives who manage and do the hard work!

Contact us!

We would love to hear from you, even if we can’t work together. We all need to understand and have a say in this rapidly evolving industry and your opinion and ideas count. We would like to hear them!

Discovery Holiday Homes Team

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