Extra Vacation Rental Income

“ROUNDING THE RENTAL REVENUE”

A couple of weeks ago I booked a hire car online which highlighted some of the recent hospitality trends and also illustrated two very important elements of the developing VR industry. The first is that the potential travel income stream is very extensive and second is this chain of opportunity has “links” which can be gamed by marketplace businesses to their best advantage.

Any vacation rental owner, manager or agents is a fundamental part of this chain and one of the strongest links, but many are unaware of the power they hold and the potential data and income “leakage”.  

THE HONEY MONEY POT

How many people book flights as the first stage of their holiday?  A backpacker: probably a high percentage. However a family holiday or couple searching for a continental weekend away will often seek their accommodation first and match this with cheap flights or book a “bundled” offer from high street travel agents or OTA’s. Dates also often need to match with time off work and children’s holidays.

The major components in this travel event are well known. They are core to any travel business’s success and creating a single invoice via a multiple service daisy chain, will make each transaction more profitable.

Travel, accommodation and also “experiences “are the central elements of any trip with current emphasis on the “complete experience” rather than the individual building blocks of a holiday. It is these building blocks that each has value however.

Imagine this as chain starting with a travellers initial thought process and ending with their return home and eventual review! There are enough building blocks to make a small Lego set.

The main travel methods are often booked online: such as ferries, hire cars, taxis flights and trains. There is also a fine balance when booking between destination, distance, length of stay, price, availability and convenience with many OTA’s offering dynamic packaging to ease the booking burden and lead you through the “look to book” process.

Real time management of travel & inventory with great presentation and keen pricing, achieved through scales of economy, can bring significant bundling rewards for the net based marketplaces.

WHERE IS THE MONEY?

Much like hotels, the car hire companies for example are served by many online marketplaces and are equally challenged by search positions, technology, and marketing reach. This means, as with most marketplaces, referral commissions are available to distribute further and wider. This may sound familiar to you as vacation rentals move into more mainstream travel channels!

In every part of this booking process and distribution there is margin to be made. Flights have notoriously low margins for agents and are limited in their number simply by the volume of airlines and airport destinations. 

There are probably one hundred recognised commercial airlines globally and 500+ in total, but there are 1/2m hotels and 3m vacation rentals and significantly more travellers using a vast array or service.  Airlines heavily market hotels and car rentals and can significantly improve their transaction margins, but extending the chain.

In the example above a £35 flight may witness a £200 hotel booking and a £100 car rental, each at 10% commission. The company is at the forefront of the travel chain and has first bite! To see a vacation rental as an option here, the industry needs to be much less inflexible. This is hard with 3m micro-businesses.

The example above is powered by Booking.com and shows 205 apartments from 2238 properties available.

The more fragmented and less centrally co-ordinated businesses and geographically diverse travel services now provide opportunities for integration in the coming years, as they breach their technology barriers and are confronted by the global marketplaces.

What really grabbed my attention was when looking for a good deal. I tried a few sites to get a good price and a recognised brand with good reviews and “on-airport” pickup and delivery.

The first site is I used was carrentals.com which is an Expedia company and then rentalcars.com which is a Price Line Company but also appeared with a HomeAway logo on the site.  Odd in itself, but the message is clear when you consider the other acquisitions that have been in the press recently with respect to monetising bookings.

None of these companies own the car rental company I booked or any of the others on offer, they are simply marketplaces and curiously cheaper than going direct to the brand! The power of marketing and aggregation is plain to see!

There are plenty of other marketplaces that make your choices theoretically easier and aggregate inventory. Restaurants are a prime example.

“OpenTable” an acquisition by Price Line provides a service that makes sense to bolt onto the booking chain or offer after a booking has been made as a further revenue generator.

In fact the number of revenue opportunities open to a creative business is very varied. Take a typical holiday overseas for a small family:  There is transport to consider, accommodation, insurances, airport parking, airport hotels, restaurants, attractions, tours, taxis, communication services (phone, Wi-Fi), travel goods, currency exchange and more.

We as holiday home businesses are all within a very important part of this travel chain and are a primary focus as we provide the glue that holds the daisy chain together throughout the whole stay and the reason our real time data is of paramount importance to the large marketplaces. Bundling allows a higher margin per transaction and this is not possible unless all data and terms are compliant and synchronous.

Consider: If the travel method or accommodation information is not available then the booking data is lost and ancillary sales are not targetable.

A travel agent may make <5% on a flight, 10% on accommodation, but up to 20% on car hire. In real terms a $500 flight and $1000 accommodation may realise $125, but add 20% of a $400 car hire and a 10% of a few tours and this soon becomes $200. Now add in insurance, luggage, pet care, visa services and more and the value per person rises sharply.

HOWEVER: The only businesses that can provide this service are the ones at the front of the chain, which is invariably travel and accommodation. This puts vacation rental businesses in a very strong but highly targeted sector and a strong or weak link in the chain depending on where you are standing.

THE RENTAL OPPORTUNITY

As owners or managers however we have all the booking and potential booking information for the guests, whether they used commercial travel or not.  The travel element prior to a trip is generally of little importance to us, but when a trip is bundled with car hire, airport hotels, airport parking  and travel insurance for example, it can make for an attractive single source proposition to OTA’s who can offer the complete solution, from leaving to arriving home. 

KNOWLEDGE IS POWER

Consider that we in the rental business know when guests arrive and depart, their nationalities, their ages, the party size, home address, even flight information and potentially more detail related to why they booked a trip: holiday, celebration, family gathering etc. This is very valuable information for bundling of ancillary services pre or post booking and is in great demand by the marketplaces. Mining of huge datasets is very topical and the travel industry is ripe for the picking. This article is generalised but is well placed for 2015.

http://www.theguardian.com/accenture-partner-zone/big-data-monetization-future-business

Local accommodation suppliers know their markets extremely well and are best placed to assist their guests at a personal level with potentially lucrative after booking services. Traditionally we have been by suggesting to customers small local car hire companies or local restaurants that have served us personally for years or have recommended local guides, tour operators and much more.  

The Internet is allowing guests to research all manner of leisure and service activities themselves of course and this is where monetisation is now happening in the rental industry.

These often small individual local services also have to become more market savvy, plus marketplaces that aggregate services are becoming more acquisitive daily.  This is driving the need for real time data to be synchronised and another reason vacation rental providers are under so much pressure to comply with marketplace rules on availability and instant booking! Shareholders can see the possibilities but do not understand the technical and industry objections!

The mainstream business services such as car hire have sophisticated data management systems that can offer more centrally organised bookings with instant online access. This trend is now seeing local suppliers needing to become part of these marketplaces in order to gain access to new business, but in so doing suffer loss of margin, more regulation and a necessary investment in technology. This may sound familiar to you?

THE POWER IS IN OUR HANDS

Very recently we have witnessed endless arguments and seen aggressive moves by vacation rental marketplaces to “enforce” more rules on a very diverse range of businesses world-wide.

Their reasons are often stated as customer wishes:

• 1.       90% of guests want to book online
• Guests need to know real time availability to avoid wasting their time are yours.
• Instant booking with payment and real time availability and pricing allows greater distribution of the accommodation globally
• The millennia’s will only work this way
•  Our travel brands are trusted

Without doubt there is some truth in all this, but look carefully and consider the data acquisition implications for future bookings, dilution of revenue and loss of possible ancillary earnings.

EXPERIENCES CARRY VALUE

Many of us download apps and use them to access data. GPS and mapping and Uber are two prime examples.

Now consider that any request for your personal life experience and paid for recommendations to be entered into a central online repository, by you, whether web or mobile app, could be shared by all guests in your destination. We live in a cosy sharing world, so why wouldn't you as an accommodation business want to help that restaurant succeed?

This is the central tenet of reviews and is of course used by consumers to make decisions. If for example you recommend a restaurant with great breakfasts and distribute the information, others will make purchasing decisions on this data.  There is nothing wrong in this, you are happy to share information, you’re that kind of person!

How would you feel however if that fabulous restaurant you have been hyping up or a beach-side coffee shop with equally good breakfasts was the decider on accommodation location and there was an equally nice apartment 2 doors away and not a couple of miles away. The marketplaces can map all accommodation to your recommendation, rather than the reverse. Unknowingly we are all creating potentially competitive situations and compiling large valuable data sets that can assist the less helpful!

SELL YOUR DATA?

The moment you receive a booking from an enquiry then the data is only available to you and the guest. The intrinsic monetary value of that data is a commission for a manager and potential future commission. To a large multi-national OTA, it may be worth double or triple that value as they can monetise the chain and “lean on the customer” in more creative ways for years. They also don’t share the income around. Selling your data is not ethical, but is using the data without your permission also ethical (it’s all in the small print of course).

The question that perhaps we should all ask is: “Can owners and managers benefit from these types of services monetarily themselves without the management burdens and large marketplace demands?”

To do this means working in one of a number of ways: Offer guests information and arrangements, personally organised. This is time consuming and relies on continual supplier relationship management but you are completely in control. Supplier staff changes and lack of notifications are a major problem.

2.       Subscribe to an affiliate program directly, add an advert to the site or/and send links to guests and perhaps make a small commission. Affiliate programs offer notoriously poor rewards and can mean people leave your site prematurely and affiliates often offer alternative accommodation themselves, so diluting your potential core business.

3.       Use a professional third party who supplies these services under your brand and is prepared to share income and segregate data.  This removes the technology issues and the after sales support in case of supplier issues.

This approach also improves your brand and increases revenue! One such company recently in the news is Vreasy. They provide this service to managers and owners along with technology to ease your life!  http://www.vreasy.com

The world of vacation rentals is facing its sternest challenges right now and the future will hang as much on technology and data control as personal service and customer care.  Adding private revenue streams will help support this and improve your business image and customer retention.

Discovery Holiday Homes