When searching for the right holiday property manager to look after your property, it is crucial that the company you choose can drive direct bookings through their own website.
This can help your net profit increase by at least 15%.
Choosing the right property rental manager is of course not only about rental income. There are many other important factors that you need to focus on, namely the quality of their customer service, guests’ reviews, maintenance, marketing, as well as who their target clients are.
You need to ensure all these areas are covered before you can decide who is the right company for you.
If a property manager’s strategy mainly relies on OTA’s to generate the majority of bookings, it will undoubtedly have negative consequences for you as a holiday homeowner. Not only will you generate less profit, but you will also leave your business in the hands of powerful conglomerates who, in many cases, don’t always have your personal benefits at heart.
In this article, I'll explain to you certain terms and aspects you have to we aware of before choosing one company or another.
What are OTA's?
Let's start by defining OTA’s. The acronym “OTA” stands for Online Travel Agency.
You are probably already familiar with a few of them: Booking.com, Expedia, Airbnb, Tripadvisor and VRBO. In the holiday rental industry, the five aforementioned companies are the largest and most powerful ones. Apart from them, there are also several other smaller operators such as Hometogo, Homes & Villas (Marriott) and Holidu to name a few.
These OTA’s all charge a commission for their services; in most cases, said commission is approximately around 15%, but in some instances it can be more. I can safely say that I’m expecting these commissions to increase in the near future. In simple terms, for a reservation worth 1000€, you will need to pay 150€ to the OTA who generated your booking.
What are Direct Bookings?
Direct bookings are reservations made directly through the holiday property managers’ website, or a reservation made without you paying any commission to a third party, such as the aforementioned OTA’s.
Why are Direct Bookings so important?
To put it shortly, there are many reasons why. To better understand, let's look at your holiday home as your small business. Your holiday rental drives an income to cover your expenses, and in most cases, to generate financial profit. The question is: who would leave their business in the hands of a stranger?
With Direct Bookings, you have the control all the time
As such, you don’t want the OTA’s to have total control over your reservations. Control is exactly what these industry giants have over your financials, and everytime, they seem to be pushing the limits a bit further. Recently, Airbnb unilaterally decided to change their terms and conditions whereby they can now force a holiday property manager, or property owner, to pay for a relocation of guests based on very questionable excuses. Sadly, we have already witnessed numerous disturbing instances where the property manager (and as a result the property owner) ended up not receiving any payout without much explanation.
A perfect example of these large companies controlling your business was seen at the beginning of the pandemic. In most cases, the customer pays directly to the OTA, who in turn organizes the payout to the property manager (or owner) a few days after the check-in.
When the pandemic started, Airbnb created a new policy called “Extenuating Circumstances” and proceeded to refund the full amount to all guests leaving many owners and property managers in dire straits.
I am of course aware that these were difficult and unusual times, and that many travelers were forced to cancel their reservation and get a refund, or get a voucher issued to use at a later time. This is what most companies in the tourist industry, including airline carriers, did.
However, what Airbnb did was that they didn't even approach the owners or property managers. They completely bypassed existing contractual terms and conditions by creating a very vague “Extenuating Circumstance” clause, acting as they saw fit in the detriment of everyone else. Yes, they are in control of your business, and it is only going to get worse in the future. Hence the importance of choosing a holiday rental manager that can generate direct bookings and does not rely on OTA’s to produce income for you.
You can drive more revenue as you don't have to pay OTA's commision
Moreover, there is a huge economic profit driving direct bookings. Paying 15% of your revenue to the OTA’s represents a lot of money at year end.
To summarize, direct bookings are essentials as they allow you to remain in charge of your business, control your cash flow, and as a result get a higher profit.
How to get more direct bookings?
There are many ways to do so, but this mainly depends on the holiday property managers’ business strategy. In all cases, the holiday rental managers, or the property owners themselves, are the ones in charge of all the hard work, such as cleaning, check-in/out, maintenance and many more tasks related to running a holiday apartment. The OTA’s are basically an enormous PR machine with a huge marketing budget that can help get more customers.
1. Hire a trusted holiday property manager with a proper website and a good online communication
So the first thing you need to look at is the website of the holiday property manager. The company needs to have a well-performing website (read webspeed and customer experience), be visible, and come up on the first search page of Google, be active on social media, have a quality blog site, and feature positive customer reviews. You should also ask your rental manager to provide some statistics. Make sure you know where their guests come from, and where they get their bookings from. As a rule of thumb, they should be able to provide at least 45-50% direct bookings.
2. Your aparment prices on your website and on OTAs' website should be different
The next thing you need to make sure of is that the property manager advertises your property at a higher price on the OTA’s themselves. They need to raise the prices in order to cover the expenses of the commission that the OTA’s charge. Holiday rental managers are free to set rates as they see if. In 2015, the European Commission ruled that OTA’s could not force hotels or accommodation companies to price parity. This means that the guests will pay at least 15% more for the same accommodation on the OTA’s.
3. Understand terms and conditions of your holiday rental manager
The next factor you need to look at is that the holiday rental manager offers better terms and conditions for his customers on their website than the OTA’s do.
An example could be a more attractive cancellation policy. As a result of the pandemic, many travelers require more flexibility and therefore it is a good idea to offer free cancellation up to 15 days before arrival. In turn, the rental manager can set the free cancellation policy to 30 days on the OTA’s. This is another incentive for guests to book directly on the holiday rental managers’ website.
Many OTA’s do not pay out the property manager (or the owner) until a few days after check-in. Airbnb, Tripadvisor and Expedia are using this method while both Booking.com and VRBO do allow the owner or property manager to charge the guests directly through their credit card facilities. What is important for you is that the property manager controls the cash flow.
There is no need to let the OTA’s be in charge of your money.
As a result, the property manager can “penalize” the OTA’s working on a payout basis by raising the prices another 10%. These OTA’s who work on this model of payout after check-in are the ones that you need to stay away from; they can keep your money in case the guests make a complaint. By raising the prices, you will receive less OTA reservations and as a result have more availability on your calendar to make direct bookings.
Direct Bookings: best and direct way to boost your revenue
Many guests are simply not aware that they can get better terms and prices when they do a direct booking, hence the reason why they keep on using OTA’s. Today, most property managers have their own website. As a traveler, by doing a simple search on the internet, you might find their direct website and save lots of money. And finally, guess who will book directly on your website if you offer the same terms and conditions as the OTA’s? The answer is nobody! But imagine for a moment that a guest could save 250€ booking on your website and cancel free of charge 15 days before arrival.
This is a real game changer for them.