There is an increasingly high dependency on Online Travel Agents (OTAs) in the vacation rental industry. As property managers compete with more listings, they should adopt distribution strategies. The efficient use of third party distribution channels can help increase profitable bookings.
→ Read more about the differences between top OTAs here
Airbnb, Booking.com, Vrbo and Tripadvisor drive millions of travellers to vacation rentals and have dominated the growth of property supply in the vacation rental industry. In 2018, in Europe, Airbnb and Booking.com each account for 30% of property manager’s bookings compared with direct channels, which account for 26%. Additionally, Vrbo accounted for 8% of bookings and Tripadvisor only accounted for 3%.
Vacation rental distribution drastically increases a listings’ exposure to travellers. By putting your listing on a variety of online travel agents, your listing will be available to more customers, which in turn, will increase occupancy.
The main advantages of OTAs are:
Many property managers use a variety of OTAs each day and managing your listings on each platform can be tiresome and time consuming.Technology partners, such as channel managers, can help expose your property across a large scale of OTAs whilst syncing all the information across the channels.
According to Transparent’s European Vacation Rental Survey 2018, many PMs are attempting to take on the major OTAs by investing in their direct channel sales: 56% of the PMs surveyed are expecting to increase their marketing spending in the next year. However, the history of the hotel industry proves that the rise of the OTA giants and their dominant distribution power makes it increasingly important to work them. Hence, a mixed strategy, focused on channel distribution and direct bookings, is likely to become the norm.
OTAs bring a lot of value. According to the European Vacation Rental Survey 2018, 60% of property managers’ bookings are concentrated in Airbnb and Booking.com, which is more than double their direct channel bookings (26%).
Although OTAs tend to have high commissions, there are several advantages that outweigh the cost. A good OTA distribution and marketing strategy is essential to increase traffic. You have to spend money to make money and OTAs charge PMs and guests various fees, so it is important to be wary of the costs and understand each fee structure.
The pricing models vary depending on the OTA:
|Host service fee||3-5%||15-20%||8-10%||3%|
For Airbnb, host service fees are between 3-5%, covering transaction fees, and guest fees are 0-20% depending on factors such as the length of stay, cost of the reservation and the properties’ characteristics.
For Booking.com, the guests are not charged a commission but PMs pay a fee of 15-20% depending on the services that the PM chooses.
For Vrbo, guests pay a fee of between 6-12% of the booking total, whilst the PM pays either $499 for an annual subscription or 8-10% per booking, depending on the reservation.
Tripadvisor redirects customers to one of its 26 sister sites. The guest booking fee varies between 8-16% depending on the reservation total and PMs pay 3% of the guest’s booking total.
Using a variety of OTAs and having an effective distribution strategy is essential, however, you are likely to lose some margin on distribution and so it is equally important to have a carefully-planned pricing strategy.
If you want to optimize your revenue, you must ensure that your listings have the right rate on the right channel at the right time. In order to do so, you must focus on market research and competitive analysis. Competition fuels growth in the vacation rental industry and an understanding of competitor’s pricing and how they are positioning themselves online is crucial when choosing the best pricing strategy for your vacation rental.
Data is the primary link to vacation rental distribution and helping property managers optimise their revenue. By having an easy-to-view dashboard that displays the listings and rates across OTAs, property managers can spend more time managing their pricing strategy and comparing their prices with competitors.