Balance is the key to successful vacation rentals

The short-term vacation rentals market has had a tough 2020. While the post-COVID rebound has begun in many areas, a possible second wave of infections could stall any advances with the re-introduction of localised lockdowns and anti-tourism measures.

In the UK, there has been a significant improvement in vacation rentals. Occupancy rates have recovered to on average 70 per cent of 2019 levels. While in Spain, occupancy rates are 61 per cent of 2019 levels on average.

In such challenging economic times, many resort teams are looking at how they can earn more from their bookings. And, diversification and balance seem to be the order of the day.

Over recent years, online travel agents (OTAs) have dominated the scene. They have changed the way people book travel and become vital distribution partners, putting heads on beds and liquidating unsold inventory. Today, they hold 99 per cent of the world’s hotel inventory and in doing so have changed customer expectations and forced travel businesses to evolve to remain competitive.

Until recently, having access to an online travel agent was all a resort needed to generate vacation rentals. The OTAs make it easy for consumers to compare prices and provide hotels and resorts with access to new consumer segments. But while these OTAs offer so much, there are some drawbacks. They charge high commissions, especially for the smaller resorts, and the support isn’t always there when you need it.

Within the OTA market, the leading brands include Expedia, Booking.com, and Priceline. These brands control 28.09 per cent, 19.13 per cent, and 16.15 per cent of the market, respectively. And they show no signs of slowing down. 

These brands have built their success on being agile, technology-led and knowledgeable about consumer trends. They have large media budgets, utilise loyalty programmes and have created brands that buyers believe offer the most cost-effective option. 

Research shows that OTAs invest 30-40 per cent of revenue in marketing, compared with just a six per cent investment by hospitality brands. It is not surprising that the 2-1 ratio of OTA versus direct bookings has remained consistent*.

Indeed, the gap between OTAs and direct bookings continues to widen annually. If these growth rates continue, by 2025 bookings by OTAs could reach $239B compared with $130B for direct bookings*.

However, resorts are now looking at more cost-effective ways to promote their unsold inventory. With the advent of Covid-19, it is more important than ever for resorts to squeeze as much as possible from each apartment rental. 

Many are doing this by prioritising the most profitable channel for online vacation rentals – their website. Not only does this reduce revenue dependence and get more exposure, but there are also no massive commissions to pay out. And resorts are realising they really shouldn’t rely on a single OTA to support their entire business. 

Balance and diversification are now vital. Property managers are finding a comfortable mix using both third-party distributors and direct bookings to help maximise revenue, especially at this challenging time for the vacation rentals market. And it makes sense to do so. 

According to Phocuswright*, online bookings have increased from 53 per cent to 77 per cent in the last few years. More and more guests are beginning to book on hotel and resort websites. Indeed, they predict direct bookings could grow to a 50 per cent share by 2022*.

At this time, guests are always looking for the best deal. They will choose direct booking websites IF they can score a better price, avoid service fees and enjoy additional benefits, discounts and offers. 

And this strategy is working. Larger hospitality brands such as Hilton, Wyndham and Marriott are already enjoying success with direct bookings. 

Hilton launched a loyalty program supported by a direct booking drive (Stop Clicking Around) in 2016. These encouraged an additional nine million members to sign up. Their loyalty members drove 56 per cent of the hotel’s system-wide occupancy rates, and web direct and mobile bookings were up 200 basis points*. Loyalty points and benefits such as digital check-in, free Wi-Fi and choose-your-room were not available to OTA bookings – just to direct reservations through the website and app.

Marriott’s “It pays to book direct” offered new lower rates exclusively designed to reward loyalty members who booked directly. Karin Timpone, Global Marketing Officer, Marriott International explained Marriott wanted to: “Dispel the myth that other travel websites offer better rates for our hotels. The simple fact is that you will find the lowest rates across our portfolio when you join Marriott Rewards and book direct.” 

Wyndham has also enjoyed significant gains in direct bookings. Their success is attributed to catching OTA users and converting them before they leave the site. Wyndham improved its website by prioritising guest experience and developed the Wyndham Rewards app’s usability. They also leveraged travellers price sensitivity by consistently offering discounts to guests who book direct, and through implementing travel messages that highlighted price.

And there are other secret weapons resorts can use to increase direct vacation rentals.

Research shows that 50 per cent of OTA users will visit the hotel or resort’s website before completing the booking*. This activity is an opportunity for resorts to capture these leads through improved user experience, website design and secure booking.

With 85 per cent of guests saying the price is the most critical factor, resorts can offer competitive rates and other incentives*.

Many consumers are looking for an instant reward, so why not give them a five per cent discount option for booking direct or providing you with their contact details. And make sure it is available directly (don’t let them wait for the sign-up confirmation email).

So how else can resorts get the right balance between relying on OTAs for volume sales while enjoying the benefits of commission-free direct vacation rentals?

There are two areas that resort managers should consider.

1 Drive more traffic to your website’s booking engine

There are several actions resorts can take to drive guests to their direct channel. These include:

• Rate parity;
• Robust metasearch strategy;
• Developing sophisticated keyword search; and 
• Omnichannel campaigns.

2 Maximise conversions on your website’s booking engine

Research shows that for every 100 visitors to a resort’s website, on average, only two will complete a booking*. However, resorts can increase this conversion rate by:

• Delivering a seamless user experience; 
• Engaging users with special offers or low inventory warnings; and
• Remarketing to potential guests who have abandoned the booking process with personalised follow-up messages and offers.

Check out our article, 19 tips to increase direct bookings on your website, for further tips and advice to generate more traffic to your website and increased direct bookings. And see our Merlin Spotlight on our new Rental WebApp.

There is no doubt that direct bookings allow resorts to take advantage of significant opportunities. These include repeat bookings, cross-selling and up-selling, increased brand loyalty, and even timeshare tour booking for your sales team. All this ultimately leads to higher revenues and higher profits.

But bear this in mind. Whatever marketing your resort might undertake to encourage direct booking, there will always be a large percentage of customers who will book via OTAs. 

They appreciate the ability to search and compare quickly, and they want to shop around for the best-perceived deal. These types of guests help you meet occupancy levels, especially in times of low activity and their importance to your business cannot be underestimated. 

In order to achieve the right balance, resorts need to develop a strategy when dealing with OTAs – particularly when it comes to pricing and distribution. At no time should third party channels rates be lower than resorts have publicly available on their website – even for loyal OTA members.

In these difficult times, resorts and OTAs can get the balance right and collaborate effectively. This allows resorts to reduce their inventories of un-booked apartments and boost revenue, especially during off-peak periods. They’re able to reinforce brand awareness and benefit if guests use OTAs for research before switching over to direct booking sites. 

The combination of compelling incentives through loyalty programs and excellent user experience, together with the broader distribution via OTAs provides a two-pronged strategic approach for resorts. With the right balance, they can maximise direct bookings and maintain strategic relationships with OTAs. It really can be a win-win for all.

How Merlin Software can help your vacation rentals?

Our clients have had access to online direct rental booking functionality through Merlin Classic for many years now. 

Recently, however, we launched the Merlin Rental Booking WebApp. Using the latest coding technology, the WebApp allows website guests to search and find available accommodation across your resort/s, check booking rules, confirm a booking, order additional items, make payment and receive confirmation. All in real-time.

Our stand-alone Merlin WebApps are entirely independent of, but can integrate with, Merlin Classic and:

• Are easy to set up and configure;
• Have an intuitive interface;
• Include tablet and mobile responsivity;
• Allow members to self-service;
• Reduce overheads and the need for staffed call centres; and
• Have a low start-up cost.

Merlin has also launched its new web API with TravelTripper (now Pegasus). This API allows you to access the TravelTripper Channel Manager service directly from Merlin. 

Our web API with leading channel manager, SiteMinder, is launching this Autumn 2020. 

You can find out more about our Rental WebApp and channel manager APIs in our Merlin Spotlight. (link)

Alternatively, contact Merlin’s Mark Thomas to arrange a full demo, pricing and further details. He can be contacted by email at markt@quickmerlin.com or by telephone on +44 870 803 4418.

*Sources

TravelClick.com

Mastercardservices.com

Micrometrics.com

Alltherooms.com

Xotels.com

TravelDailyNews.com

Images: Rawpixel.com