July 6, 2020
COVID-19 has caused a shift in the short-term rental industry. In response to the pandemic, online travel agencies (OTAs) cancelled all bookings made through their sites after a certain date. This forced property managers to refund much-needed revenue. As a result, industry experts have suggested that property managers should rely less on the booking giants and more on direct booking sites.
But with direct booking sites, property managers are faced with the difficult task of driving traffic—or in other words, competing against the same OTAs they’re so desperately trying to avoid. To find out whether this is feasible, we contacted digital marketing expert Vlad Rascanu, who headed Expedia’s SEO in Canada from 2013 to 2015, and got his take on which route provides more benefits for your business.
The reality of direct booking sites
In the vacation rental industry, a direct booking site is a website built and monitored by you or your company. That means, when a guest books one of your properties, they can do it through your site rather than a third party.
There are some obvious perks of having a direct booking site. First, it's a great way to increase brand awareness. Guests can browse your properties and get a sense of what your business has to offer. Plus, once the guest is on your site, there’s no competition from other companies, so it's easier to secure the booking. And when you do, you can avoid high commissions, pocketing all the profits.
While this sounds great in theory, the issue with a direct booking site is driving traffic in the first place. Typically, when a guest books an accommodation, they browse sites like Airbnb, Expedia and Booking.com—OTAs whose brands they know and trust. These OTAs have established their credibility through years of marketing efforts. Even if you are trying to compete by ranking for keywords and paying for social media ads, your digital marketing won’t compare to the reach of an OTA.
According to Rascanu, globally, Expedia’s digital marketing budget is close to $5 billion a year. In Canada alone, SEO has a budget of over $1 million a year, and in the U.S. it’s closer to $10 million. “If they decide they want to rank for rentals in New York or wherever, they can put that budget towards that and they can squish everybody else out of there,” Rascanu says.
This isn’t to say direct booking sites can’t be profitable. But to make that happen, the property manager needs to focus their marketing. “They really have to find a niche,” Rascanu says. “Whether it’s a niche audience, whether it’s niche keywords that they rank for, whether it’s a niche in their social media channels and hashtags. They have to find a niche that works for them. They just can’t go broad because they won’t succeed.” For example, trying to rank for the keyword ‘vacation rental’ isn’t going to work as the biggest travel companies in the world are all trying to rank for that same keyword.
Rascanu adds that it helps to have a unique property that you can promote—something like a house on the ocean or a cabin on the summit of a mountain. If your listings are all urban condos, your direct booking site won’t be able to compete against OTAs and hotel chains that are marketing their central locations and downtown convenience.
Competing with OTAs
Listing with an OTA can be frustrating. It’s a challenge to make your properties stand out in the search results, they take a percentage of each reservation, and they have the final say over your bookings, which includes the authority to cancel. It can leave you feeling pretty powerless. But migrating all of your listings over to a direct booking site isn’t the answer. It can’t compete. That’s why property managers need to identify and exploit the positives of listing on an OTA.
The biggest pro of using an OTA is its reach. The top five major OTAs have an umbrella of 70+ listing sites that see thousands of views everyday. Not to mention hundreds of employees and millions of ad dollars devoted to promoting the site and your listings. By leveraging tools, promotions and features provided by an OTA, you can increase your properties’ visibility and earn some major revenue.
OTAs are constantly working on developing their brands. It’s the reason everyone recognizes names like Airbnb, Booking.com and Expedia. Take advantage of this. By listing on one of these sites, your business gains a certain amount of trust and credibility. According to Rascanu, one of the major ways an OTA makes money is through recurring purchases. “Once they get the [user] in then the user gets familiar with their brand and they go back to their site to purchase directly versus going to Google to do their general research,” he says. Having a devoted customer base lends trust to your listings and increases their chances of being booked.
Securing these recurring users, however, is expensive. While OTAs can afford to dish out $2-$3 per click in an attempt to acquire a first-time user, smaller property management companies risk bankruptcy trying to keep up.
The balancing act
There are pros and cons to both types of booking channels, but the bottom line is, you’ll struggle to profit if you rely solely on a direct booking site. Without the budget and resources to back you up, your site can’t compete against an OTA's marketing budget.
Instead, you need to find a balancing point. Creating a direct booking site is a great tool for driving brand awareness and developing a loyal customer base. And any guest you can drive to your site is a win-win. Since most companies mark up their properties on OTAs to account for commission, you can offer discounted rates on your site while avoiding any commission fees. But to find these guests, you need to first list your properties on an OTA. It allows you to reach travellers you normally wouldn’t, converting them into future visitors of your site. By using both, you can grow your business and your brand. Cha-ching!