Pay-Per-Booking Advertising For Vacation Rentals? An Industry Thinks Twice
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All vacation rental owners have been spoiled by listing sites.
They’ve gotten accustomed to seeing several hundred (if not thousand) percent ROI on annual subscription fees…
They’ve become picky – even lazy – when a reservation inquiry doesn’t perfectly fit into their calendars…
And they’ve gotten a taste for champagne really quick, happily forecasting future earnings based on this one inexpensive (and probably unrealistic) listing fee.
But times are changing in the vacation rental industry…
And the most visible shift is in the direction of a pay-per-booking model, where, whether they like it or not, property owners and managers will begin to pay a percentage of every single booking generated through the major platforms (as opposed to the one-time phonebook-style listing fee):
What Does This Mean?
It means that the nature of vacation rental marketing budgets will suddenly switch, from a fixed yearly amount, to a scaled number based on performance.
And for most successful owners/managers who rely on listing sites, this new model means profits will drop.
So today – with the pay-per-booking implementation actually happening before our very eyes, and with the seismic roars in opposition heard from all corners of the globe to prove it – I am going to let you in on where I think things are going next…
The pay-per-booking model enlisted by HomeAway (click here to list your place for free on HomeAway—only pay when you get a booking), FlipKey, and AirBnB is based on one primary power play: that property owners and managers do not have the time and/or ability to book nights on their own.
Leveraging this dependence on their control of the marketplace, big listing sites, it would seem, are smart to make this change. As profit-oriented corporations, it will make them more money in the short term.
But scratch below and you’ll find a much less obvious yet far more influential set of longer-term ramifications in a 4-Part Sequence Of Events To Follow:
1) Like in any emerging market, vacation rental owners/managers will ultimately go where the demand is
This is to say that the moment a new method for generating inquiries arises, the restrictions and limitations of the pay-per-booking model will become irrelevant and obsolete simply because cheaper bookings can (or must?) be acquired elsewhere.
2) These new methods for generating bookings are not a fantasy
Already, owners and managers have begun to improve their own online reputations, dedicating more time and resources to self-sustainable online marketing. And new niche listing site competitors have started providing leads at a fraction of the cost (and in some cases free).
3) Under this new status quo, acceptable pricing and ease of use will be king
As more owners and managers access increasingly more ways to generate bookings, the new question becomes, where can they get the most affordable leads and where can they do so in the safest, most user-friendly way? In very much the same style that Steve Jobs changed a very chaotic landscape of digital music downloads with iTunes’ $0.99/song model, the winner in the vacation rental industry has the ability to manhandle the power structure, but only with the right policies in place.
4) When these disruptions fully materialize, it will be the company with the strongest brand loyalty that conquers all
The biggest of the listing sites aren’t going anywhere soon. But said in another way, in the embryonic vacation rental industry, the long term really matters. Making pricing flexible for proprietors of all sizes, responding to market feedback in a respectable way, and making customers happy: these time-tested business values will hardly be lost in the war for more bookings.
So, what does this suggest?
It suggests that the pay-per-booking model is predicated on a weakness.
And as industries evolve, weaknesses strengthen.
It could be a mistake of any given vacation rental company to neglect to realize that the sustainability of their success lies ultimately in the customer. The biggest challenge for major listing sites will be recalibrating users expectations while keeping that all-too-important loyalty fully in tact.