9/9/2017 - Industry Update
=== Introduction and Overview ===
When I started in the vacation rental business in 2006 I had one vacation rental in downtown Baltimore, and I relied on VRBO.com as my primary marketing channel. (VRBO = vacation rentals by owner)
When I started in the vacation rental business in 2006 I had one vacation rental in downtown Baltimore, and I relied on VRBO.com as my primary marketing channel. (VRBO = vacation rentals by owner)
- In 2006 advertising fees with VRBO were $300/year per property.
- In 2006 Homeaway purchased VRBO.
- From 2006 through 2016 my advertising fees grew from $300/year to $1800/year per property
- In 2016 Expedia purchased Homeaway/VRBO and in 2017, Expedia totally changed the entire business model -- In 2017 Expedia made themselves a required middle-man for all transactions with a 6-12% booking fee
- In 2017, Expedia projected to make approximately $5,000/year per property on my properties
So, in this business I have gone from being worth $300/year to a homegrown website that was offering a great advertising service to being worth $5000/year to some huge corporation -- and in that process, I have lost a huge amount of control over all aspects of my quoting and booking process, all of which directly affects a large mortgage payment each month
And amazingly, with this last shift that has stressed me out, they have managed to shift the financial stress of doing business with them over to my customers -- and as such, they have in fact pissed off so many people that the net affect on me has been decreased bookings as they have become more profitable per transaction...
And amazingly, with this last shift that has stressed me out, they have managed to shift the financial stress of doing business with them over to my customers -- and as such, they have in fact pissed off so many people that the net affect on me has been decreased bookings as they have become more profitable per transaction...
=== But how are they going to charge YOU a booking fee you might ask? ===
Those familiar with VRBO/Homeaway may be confused right now so let me clarify -- Expedia (Homeaway/VRBO) has totally changed everything about how you and I can communicate.
I don’t know about you but this all seems like a giant step backwards to me!? You are now having to pay a 6-12% booking fee for something you use to be able to handle yourself, and I have lost control of my sales and booking process. Ironically, the major benefactor in our losses here is a huge company (Expedia) who really doesn’t care as much about our transaction nearly as much as we do.
Those familiar with VRBO/Homeaway may be confused right now so let me clarify -- Expedia (Homeaway/VRBO) has totally changed everything about how you and I can communicate.
- In times past, I’d get an email with lead info along with access to your email address and phone number. From there it was up to you and I to do business.
- Now, I get an email with your name, dates and comments. I have no access to your email address nor your phone number. I can only respond to you in their web based console and you can only reply to me in the same fashion. We can NOT communicate by phone nor by email outside of their console, and I can NOT provide you a link to my website for more information.
If we agree to do business, I have to book you through their payment processing system, and as part of that I have to pay them payment processing fees, and you are going to get charged a 6-12% transaction fee.
I don’t know about you but this all seems like a giant step backwards to me!? You are now having to pay a 6-12% booking fee for something you use to be able to handle yourself, and I have lost control of my sales and booking process. Ironically, the major benefactor in our losses here is a huge company (Expedia) who really doesn’t care as much about our transaction nearly as much as we do.
=== This was a Corporate Coup and Resistance is forming, but... ===
For what it's worth, this is a corporate coup that has been in the making for over a decade. There are a few class action lawsuits going related to false promises made by the CEO Brian Sharples of Homeaway a few years ago, but they won’t fix this problem.
Many people are scrambling now to try to create new marketplaces for direct interaction again, but it will likely be years before we all have a useful global marketplace for doing business without a middleman again, and until then, we are all going to have to work a little harder to keep our transactions costs down and our business more personal.
For others with properties who want to keep a finger on the pulse of industry changes, there is a closed facebook group... Say no to VRBO Service Fee. You will need to be a property owner to join:
For what it's worth, this is a corporate coup that has been in the making for over a decade. There are a few class action lawsuits going related to false promises made by the CEO Brian Sharples of Homeaway a few years ago, but they won’t fix this problem.
Many people are scrambling now to try to create new marketplaces for direct interaction again, but it will likely be years before we all have a useful global marketplace for doing business without a middleman again, and until then, we are all going to have to work a little harder to keep our transactions costs down and our business more personal.
For others with properties who want to keep a finger on the pulse of industry changes, there is a closed facebook group... Say no to VRBO Service Fee. You will need to be a property owner to join:
=== Problematic Details with this Business Model Shift ===
For those of you familiar with AirBNB's rental process, VRBO/Homeaway has basically switched over to that type of system.
What was once just a lead generation system connecting property owners to prospective tenants is now a booking platform with a very controlling communication console and a hefty booking fee for consumers.
And while you may have had good experiences with AirBNB, AirBNB was started for renting beds in a home, not entire homes, and that business model really isn’t a great fit for self managed check-in and check-out processes as found on many vacation rental properties.
Likewise, AirBNB started out with their pricing structure -- so everyone who participates understood the rules from the get go -- where as I started out with a website called "Vacation Rentals By Owner" and I've ended up in a situation in which I have lost control of my entire booking process...
This change with VRBO/Homeaway has been slowly creeping up for years with small steps taken each year to get them to the point where this last step was doable -- and many of us had to add AirBNB as another advertising channel as everyone started to become less comfortable with the changes -- and until another web portal that caters to person-to-person business without booking fees manifests again -- we are all financially caught by the man-in-the-middle trick yet again.
Some folks don't view the booking fees as being that out of line, and some property owners in seasonal settings with smaller homes don't care as much about the loss of control, but there are lots of us who it affects far more than others...
What was once just a lead generation system connecting property owners to prospective tenants is now a booking platform with a very controlling communication console and a hefty booking fee for consumers.
And while you may have had good experiences with AirBNB, AirBNB was started for renting beds in a home, not entire homes, and that business model really isn’t a great fit for self managed check-in and check-out processes as found on many vacation rental properties.
Likewise, AirBNB started out with their pricing structure -- so everyone who participates understood the rules from the get go -- where as I started out with a website called "Vacation Rentals By Owner" and I've ended up in a situation in which I have lost control of my entire booking process...
This change with VRBO/Homeaway has been slowly creeping up for years with small steps taken each year to get them to the point where this last step was doable -- and many of us had to add AirBNB as another advertising channel as everyone started to become less comfortable with the changes -- and until another web portal that caters to person-to-person business without booking fees manifests again -- we are all financially caught by the man-in-the-middle trick yet again.
Some folks don't view the booking fees as being that out of line, and some property owners in seasonal settings with smaller homes don't care as much about the loss of control, but there are lots of us who it affects far more than others...
The loss of control has the greatest affects in the following ways...
- Booking Fee -- Consumers are being subjected to 6-12% booking fees, and many were getting along just fine for decades without that middle man nor that fee.
- Automatic Price Quoting -- Setting up a pricing matrix can be relatively simple for landlords in very seasonal spots with smaller homes or bedrooms for rent. That is NOT the case for those of us with larger homes, in urban areas and with the need to manage minimum stays in a very active manner. More on this below...
- Large homes -- Many landlords with larger homes may decrease pricing to compete with the next size home down in certain situations and these systems don't generally convey that concept well. Likewise, when custom pricing is agreed upon, changing the pricing in the system is not always as easy as the platform operators would like you to believe...
- Urban Areas -- Landlords in urban areas are affected by dozens if not hundreds of events that may create a situation where increased pricing or modified minimum stays need to be used to remain profitable, and both of those are nearly impossible to manage in these controlling booking systems
- Minimum Stays -- Many landlords in general have come to realize that booking two or three night stays well in advance often times affects their overall profitability to a point where they are not profitable -- and yet if they exclude them completely they are also not nearly as profitable as they might be otherwise -- thus these need to managed on a case by case basis and that is not doable easily in these controlling booking systems without risking your account -- and this is a huge problem.
- Ease of booking is problematic -- The ease of booking is "too easy" for the guest. All they have to do is click a button to reserve and if they've decided not to read details, as many do, we end up with situations that cause stress for both parties. Likewise, these automated booking processes do not give the landlord and the guest an opportunity to bounce a few emails back and forth to determine if there is a mutual match -- and as such, we've all lost the greatest screening tool we can have...
- Screening is being phased out -- With instant book options we are told we can still screen, yet if we turn someone down after they've indicated they would like to book, it negatively affects our profile rating and can lead to account termination. T
- Cancellations -- Cancellations with these organizations in the middle can become problematic for multiple reasons.
- Security Deposits -- The lack of a security deposit that is fully paid in advance and controlled by the property owner leads to a lot more small issues that I don't see at all when I'm collecting a security deposit in my hands.
- Other -- and there are other issues...
And let's be clear here -- with all of these issues, who would have voluntarily done this?
Few people -- yet here we all are yet again -- serving corporate masters we've never even met -- and they caught us this time with technology...
Few people -- yet here we all are yet again -- serving corporate masters we've never even met -- and they caught us this time with technology...
=== Please support small business ===
For those that like to support small business and for those that prefer to deal with owners directly without intermediary fees, always try to find the personal websites for property owners and/or use advertising sites that allow you to communicate and book with property owners directly outside of a controlling email console with booking fees.
For those that like to support small business and for those that prefer to deal with owners directly without intermediary fees, always try to find the personal websites for property owners and/or use advertising sites that allow you to communicate and book with property owners directly outside of a controlling email console with booking fees.
A less detailed email that was sent out to my customers with a different version of this information -- for an html version of that with images see: