Kayak recently announced plans to display over 200,000 HomeAway listings by the end of 2015, and Booking.com reports a full 20% of its listings are vacation rentals. The ubiquity of vacation rentals gives property managers greater opportunities for exposure; however, successful distribution depends on a nuanced consideration of the cost of guest acquisition.
The expenditure that consumes much of the conversation is the cost of commissions. On the surface it may seem that OTA’s chip away at profits; however, there is real value in that 20% fee.
Online Travel Agencies (OTA’s) now feed travel aggregators such as Kayak vacation rental listings, and OTA’s and aggregators both invest heavily in marketing. Expedia alone sees 50 million unique visits per month. A savvy approach to OTA listings can put a vacation rental at the forefront of consideration among travelers. Ultimately this will increase occupancy substantially, in a way that is utterly impossible for most vacation rental management companies to do on their own.
Without wide distribution from OTA’s, most rental properties will suffer from empty room nights, and empty rooms cost money. Maintenance and front-desk
staffing costs don’t depreciate in proportion with occupancy lags. A $250 ADR property with 80 occupied units requires nearly the same level of investment as a property at 60 occupied units—and yet the $5000 in potential revenue is substantial. In this case, the commission fee is well worth the $200 per room in revenue from the guest who might not otherwise have discovered the property, the potential for the repeat or lifetime guest, and the ancillary direct traffic driven from the OTA (called the billboard effect).
Studies show on average, 20% to 25% of units are unoccupied every night. For a property of 100 units with $250 ADR, this looks like $5000 of lost revenue. Alternatively, $1 Million per year. Commissions are an investment with measurable ROI. They are critical to increased presence, increased revenue, and, at the end of the day, increased owner retention.
The post The 3 C’s of Change for PMC’s: The Essential Role of Commissions appeared first on LeisureLink.com.