Automation and OTAs | The Biggest Opportunity in Vacation Rentals

Sometimes it’s difficult to understand how industry news relates directly to your vacation rental business. We decided to start with the Wall Street Journal article called Expedia & Priceline Hone in on Airbnb’s Turf.

In this post, we’ll break down the news article highlights. This includes Futurestay’s perspective and what this news means for your business.

To start, the WSJ presents the different industry concepts of “Online Booking” vs “Instant Booking” vs “Instantly Reservable.” It paints a clear picture of tomorrow’s world where vacation rentals and hotels are all instantly booked, side by side, within all of the travel platforms we know and love.

In short — vacation rental owners who leverage today’s technology have great opportunities, not only for traveler demand but to compete alongside hotels in the future. Inventory which is missing instantly bookable features is likely to be left out.

“Priceline Group and Expedia are increasingly displaying vacation rental properties alongside hotel rooms on their sites. Executives said the goal is to provide travelers with the most comprehensive listings for any destination.”

“We think vacation rentals are at the very early stages of being wired up on a global basis. To the extent that you as an e-commerce player can wire up these fragmented marketplaces, you can add significant value to both the supplier and also to consumers.” — Dara Khosrowshahi, CEO of Expedia

The above quotes are some of the main points of the article. What does this mean?

• Expedia & Priceline view vacation rentals as the next opportunity in travel and are merging vacation rentals into their hotel inventory
• Expedia & Priceline are competing with Airbnb to acquire as much instantly bookable rental inventory as possible, as quickly as possible
• Instantly bookable inventory at scale is in high demand. To compete in the market, vacation rental inventory needs to evolve.

What’s the #1 point you need to take-away for your business? Online bookings and instantly bookable inventory are here to stay. Partnering instantly bookable inventory with current automation technologies puts these properties in a position of strength.

Vacation Rentals + Automation = Ready for OTA Market

Listing a vacation rental property alongside hotel inventory is complicated. The WSJ references the “growing pains” that the vacation rental industry experiences as it grows. They write, “A home is a very different kind of asset than a hotel…Homes come in all shapes and sizes…There is no 24-hour front desk attendant on hand, and the owners have extensive lists of special instructions.”

For vacation rental owners, it is important to see that to compete alongside hotels in an OTA market, you need to have a similar set of tools. That’s where automation comes in.

Automation is an increasingly important process to allow vacation rentals to be bookable on OTAs. Automation bridges the gap between complex standardized OTA processes and the special vacation rental rules.

Is Your Rental Positioned to Advance the Market?

We see from the WSJ research, that vacation rental market popularity is what caused “Big travel portals Expedia Inc. and Priceline Group Inc. [to race] to catch up.” These popular channels see the opportunity with vacation rental inventory. They’ve “Dominated hotel bookings for two decades, [and] are now betting big on the rental sector by boosting their inventory of home-rental options that can be booked similarly to a hotel, with just a few clicks.”

Why does this matter?

The vacation rental market is growing at 2x the rate of hotels. That’s why OTAs want in.

This is great news for your business. Vacation rental popularity and demand is increasing faster than hotels. In fact, vacation rental’s grew “11% last year from the year earlier, and is projected to grow 8% this year to more than $34 billion. The U.S. hotel industry grew 5%”

Vacation rentals have the leverage of a growing, global industry behind their success. To sweep away their hotel competition, vacation rentals also need a complete set of tools for success. That’s where instant bookings come in.

What does it mean to have Instant Bookings?

Instant Booking means that a property can book online instantly and accurately. This booking capability is because of  a real-time connection between three pieces:

1. Its listing (eg: on Booking.com & Expedia)
2. Its property management software
3. And its distribution to all other listing channels (Expedia, Airbnb, HomeAway, Tripping, etc).

By definition, an instant bookable property requires a software that sits “outside” of the channel and keeps it up-to-date. It’s not something that Expedia or Booking.com does internally by enabling credit card processing or flipping a few switches.

“Outside” software means instantly bookable properties must have signed partnerships with all channels to access their partner APIs, as well as higher levels of partnerships to even list a property on those specific channels.

“Online Booking” is not Instant Booking

Online Booking is a manual booking process where travelers and managers email each other back and forth through a platform (eg: Request to Book on HomeAway). If they reach an agreement hours or days later, the transaction can be processed online via credit card.

Online Booking is not instant, and is never listed alongside hotel inventory on channels like Booking.com or Expedia, in order to “give guests a consistent customer-service experience.” — says John Kim, President of HomeAway.

“Expedia’s 2015 purchase of vacation rental site HomeAway Inc. has given the company about 1.4 million online bookable listings that it is beginning to roll out on sites such as Expedia.com and Hotels.com.”

Thus — it’s exciting when HomeAway says it will add Online Bookable units to Expedia, but that’s just a small step in their plan towards creating more Instantly Bookable units.

What happens when you treat “Online Bookable” inventory like its ready for “Instant Booking?”

This nightmare, seen in a viral article by a property manager, which results in double bookings, failed payments, travelers showing up without reservations and of course — the vacation rental de-listing themselves.

The massive demand and pressure for (real) instant bookings on Booking.com and Expedia is already driving property managers to seek out automation software. This pressure has influenced industry/enterprise partnerships to develop automation technology.

So, Everyone Wants Instant Bookings — What Now?

The demand for actual, connected instant booking is years ahead of the supply. The article paints a rosy picture, but here’s the truth.

As Dara Khosrowshahi, former CEO of Expedia said: “Vacation rentals are at the very early stages of being wired up on a global basis.”

While vacation rentals are in their “very early” connectivity stages, don’t be discouraged. The opportunity for growth in this competitive market is amazing. What Khosrowshahi wants you to know, is that putting a “book now” button on a listing doesn’t actually make it instantly bookable.

The complex “wiring up” for vacation rentals to become instantly bookable are as follows:

• Vacation rentals need to have the “plumbing” (software) required to be instantly bookable, which may include property manager training.
• Hotels which are instantly bookable have complex technology and full-time staff. Similiar resources may not be applicable to vacation rentals looking to become instantly bookable.
• Expedia (and Booking.com) is currently designed for hotel inventory. Vacation rentals offering instantly bookable properties without business automation on these channels are likely to face some challenges.

What do we mean by “challenges?” One example is from Brian Harris of Harris Properties Management Inc., who manages 90 vacation rental properties along the Alabama Gulf Coast. He lists on VRBO. He explains some of the challenges of listing on VRBO. One such challenge is the lack of interaction with guests which reduces the ability to resolve their problems.

Harris says, “A recent guest was trying to book a home near family in Gulf Shores, and was told by a customer service agent that the listing was close by. It turned out to be 20 miles away, and the customer was upset…This is more about VRBO and HomeAway keeping that guest in their pipeline and getting the guest fee, rather than what the guest wants.”

This means that manual interactions for your business decrease, and you need automated functionality to replace this.

Managing your property alongside hotels on OTA’s or using an instantly bookable feature, is going to be a different experience from what you’re used to. There is going to be a learning curve. The opportunity for increased visibility and bookings is going to be worth it.

Outlook

As we’ve seen, the current OTA space, with giants like HomeAway/Expedia and Priceline/Booking.com do not currently tailor their processes for vacation rentals. However, they see the opportunity that vacation rental inventory has to offer. The industry and space are progressing for making this process more successful.

At present, vacation rental automation technology lays the groundwork for vacation rentals to compete and interrupt the OTA/hotel space.

S. Philip Kennard, CEO at Futurestay | co-writer Kristen Martinelli, Marketing Coordinator