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Tuesday, December 17, 2013

Endangered Species - PPB or PAYG or Owner Oriented Model or whatever you want to call it

I take responsibility for much of the proliferation of acronyms, apologies, however what matters here is the message: marking up on the net to owner - that is having the traveler pay the fee at the moment of booking - is on its way out.

An unseemly thing to say right when the behemoths of Vacation Rental (+Homeaway and +TripAdvisor and +FlipKey) and even huge OTAs (+Booking and +Expedia) are embracing right this model. Right now.

But we need to make a distinction first. #VacationRental is not, professionally managed serviced apartments. The latter is by far closer to a hotel than a vacation rental.

I think the best attempt at defining vacation rental is reversing the definition, get in the travelers' boots resting just below that screen and answer the question: 'What are you looking for?'
local, unique, personal, slow, well in advance
these answers should take you straight to the vacation rental website as opposed to these answers
global, standard, professional, efficient, last minute
that should take you straight to OTAs or specialist websites.

I think mixing the two models can be fatal for venues that have grown with a distinct VR profile. Homeaway for example, why would anybody go to such a cumbersome website if not looking for a very personal deal. Talking of which: these guys are aiming at their forehead right now. Same goes for +Airbnb. And again OTAs I doubt can get away from these constraints. +Booking.com and +Expedia, they're also aiming at the forehead see here, although Booking has it figured out, since they only deal with professionally serviced apartments, as opposed to Expedia taking owners' direct from +HomeAway, tantamount to business suicide, I think.

Somewhat of a special mention in this is deserved by +FlipKey, which I consider a maverick model in many ways, because it does miraculously manage to conjugate on the same site, property owners with professionally managed serviced apartments and villas as well as aggregator and some peculiar way of being a Meta. In that it defies gravity (at least attending the law of physics that I am establishing here ;) by using the Traveler Oriented Model (or PPL, pay per listing) along with the Owner Oriented Model. Aggregate and yet be a Meta (impossible, quoting Brian Sharple from HA, for vacation rentals, since the 'Metas only makes sense when selling commodities' and VR adds a lot more to it). Will they be able to swing it? Maybe, because they have got the pull of Tripadvisor which somehow hasn't yet lost credibility as an unbiased venue despite going commercial. Or has it?

But let me go straight back to the point. Vacation Rentals, ie the previous set of answers above, the reason why the PPB is going to fail is really basic.
You can look at it from two different perspectives
- The private owners posting their ads. These guys just can't be bothered with analytics, tracking, let alone analytical thinking altogether, they're busy doing other stuff, just want to make a little cash and forget about it all. They don't care about control, they want to get it over with the marketing (pay the flat fee) and cash in every time they leave the keys in that mailbox. The result is that when they post on Owner Friendly Websites, Airbnb etc, they forget they paid a flat fee to Travelers Friendly Websites, Homeaway etc, and by posting the same base price on both models they automatically drive the price of the previous above and over the market value.
- The traveler, everyday savvier, will sooner rather then later be aware of this and go for the cheaper option. No matter how social you can be, the market is just going to get at you, you're going to have to find a way to charge that owner or die. +Airbnb included.




Monday, December 16, 2013

AirBnb or the Truman Show syndrome - Disruptive Innovation or just Disruption in the Vacation Rental Market?

If I were to try and give my best shot at an interpretation of Clayton Christensen definition of 'Disruptive Innovation' I would say you need one firm out of an incumbent oligopolistic industry leadership to start using a cheap technology that saves costs. These is then taken up and reused by a newbie company that can afford it because of its low cost and low need of know-how and reinterprets the business model altogether.

Now let's step back and go to the Vacation Rental market as it was, say, in 2008. Homeaway was aggregating by brute force the almost entirety of the PLW (Pay per Listing Websites, which I otherwise call the Traveler Oriented model) and the only competitor worth of that name was Flipkey/Tripadvisor, that had just started using a new business model, the PPL (Pay Per Lead), whereby Property Managers were offered the option to pay just for qualified leads received instead of paying a forfeit per listing a year.

The market already had a Owner Oriented Model (or PAYG) since at least a decade, +Cities Reference among other websites, the property owner can list for free and the traveler is charged, but that affected only a very small share of the market.

Come Airbnb in 2008, uses the PAYG business model, there is precious little to none innovation and shake up of the market looking at the fundamentals. Attending Christensen definition of disruptive innovation, we should have rather looked at Flipkey to see a shot in that direction.

Starting 2011 Airbnb is backed by Andreessen Horowitz and from that moment on Airbnb model starts being trumpeted about as disruptive innovation for the whole, mind you, travel market.

While we don't believe so and we don't even believe that this is a winning model in the medium-long term for vacation rentals, we do believe there are elements of real innovation, targeted to... a wider audience and market.

The one and foremost intuition, albeit not necessarily a conscious one, is that the vacation rental market (the sharing economy in general) cannot be handled as a commodity market (unlike hotels or airlines) and requires human contact. Looking at it from the vacation rental, or even the Bed and Breakfast, perspective, this market had already been monopolized and was hard to tackle.

Thing is that Airbnb, or their backers, seem to be after something much bigger than the VR market or even the travel market. Through the use of massive technology know-how Airbnb created a walled garden where guards and fences have been perfectly hidden. A Truman Show where you are induced to believe that you are among friends, or friends of friends at worst, although every word you type is tracked and you get easily flagged on the basis of the wording you use or the peers that have been invited to report you. Offenders are quietly driven out of the studio with subtle moral suasion techniques. Nice, uh?

Well, yeah, it is actually. These guys are real cool and they know how to make you feel good even when you're kicked out of the place. It's not a real kick-out what you get, you're simply pushed down ranking and, upon time, invited to freeze the listing. I don't think it's too far fetched to call in the Liquid Modernity of Zygmunt Bauman here, these guys are modern, big time, and seduction, not anymore coercion, is the way you have people do what you want them to do, or, he would add, buy what you are selling.

However, getting there is not as easy as it's been described by the medias. Yes, we all know about the nice professional pictures looking good and the sweet little hearts instead of the stars... Sure. But there is a lot more then three nice looking kids with wonderful ideas behind Airbnb, a Big Brother concerted effort looks closer to real.

Disruptive Innovation? No doubt. But not of the vacation rental market or the travel market or the sharing economy for that matter. Much more than that. Describing this kind of disruption takes a much better pen then mine. George Orwell? Probably. Are they going to dominate the vacation rental market? Com'on! At this stage these guys are only looking at the big money coming from the IPO and warming up for the next big thing. What is it? I wouldn't be here if I knew it, but it's going to be BIG. Wait and see ;)

Ah, and while you're at it, go post that ad in the most old fashioned of the oldest digital economy website out there: Homeaway.

One last note: how would you have reacted 15 years ago if I had told you that on 2014 we would be still paying at Cost per (very vaguely tracked) eyeovers! How comes we got the shiniest little website out there well over 5 years now, claiming to be the future happened, yet the majority of internet savvy users keep going for the cumbersome and old fashioned Homeaway? Go figure.

Sunday, December 15, 2013

Endangered Species - Instant Booking

At the turn of the new millennium, an Era of great enthusiasm, in the paradisiacal (then) world of Vacation Rental we thought that things could only get better. The thinking was: since there is no awareness about our business and we are backward in technology and processes, the further proficiency we reach with the above, the better for the whole of us. Think again.

Awareness brought the big lobbies and the big financial guys attention bringing about disruption with precious little innovation.

As for the technology and processes we may be facing a half truth here. Sure, it would be 'better' to streamline the booking process and turn it into a hotel like experience, but is it possible and, most importantly, is it really what the travelers are looking for?

The provider's side: is it possible? At Cities Reference we've been doing the Instant Bookings for over a decade now. On a mixed structure, upon great reward pressure, ~25% of owners would go for the Instant. The catch is, that the property owners being mostly unprofessional, if you don't send them a couple of bookings a month they'll quickly lose pace and stop updating the calendar. If you implement penalties at the first mistake you lose ~70% of them thereafter, if you implement just incentives on the opt-in you'll be in for a lot of cancelations. Still bullish about the Instant?

The travelers' side: is it really what they are looking for? Not sure. If they want professionalism and streamlined process they'll just use OTAs on a flight&hotel combo. Vacation Rentals are often a choice of experience where unique, slow, local, personal relationship may weight more than words like quick, professional, standard.

What with the fact that OTAs are debuting into the vacation rentals? I think this is working with Booking.com only because so fare they have only taken up professionally managed serviced apartments, the moment they'll try to catch and digest also the huge mass of the unprofessional owners the system will go bust.

Saturday, December 14, 2013

Cities Reference to include VAT into its commission starting today - Is PAYG model an endangered species?

Continuing the race downward of the spread between the net rent to the property owner/manager and the grand-total paid by the traveler, Cities Reference is to include VAT into its commission rates starting today. This will result in a further 22% decrease of its net commission continuing the dramatic drop that has seen the commission fall ~70% in the past 10 years, count in promotions and discounts that nowadays more often than not kick in and you get a razor thin margin.

This is broadly good news for travelers and property owners/managers alike, at least until the system stays afloat. As argued in a previous post here about the winning business model in the vacation rental market which is likely to take-all in the medium/long term, market pressure on the small/medium sized vacation rental portals featuring an 'Owner Friendly' model (or PAYG, or PPB) is applied by its own richer peers, like Airbnb, that are backed by venture until IPO and need more aura than results in the bottom line to keep blowing in the bubble.

It is not reasonable to think they are not aware that this is going to backfire in the medium term after they go public and they will have to bring home results, therefore we can infer they are after a short term strategy at the moment to offer a handsome exit to the ventures that have invested in them money and, most importantly, know-how.

The outcome is somewhat ironical, in that, at least attending our analysis, the winning model in the vacation rental market will likely be the oldest one. Since the beginning of the new millennium we've tended to believe that whatever had to do with internet advertising would have eventually embraced a very analytical approach of pay per results. In the age of virtually full tracking of customers funneling the furthest away you can get, and the closest to old style advertising, is the pay per listing model (PLW) whereby you pay a yearly forfeit in advance with no control on your listing's exposure, forget conversions to leads and/or bookings.

Friday, December 13, 2013

Links and useful info of Cities Reference founder's presentation @VRMA European conference in Bruges (BE)

Just back from an intense two days of seminars and conferences @VRMA European seminar. VRMA is importing to Europe the educational and networking culture it has been selling with great success in the US for over 20years now, something that was and is key to the success of the Vacation Rental Market as a whole. Here is a look at the who's who on one of the vacation rental's leading online magazines, VRMintel.com
http://www.vrmintel.com/whos-who-at-2013-vrma-eurpoean-conference/

As announced day before yesterday during Mr. Parasporo's presentation  here follow a list of relevant links to the subject discussed:

1- The Crisis: endogenic or exogenic @Vacation-Rental-Market?
http://blog.citiesreference.com/2013/09/the-crisis-and-us-whats-within-and.html
2- The business models @Vacation-Rental now, which is winning?
http://blog.citiesreference.com/2013/11/homeaway-vs-airbnb-whos-winning-race.html
3-@Property-Managers: the ponderability of prices:
http://blog.citiesreference.com/2013/10/the-ponderability-of-prices.html
4- Legal battle @Vacation-Rental-Market:
Legal battle against VR
http://www.businessinsider.com/why-hotel-industry-lobbyists-want-a-global-crackdown-on-airbnb-2013-5
http://www.hotelnewsresource.com/article71138.html
http://www.fastcompany.com/3018755/fast-feed/airbnb-wins-legal-victory-in-nyc 
5-@Channel-Manager solution(?):
http://skift.com/2013/11/13/the-trouble-with-managing-managed-vacation-rental-listings/ 
6-@OTAs entering the Vacation Rental market
http://skift.com/2013/12/07/booking-com-no-longer-toying-with-vacation-rentals-reaches-historic-milestone/
http://skift.com/2013/10/22/expedia-partners-with-homeaway-to-offer-vacation-rentals/
7- Origination Vs Destination marketing strategy
http://skift.com/2013/11/04/expedias-uphill-climb-must-meet-booking-coms-structural-advantages/
8- Investments @VR-Market since 2011
http://www.vrmintel.com/over-530-million-invested-in-vacation-rental-startups-since-2011/
9- Is google turning to @be-Evil?
http://www.vrmintel.com/googles-organic-keywords-not-provided-10-easy-ways-for-vacation-rental-managers-to-adapt/
10- Engagement Vs conversions does it always work?
https://blog.compete.com/2013/12/05/engagement-case-study/

Tuesday, November 26, 2013

If HomeAway is winning the vacation rental market are Airbnb & C. on their slow way out?

There are three main competing models in the vacation rental market today:
the Traveler Oriented Model (PLW see previous blog post for details on this acronym): The Property Owner (PO) pays for listing, the Traveler pays just the net price with no commissions added.
the Owner Oriented Model (PAYG): The Property Owner lists for free and only pays a small commission or none when she gets a booking, the Traveler is charged 10 to 30% commission at the moment of booking.
the Owner+Traveler Oriented Model (or PayPerLead PPL): Neither the PO, nor the Traveler are charged all costs falling on the PM listing in bulk

The online vacation rental world has been quietly dominated by the PLW model ever since it's origin for well over a decade. It's not like the PAYG model did not exist, on the contrary, it was live and well since its origins when some locally based Property Management Companies (PMs) with a live website were using something similar to what is the PAYG model today. Most PMs were coming from the Real Estate Agents experience (if they weren't one themselves) and tended to charge both PO and Traveler. Come the mid 90's though, some PMs started charging only or mostly the traveler a commission which then also included fees on services such as cleaning/check-in etc (ie Roman Reference since 1997). Within the first decade of the new millennium a few pure websites using the PAYG model started pure online operations, one of these, of course, is Cities Reference since 2006. Enough of self quotations, just to hint that we know where we are coming from and what we're talking about here. Nevertheless, during the first decade of the new millennium online services were still broadly intended as owners' direct services with PLW models (today known under the oligopolistic brands of Homeaway (HA) and Tripadvisor/Flipkey (TA/FK) as opposed to local PMs using various forms of PAYG models which were less competitive in cost to travelers, but more competitive in service. The vacation rental market couldn't be called mature, but it had reached some sort of a balance.

Disruption came in 2008 when FK (now a Tripadvisor company) started a then totally new business model, the PayPerLead (PPL above), targeted straight to PMs that couldn't afford or wouldn't go for PLW listing. It was quite an innovation for the market and the first attempt to aggregate a very chaotic market offering a brand new channel for PMs where they could compete with their own brand.

At the turn of the second decade of the second millennium Airbnb (Air) got its venture's hundreds of millions (July 2011) and the PAYG model as a whole got a -very conservative since it's forgetting Wimdu and its peers altogether- cumulated 530$ millions up to 2013 and took the lead... that is, on the press and consequently on the general perception. Was that real disruption? Think again.

Number of properties: we all know how numbers can be delusional, if that is true in general, more so in vacation rentals. On our own experience the majority of properties have 1euro value per year against a top 10% of properties that are worth 500euro a year, still, this is a measure that must be taken into consideration. Airbnb declares 300,000 properties (other sources say 500,000, notably Ken Yeung in an article on thenextweb that doesn't reveal its sources), against Homeaway's 773,000 and Flipkey's 240,000.
Ever more interesting measure since we are calling Homeaway model Traveler Oriented! On the other hand these figures can't be taken without doubts, for example, the meta title of Homeaway.com reads '65,000 + vacation rentals worldwide.' Interesting... true they own tens of different websites and VRBO reads 'over 75,000 listings', but it's a safe guess that many properties overlap, that numbers declared will likely be floated etc. Anyway it is already something to know that Homeaway claims to have more properties than Airbnb and no-one, that I know of, has yet blowed the whistle. HA takes 1.

Number of destinations: 171 countries in Homeaway against 192 countries and 33,000 destinations in Airbnb and 11,000 destinations on FK. HA declines to share the number of destinations it covers, but we can play the same game of above and consider that Airbnb declares more destinations and no-one seems to be complaining about it, so far. 1 all.
Air

Traffic: this is also an interesting exercise and we can use Alexa as a metric. Starting with the .com Air is ahead being 1,923 against 2,901 of HA (but it must be stressed that VRBO, a HA property, ranks 2,435, so better than its owner's company .com, still somewhat short of AIR, but that gives the general measure of how there cannot be competition among the two), FK is down at a mere 5,996, not so if you consider its mother company TA at 204 (!) although we don't think that could count here; co.uk HA is ahead being 12,129 against 17,866 (and it ownes Ownersdirect.co.uk wich is 16,537); .fr Air is 15,122 while HA with Abritel is 12,122 and with Homelidays is 13,012 so HA is ahead; .de Air is 18,609  HA with Fewo-Direct is 9,308, so HA ahead again; .it Air 18,165 and HA 41,698 so this time HA is big time in delay, AIR has a flair in Italy for some reasons; .es Air 16,809 against 53,364, so Air is leading again, but HA owns Toprural which ranks 24,114, so the spread is lower than you think.
Leaving aside FK which can't really compete here and looking deeper into the numbers we notice a number of interesting things: 1. that growth rate in traffic for HA is higher than for Air 2. that the search share of traffic is higher on HA(18.5%) then on Air (11.7%), does it spell for better SEO? 3. that traffic, although mainly US in both websites, is then distributed on travel buyer's countries (Spain, Italy, Canada, France - 16% of client base source Cities Reference) in HA as opposed to AIR that has secondary traffic distributed in more typically SEO labor countries  (India, Mexico, Brazil, Thailand short of 2% of client base source Cities Reference) 4. On the other hand Air engages its users a lot more judging by bounce rate and pages per user, but this doesn't spell for higher conversions attending Compete.com. HA takes the lead again.
HA

The Stock: If we give a look at what the financial guys are saying about this I'd like to take into consideration what Estimize says since starting last June they're publicly attempting to 'estimize' private companies. Here is what Estimize CEO/co-founder Mr. Drogen thinks about the matter we're discussing on this post. He runs an estimate on the base of what Airbnb states on its infographics and concludes that Airbnb is set to outrun HA. Is he right? I'd be very cautious about this, do read at the bottom of the above post how user AirBnB Whistleblower de-codifies numbers claimed on the infographic, de-codifying Airbnb numbers you'll find yourself listening to a different story from the one you're watching... HA 3, AIR 1. FK doesn't qualify here.

Mistifications: There seem to be little doubt on the mystifications of airbnb infographics as I was hinting above, this said on the contrary HA measures are relatively more reliable than Air's, there is more ahead on this. This is not because HA has better ethics, ethics has never been on HA menu, it's just because AIR has managed to still keep away from going public and avoid the scrutiny that follows IPOs. If you look carefully at the info-graphics below there is more than meets the eye. One example? "Guests nights booked" is not to be confused with actual nights booked, uh? HA 4, AIR 1.

Our Test: And... we have been testing the two behemoths this Fall! More precisely we posted 3 test properties: 1 in Rome, 1 in Paris and 1 villa in Sicily. The Paris apartment has 36% more visits on Airbnb than HA, but, mind you, no leads whatsoever, while TA has a 30% conversion into leads. FK here wins, it has way more traffic than both the above (~200%) with a 4% of conversion into leads and 3 real bookings made! The Rome apartment has 9% more visits on Airbnb, but, mind you, again no leads, while TA has an 18% conversion of lookers into leads, FK is a lot weaker than both here with about half traffic and 1% conversions and no bookings.  The Sicily Villa has 18% more visits on AIR with ~1% of lookers converted into leads while HA has a 4% conversion. FK is extremely low on traffic with a ~1% conversion.
Pay attention, no bookings for the posted properties in the past 90 days neither from HA nor from AIR, but a bunch of leads from HA turned into other conversions in the rest of our inventory while nothing like that is possible in the closed system of Airbnb! FK converted only on the Paris apartment, but it has to be stressed that it wasn't new to the site and had reviews, while the new ones competing shoulder to shoulder didn't really qualify. Still it does work impressively when you get reviews. Look at this factor from the PMs perspective and... more on this ahead.
What do we see here? We see that numbers showed by Airbnb are, once again, dubious ~0% conversions on leads (mind you, it's Questions of travelers, not Bookings, what we're calling conversions here) on almost 1,000 visits compared to the over 20% conversions on the same properties on HA. Really? HA 5, AIR 1, FK1

How are they behaving? In everyday life it's the most common thing, to look at how a person is behaving and draw conclusions. If that still stand some chances of getting it right, does that rule still stand if there are big interests and organizations involved? Mmmm, not really. Looking at it from the outside we see HomeAway struggling. Every day there is a new, almost incomprehensible and very steep fee on their subscriptions page, now HA is even shooting on its own foot by opening to the PAYG model, see more details on Skift, while AirBnb is booming and busting on all medias and creating high expectations. We suspect this may all be a facade. HA seems to be struggling just because it's been a public company for years now and has to keep growing inventory and turn-over to make investors happy, while AirBnb shows hubris just because there are interest behind them ever since they got their venture money that want to turn them into the next internet bubble IPO and will possibly abandon it soon after. There is ground here to doubt that AIR will keep shining for long after going public. FK has been also embracing revenue share. So, this is still a score to AIR though: 5 to 2.

Our Poll or the users' perception: We've been running a poll with our users, travelers, POs and PMs. General perception of travelers is all for AIR, they vote for their graphics (which has been defined as shiny and cool as opposed to boring and depressing for HA), for their social appeal and easiness of use. Most also post their own apartments. But they list as travelers, not professionals, they don't update the calendars, reply only if the request falls in the right dates, or if the user looks cool, they (ouch!) wouldn't even consider listing with Cities Reference when asked (not to our face!), never mind HA that is even asking for money. POs and PMs are divided, we've been surprised finding out that almost 30% of PMs also uses AIR and declares itself satisfied by it. That's definitely a go for AIR again 5 to 3.

We have a winner of our little game: HomeAway! Flipkey comes a good second, AIR from our perspective looks in quagmires.

Really, why do we think that, against all odds, taking the press online and offline (see estimize above), against the general perception, see our poll, against what we thought ourselves just until a couple of years ago, the HomeAway model will win the battle over the vacation rental world dominance? Let's look at it from the perspective of those that actually use these tools, once the shine about the 'new' tool (is it really new? I will soon post a 'Disruptive Innovation or... just Disruptive' article about the elephant in the room of vacation rental) will fade away, they will have to cope with facts, and here is how we see the facts from the different perspectives.

The Traveler perspective: young travelers are charmed by the social feel, the easiness of use, the bright colors of AIR/PAYG websites and claim not to even consider PLW websites. Seasoned travelers on the contrary are matter of fact and realize that PLW and PPL websites won't charge commissions and eventually will give them better deals. Phocuswright claims that vacation rentals are mainly used by families and groups that are more price sensitive, the average 15% overcharge of PAYG websites, once the hipe is over, will make a difference.

The Property Owner perspective: It is true that property owners don't like to pay in advance and in the case of Homeaway prices are getting steeper and ever more complicated by the day, which doesn't help. Still, as we've seen on our testing, PAYG websites will hardly give you a full occupancy unless the apartment you're listing is sold at a net price below its market value. It is important to stress that all the property owners we have interviewed once they pay the flat annual fee to PLW websites just forget about that charge and when they list on PAYG websites they will not write it off the base price creating an extra charge that will be pushed on to the traveler buying on PAYG websites. Get a better grasp on how this maybe a problem for PAYG websites on our previous post 'The ponderability of Prices'

The Property Manager perspective: Most PM marketing departments are understaffed. PMs are historically more focused on operational and sales (meaning acquisitions of new properties). Closed systems on PAYGs websites like Airbnb force them to list each single property thereby using a lot of their precious time for precious little conversions. Until Homeaway will close a blind eye on PMs listings multiple properties at a discount as private owners (that are ranked better on most PLW websites), the possibility of moving leads across their inventory will push more and more PMs towards PLWs as opposed to PAYGs which use closed systems that are at odds with the way most PMs conduct their businesses. Finally, PPL is a fantastic deal for PMs that can afford the little technology required to pass the properties to PPL websites in mass.

I would like to close this with a note on what my really be THE disruptive innovation taking more and more shape now in the vacation rental market. Channel managers, like Rentals United and Kigo, they are a further tool in the hands of PMs to pool together and share properties and bookings. We'll dedicate a post to it soon, but this may really be the future of the market. Keep posted ;)

Tuesday, October 29, 2013

Art Openings at Cities Reference Rome office

First of a series of art openings we've decided to launch at our office in Palazzo Taverna, Via di Monte Giordano, 36 - Rome.
A good occasion to get to know each other in front of a drink and contemporary art.
Veneri in Astronave curated by Elena del Drago, everybody is invited.

Tuesday, October 15, 2013

The Ponderability of Prices


Let's brain storm here on the decision making behind the rental fee I mark on different websites. It just cannot be one-size-fit-all, because there are important differences to take into account between Cities Reference and PLW/PAYG(see below) websites.

I want to take into consideration the following facts about CR website and then compare:


  • 1- The price I mark on Cities Reference is net in my pocket (the only possible exception is the Priority Owner discount).
  • 2- Cities Reference does not ask for an advance payment to owners (unless your very self asks for a flat annual fee), Per Listing Websites (PLW) do.
  • 3- Cities Reference does not take off percentages of my rental fee, typically 3% are levied from your fee at the moment of payment, but it can be more, by  Pay As You Go Websites (PAYG).
  • 4- Cities Reference deals with the traveler and contacts me only when the traveler has paid the advance, no direct bargaining with the traveler, contracts via fax machine and the like.
  • 5- Cities Reference assists the traveler until my door steps and after.
  • 6- Cities Reference pays me any money it has received from the traveler in case of cancelation.
  • 7- Typically CR's clients pay directly to me on arrival, therefore avoiding the commissions and hassles of bank or electronic payments, so my booking is confirmed but I don't have to deal with bank wires and other methods of payment


Okay, that means that when I'm sitting down to mark my net weekly fee on Cities Reference, say 1,000 a week, I consider

  • -point 2, that I was about to set the same net price I had  for a listing site that has me pay, say, 500 euro in advance and on average books 5 week in a year. That means I should take off 100 before I list on CR.
  • -point 3, that I typically list with websites that take 3% off my rental fee when they pay me. That means I should take off 30 before I list on CR.
  • -point 4&5, how much is an hour of my work worth? Did I ever consider how many hours of work it takes me to answer emails and how many times direct bargaining takes me to discounts I had not planned for? Fair enough, say it has taken me 5 hours of work to reap those 5 bookings a year, say I value my time 100 an hour, it's a 500 value on a 5,000 turn over, 900% of ROI is nice, but isn't it better if I don't even have to work for it!!? So, that means I could put 100 more towards CR net and still be even, say 100 sounds too optimistic... That means I should take off another 50 before I list on CR.
  • -point 6, typically if you don't take a 'flexible cancelation fee' on PAYG websites I get ranked to the last pages, while on PLW websites the down payment is all up to you and that is most times cumbersome. We deal with the advance and pay it to you in case of vacancy on cancelation. Both the other options have a cost. Did I get unpaid cancelations that resulted in vacancy last year? Did I do the math of what that costed to me? Say 1 week, with CR I would have gotten about 200 and instead I got nothing. Say I rent 20 weeks a year on average, that makes 10euro less on the average weekly. That means I should take off another 10 before I list on CR.
  • -point 7, Paypal takes almost 4% of your payment, credit cards 2 to 5%, banks take fees, we can average that to 2%. That means I should take off another 20 before I list on CR.
Let's call the numbers:

When I list my apartment at 
  • 1,000 on PLW I will list at
  • 940 on PAYG and at
  • 820 on Cities Reference
That's fair! Contact us if you have questions or if you just want to talk about it you could comment right here ;)



Tuesday, September 24, 2013

Flat Annual Listing fee now available also at Cities Reference

You've asked and we've listened.

Starting today you can list with us as On Request paying an upfront fee of 144 euro + VAT for 12 months (12 euro per month) and our commission charged to the traveler per booking will go down from 16% to just 3%, to cover just the basic reservation costs.


The only change for you here is that
we will follow the clients just until the acceptance of the terms and then ask them to get in direct contact with you for the advance payment and anything else concerning the apartment and the arrival (otherwise we normally we take care of these services).

On the plus side your price will become much more competitive and after 12 months you can decide whether it pays off or if you'd rather go back to the standard method.

Questions? Contact us.

Tuesday, September 10, 2013

The Crisis and us: What's within and what's without the current crisis in the Vacation Rental Market -or the uncomfortable position of the Little Ones

Over the course of the past 12 months I've been polling just above 200 among Property Managers and Channels about the current crisis in international conferences and gatherings. I've gotten started to the direction of some conclusions, although this is bound to remain food for thought rather than anything written in stone.

First of all an assumption though; all but a precious few (1.9%) have indeed confirmed a slowdown averaging just about -20% over the past 12 months (when the question was asked), especially among Property Managers it's been claimed the slowdown has been ongoing starting 2008.

Now a look at who is the 'ALL' that's been interviewed.

Property Managers (PM): Individuals or companies responsible for the day-to-day functioning of tens of pieces of real estate, in charge of advertising, collecting and depositing rent and communicating regularly with the property owner on the status of the property.
Direct Channels (DC): Businesses through which the property passes until it reaches the end consumer. Not to be confused with Indirect Channels, better know in our market as Channel Managers.
Please note that I've been strictly interviewing small to medium companies, which I consider to be the backbone of what used to be the Vacation Rental Market before the appearance of big investments in our field. More of that later.


The Crisis Without
While talking to me many of the above mentioned just shuddered and said there was Crisis in the World and that explained about everything. Or did it?
I've been taking a look at the European Commission's

Attitudes of Europeans Towards Tourism - Flash Eurobarometer Report (March 2013)

and other papers that establish that the number of leisure trips hasn't decreased in Europe's overall figures throughout the crisis, more details here. However it must be stressed that 36% of travelers travel as free guest ('visiting family, friends or relatives' see: here) and that package travel (33%) is growing faster than organizing travel plans separately (necessary for vacation rental online). On the other hand 46% claim information gathered through internet websites was most important when making decisions about travel plans (!) and 53% claim to have used the internet to arrange their travel plans. 
This is not meant to say that the crisis hasn't influenced travel trends at all, since the poll shows 41% of people interviewed declared it did, nevertheless I argue that the world crisis is not key to explain the small/medium business' crisis in the vacation rental market.

The Crisis Against
Some of us have been blaming the hotel lobby and it is reasonable to think that behind many anti-vacation rental laws there is their labour. It is also true that they have slightly shifted their product towards a more family friendly environment, maybe also to compete with vacation rentals. But if I may misquote a sentence of Larry Page, have you ever heard of a company shutting down because of legal disputes? Nope. Of course this doesn't help, but again, this isn't key to the crisis of medium/small companies in Vacation Rental.

The Virus Within
Oh, an by the way, the Vacation Rental Market as a whole is facing a slow down, right? Think again. It is not attending to PhocusWright that talks of a 'rebound' or if we look at what airbnb and the other behemoths are claiming (although this should be subject to further scrutiny, see our previous post 'Airbnb Vs Homeaway: who's winning the race?', another nice take is Estimize's eye.

So, let's face it, we've got to look for trouble at home it's pointless to search elsewhere.

A little history - Online Marketing
Back in 1997 when we got started with RomanReference.com it wasn't hard to market vacation rental properties, you pretty much just had to list on any search engine to be on the first page of results. That would take you travelers. In the old times we all felt like pioneers... But, hold on, who did?

The traveler: back then a very internet savvy person looking more for a very personal experience than for a deal. Not anymore...
The property owner: back then a very internet un-savvy person who wanted to make some money with no effort, totally unaware of marketing and reputation. This is also not the case anymore.
The PM: see above.

Getting to the traveler was relatively easy online, while getting to the owners online was still near impossible. It was a time when finding the right owner was a problem and you had to compete elbow to elbow with brick and mortar agencies with a lot more experience and appeal. This has changed for the better now thanks to huge investments that improved awareness of vacation rentals in the general public.
Back to history, by 2002 organic competition had started to get a little stiff and there came Google Adwords, at an average 50c per click it would reward you with great conversions giving you a lead on the newly arrived organic competition.
Today's sponsored listing, at an average 3.5$PC on big cities keywords, has become almost unaffordable for channels or PMs that don't earn the full rental revenue and/or can scale with thousands of destinations worldwide. CPC has gone up almost 10fold, while conversion rates have gone down, to the best of our knowledge no matter how good you are Adwords will cost you ~18% of total revenue. To make things worse google adwords does not let you target long tail keywords anymore putting the small operations totally out of reach. True, there are new players such as MSN, Yandex, etc, but they're still too small to matter on sponsored ads.

What happened? Or The End
Since 2011 just short of 1Bl of dollars (see dedicated VRmintel article on venture money in the vacation rental market and consider they have forgotten at least 200$mil with Wimdu and 9flat and Billy+many undisclosed investments) have been invested in online vacation rental via venture capital, stock market and big company investments. These investments have outplayed the small operations online both organically (unless they use shadow or black hat techniques) and sponsored. At the same time have put a very heavy weight on commissions, pushing them down from an average 30% to an average 15% (do the math with my above findings if you want to make a ROI out of your next SEA campaign).
It must be said though, that not all the investment has played against the little operations in the VR market. A growth in awareness, see above, has brought about a great abundance of properties and travelers.
For old timers like me it's like having grown up on the tip of a dune in a desert where every once in a while it used to rain enough to drink aplenty all year long. Now the desert has been flooded with salty waters and we're just standing there, surrounded by the very thing we've been craving for for so long. Only unable to drink it.

What's left?
Oh well, we just need a desalination kit... or good communication.
Thankfully over the past few years a lot of Direct Channels have sprouted out, most of them are free to PMs. These are now getting together (see the Switch or Rentals United) or getting managed by Indirect Channels or Channel Managers (see Kigo). The future of small operations is here, like little bridges that link those tips of the dunes, so we can share the little drinkable water spilled by them behemoths hovering high above our heads...

A little pride, c'mon!
That is unless... you come up with a couple of tricks, I've got a couple of ideas, but we better talk about it in person. I plan to be voicing them on a brain tempest taking place in next VRMA European Seminar, Dec 9 to 11 2013, in Bruges Belgium. See you there!



Monday, July 15, 2013

Sponsored Listings

Answering to repeated requests for this product made by our apartment owners we are eager to introduce starting today the Sponsored Listing feature, it consists into being published under the Featured Apartments section of the page at a fee.

Here follow the fees to be published on the city/destination homepage per week + VAT:

3rd position to the right: 15 euro
2nd position in the middle: 25 euro.
1st position to the left + bigger picture im mid page and top on rotation: 50 euro

If interested in a sponsored position please contact us.