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Escape the big OTAs high fee with a book direct strategy

An overreliance on the big OTAs: Time to break free in 2024! 

7 min read

Travel

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Over the past 15 years, platforms like Airbnb and Vrbo transformed the fragmented travel industry online, making it incredibly convenient for travelers to search, book and pay for unique and oftentimes affordable accommodations. As these companies went on to attract millions of travelers to the novelty of their platforms, using ubiquitous ads, marketing and word of mouth, they also became indispensable to hosts and property managers (PMs) to list and market their properties.

And while there are significant advantages to listing properties on these sites, with their increasingly high fees – not to mention the heavily covered challenges they’re facing – my hunch is that many PMs are well aware that relying heavily on these types of online travel agencies (OTAs) is both risky and likely already eating into their profits. Let’s explore some of the pros and cons of using these sites to market your properties, and then look at an alternative that is reemerging in lockstep with these major platforms.  

The cost of failing to read the room

Outside of the early months of the pandemic, vacation rental bookings soared in 2021 as travel behaviors and preferences evolved.  Many PMs rightly raised their rates in response to the higher demand and, for a while, “revenge travel” meant consumers were paying those higher costs with an eagerness to make up for lost time and experiences from the pandemic . 

At the same time, because these  platforms charge PMs up to 8%, some PMs are passing that fee on to the guest by raising their rates. This can not only cost them the booking altogether, as they just priced themselves out of the market, but can also see shorter stays for their homeowners, which could lead to increased homeowner dissatisfaction and churn.

Rather than lowering these fees in response to inflation, concerns of a slowing economy and other factors, the OTAs sat by while guests and PMs fumed on social media over exorbitant charges and poor service. The calls of “Airbnbust” came to a crescendo when The Washington Post published an article about the backlash.

“I would say it’s a last-case [choice] for me now, when before it used to be like one of my go-tos,” traveler Cierra Chesir was quoted as saying in the Post piece.

The negative publicity couldn’t have come at a worse time for hosts, as the macroeconomic uncertainty also forced vacation rental demand back down to pre-pandemic levels. Travelers who are booking are doing so at the last minute and being more budget-conscious, eroding lead times and profitability for PMs. And for the savviest of travelers, they’re even finding a property on these platforms, then researching ways to reach the host directly to book.  Hotel occupancy has consistently outpaced vacation rentals since June 2022. In April 2023 for example, occupancy for vacation rentals was 59%, compared with 64% for hotels.

That change in consumer behavior finally hit Airbnb earlier last year, when the company announced that it experienced slower booking growth than expected,  and lower average daily rates in the fiscal second quarter compared with the same period a year earlier. Vrbo saw a reduction in bookings in the second quarter as travelers showed a preference for hotels over vacation rentals.

The lesson here is that PMs need to retain more pricing flexibility to better adapt to shifting demand patterns and consumer sentiment. To that end, PMs can reduce the impact of high fees on their booking rates by also listing on a reputable direct booking site. Instead of high service fees per booking, the book direct models sometimes can be completely free to list with the ability to upgrade from a free standard listing to a paid premium one when additional exposure is needed. Meanwhile, travelers are never charged a fee to book. This can result in guests booking a longer stay, making more money for the PM and host, and cutting down the property management company’s homeowner churn.

Tear down that wall

Another grumble of guests who contributed to the Airbnbust uproar was that customer service from “the big two” platforms had deteriorated. Travelers want a return to the “old school” hospitality that was the hallmark of vacation rentals a decade ago. But that’s hard to do when Airbnb and Vrbo discourage direct off-platform communication between PMs and guests. Those platforms go so far as to scrub messages of any text that resembles a phone number, email or URL. These steps to discourage direct booking are understandable considering they only make money if the property is booked through their platforms, but PMs also have to do what’s best for their business. Hosts and PMs can’t deliver the kind of hospitality travelers are desiring by leaving it up to someone else to promote their business and service their guests.

A book direct vacation rental marketplace, on the other hand, offers communication between PMs and guests without limitations, from the beginning. Guests can call, text, or email the host directly for off-listing advice, like local experiences they recommend or even for a different accommodation within their portfolio that better meets their travel needs.

Booking direct makes the guest-host relationship more personal and less transactional, while also providing another opportunity for hosts to significantly increase conversion rates during the booking process. What’s more, a book direct model empowers PMs to set and enforce their own policies on payment and cancellation.

It’s time to cast a wider net

During the Airbnbust uproar, guests and hosts alike drew comparisons between the “big two” platforms and a company that’s been the target of scorn for decades: Ticketmaster. Just like Vrbo and Airbnb, Ticketmaster revolutionized a marketplace, giving consumers a user-friendly one-stop-shop for every conceivable kind of event and, in the process, became the preeminent place for performers and promoters to list theirs. 

Ticketmaster ruined what had been a positive, mutually-beneficial ecosystem by levying exorbitant, unreasonable fees, deprioritizing customer service and forcibly wedging itself between suppliers and consumers. In the process, they’ve also repeatedly attracted unwanted government attention. The icing on the proverbial cake that prompted the government to get involved was when Taylor Swift fans faced a slew of major issues, including inflated fees and prices, during presales to her Eras Tour concert.  As a result, many on both sides resolved to do all they could to avoid using Ticketmaster. Whether valid or not, many travelers are starting to see Airbnb and Vrbo in the same light, and these platforms are seeing not just government scrutiny, but increased rules, fees and even bans.

Between the lingering negative public perception of Vrbo and Airbnb, continued macroeconomic uncertainty and increasing government regulation targeting vacation rentals, owners and PMs need to maintain as much price and policy flexibility as possible. And with so much new property supply that has come online in the last three years, taking away from properties that previously had great placement and visibility on these large platforms, many are now looking for new options that they can control to help them reach travelers, and stand out in a crowded marketplace. This will be impossible to do for PMs who rely solely on OTA’s, with their high fees, one-size-fits-all policies and impersonal service. Hosts and PMs can longer afford to place all their eggs in two baskets. The only way to ensure you’re casting as wide a net as possible is to also set up shop on reputable book direct vacation rental marketplaces. 

Opinions expressed by SmartBrief contributors are their own.

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