Automatic Pricing Suggestions….The Point of No Return?
Once upon a time the hotel industry made a big gamble. The leaders of the industry saw the potential of Online Travel Agencies and surrendered control of their inventory in order to participate with the large up-and-coming sites such as Expedia and Priceline. While there was a love/hate relationship for many years, this reliance has ultimately proven to be one of the single worst decisions that these hotels ever made, and to this day the average hotel pays commissions as high as 20-30% on every single booking that is ever made on these sites. They have in fact become so reliant that they no longer control their own destiny and have entered into a lifetime of servitude that removes billions of dollars from their bottom line every year.
While the vacation rental industry has grown to become one of the most popular and successful verticals within the travel industry, a target has now been squarely placed on vacation rental inventory by the OTA’s which became quite evident last week during the HomeAway conference in Las Vegas.
While industry insiders have mixed reactions to many of the announcements made, there is one point that raises serious questions and concerns. This contention relates to the introduction of automatic pricing suggestions which will now be offered to vacation rental owners and managers who list on the HomeAway family of sites. While at first glance, this may be perceived as a helpful tool, there remains one serious point which should be considered. Once the OTA’s control the pricing, they will have completely overtaken the last shred of control from the end user and the industry is most certainly poised to receive the same fate as the hotels.
The largest difference being, of course, that an individual property owner or small-mid sized property manager does not have the staying power that the large hotel chains have. In fact, if margins are squeezed from these users, there is a near certainty that many will be pushed out of the market, as the work and effort required to run a vacation rental home will simply not be able to justify the miniscule margins that remain.
Perhaps just as concerning are the plans that have been made to integrate these pricing suggestions into the rank algorithms used to sort properties on these sites, so those who resist will simply sink to the bottom and never receive the exposure that they need in order to survive.
These changes mark a continued course that has been made by these platforms over the past year including the removal of phone numbers, introduction and eventual forceful integration of Direct Booking, and the policing of communications that prevents owners and managers from contacting their guests pre-booking.
There is but one last thing that the platforms have yet to announce, but are nearly guaranteed to do in the coming months which will be the removal of the option of paying for annual listing subscriptions in favor of a pay-per-booking model that will increase the costs associated to list on these sites dramatically more.
Between higher costs to list, reduced margins through recommended pricing, and the lost control of Direct Bookings there is very likely to be a massive fallout that will shred the industry into pieces, leaving the indentured the only parties remaining.
While all of these points should be officially hitting the industry hard, there remains a level of optimism and a lack of understanding that may prove to be damning for many involved.
Users who are keen to these changes are wise to begin seeking alternatives including sites like https://vacayrx.com which have continued to volunteer a willingness to adopt to the needs of the end user which is quite contrary to the approach being implemented on the larger OTAs in the industry.