2018 OTA Update The Real Cost of Working with OTAs - Steve Milo, CEO, VTrips - VRM Intel
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2018 OTA Update
The Real Cost of Working with OTAs
Steve Milo,
CEO, VTrips
steve.milo@VTrips.com
VTrips Key Highlights
▪ VTrips, a leading vacation rental management company operating in 19
distinct markets in the United States with over 2,000 vacation rentals.
✓ First Mover Advantage with Unique Company is growing at a rate of 60%+ per year:
Competitive Positioning
✓ Proprietary Technology and Platform – Proprietary technology platform is on-trend with the growth of online
Maximizing Occupancy and Revenue booking and dynamic pricing produce consistent rental revenues
✓ Ability to Leverage Complimentary
Vacation Rental Marketplaces (e.g., Airbnb) – Partnerships with online marketplaces and the use of leveraging
customer data base maximizes marketing capabilities
✓ Differentiated Pricing Structure
✓ Demonstrated Ability to Successfully – Strong historical financial performance
Integrate Acquisitions
– Successful integration of 19 vacation rental management companies.
✓ Identified Attainable Acquisition Targets
✓ Management Team With Deep Vacation – Entry into New Markets with new policies (deposit policies, cancel
Industry Experience
policies, fees) creates pressure to drive new customer acquisition.
✓ Track Record of Growth and Profitability
VTrips has the
necessary, robust
infrastructure, a strong
management team and
the proven acquisition
expertise to continue its
growth strategy through
a series of additional
transactions that will
rapidly expand its
national footprint 2
VTrips Rental Markets – Resort - “non urban”
Ponte Vedra, Florida Fort Myers, Florida Panama City, Florida Maui Hawaii
• Market Entered: 2011 ▪ Market Entered: 2014 ▪ Market Entered: 2017 ▪ Market Entered: 2017
– Employees: 80 (main office) – Employees: 4 – Employees: 4 – Employees 7
– Number of Properties: 75
– Number of Properties: 210 – Number of Properties: 106 Number of Properties: 140
Palm Coast, Florida Hilton Head, South Carolina Daytona Beach, Florida Ruidoso & Santa Fe NM
▪ Market Entered: 2007 ▪ Market Entered: 2015 ▪ Market Entered: 2015 ▪ Market Entered: 2016
– Employees 4 – Employees: 7 – Employees: 2 – Employees 10
– Number of Properties: 147 – Number of Properties: 133 – Number of Properties: 61 Number of Properties: 188
St. Augustine, Florida St. Pete Beach, Florida Gatlinburg, Tennessee Siesta Key/Venice , Florida
▪ Market Entered: 2009 ▪ Market Entered: 2016 ▪ Market Entered: 2016 ▪ Market Entered: 2006
– Employees: 3 – Employees: 7 – Employees: 30 – No office
– Number of Properties: 231 – Number of Properties: 113 – Number of Properties: 340 3 64
– Number of Properties:
Industry Overview
Demand keeps Growing and Growing and Growing….
Growing global vacation rentals demand… …with room for further online penetration
Headroom
5.6% 4.5%
CAGR CAGR
(6.1m listings)
(8.3m listings)
• Demand drivers:
– Consumer value of renting a unit for the entire family
– Growing consumer awareness of vacation rental option
– Increased use of internet as rental transactions facilitator
...with few large players and a broad range of “other”
Large, fragmented US market… competitors
Market Places OTA’S Other
• Regional
players
• Large internet
• TRIP generated • > 2 million • Expedia / companies
$68m revenues listings targeting Homeaway: >1 (Google,
in 2014 from singles / couples
vacation rental visiting urban million listings Yahoo!,
operations areas Craigslist…)
• Priceline / Villas:
• Flipkey, Holiday • Raised over >400k listing • Hotel groups
• Highly fragmented: Lettings: >300k $2bn of funding
listings each during the 2014- (predominantly (Accor,
– Approximately 10,000 rental management companies 2015 period Europe) Wyndham…)
– Handle over 7 million short term / vacation rentals
– Concentration in Florida – 20% of rentals, 28% of management companies • Private
individuals
Source: Broker notes, PhoCusWright
4
Steve Milo, CEO, VTrips steve.milo@vtrips.com
Vtrips OTA Revenue 2014-2018
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$0
Jan-Dec 2014 Jan-Dec 2015 Jan-Dec 2016 Jan-Dec 2017
VTrips began OTA integration (of vacation rental travel sites) in April 2014.
• Jan-Dec, 2014, OTA Integration accounted for 342 bookings, $523,207 USD rent revenue.
• Jan-Dec, 2015 OTA integration accounted for 2,828 bookings, $4,596,589 USD rent revenue.
• Jan-Dec, 2016 OTA integration accounted for 7,380 bookings, $10,337,652 USD rent revenue.
• Jan-Dec, 2017 OTA integration accounted for 17,599 bookings, $19,429,137 USD rent revenue.
• Integration includes HomeAway, Booking.com, and on a limited basis Airbnb.
Steve Milo, CEO, VTrips steve.milo@vtrips.com
OTA Revenue Quarter 1
$10,000,000
$9,000,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
Q1 2015 Q1 2016 Q1 2017 Q1 2018
VTrips began OTA instant booking integration (of vacation rental travel sites) in April 2014.
• Jan-Mar, 2015 OTA integration accounted for 892 bookings, $1,577,869 USD rent revenue.
• Jan-Mar, 2016 OTA integration accounted for 1,855 bookings, $3,278,637 USD rent revenue.
• Jan-Mar, 2017 OTA integration accounted for 4,951 bookings, $5,580,083 USD rent revenue.
• Jan-Mar, 2018 OTA integration accounted for 6,178 bookings, $8,893,542 USD rent revenue.
• Integration includes HomeAway, Booking.com, and on a limited basis Airbnb.
The OTAs are Disrupting
The Vacation Rental Industry
The Dodo Bird could not fly. It lived on an isolated island until the arrival of man. It was clubbed to death.
• Phone #’s on VRBO are gone
• Email inquiries are being eliminated.
Guest emails are being “cloaked”
• Listings likely will be turned generic to
remove key words that can reveal “source”
• OTAs are materially changing TOS without notice
• Large OTAs (HomeAway, VRBO, Airbnb, Booking.com,
Expedia) are out bidding PMs on Paid Search.
• Those who can adapt will survive and thrive
• Those who cannot adapt will perish.
Subscription vs. Online only • Subscription allows you to pay a “flat fee” ($499 per year). Allows you to generate online bookings. Removed Property Managers discounts. • PPB (Percentage of booking). For RBO it is 8% and HomeAway pays the credit card fee. For IPM it is 5% if “online booking” and 10% if “offline matchback”. • It appears most OTAs are experimenting with increasing more costs to the Guests. $95 guest fee. 17% of the rent, or 11% of non taxable event.
Who is the Merchant of Record?
And what are “Terms of Service”
• If OTA is merchant of record, the OTAs absorb the merchant payment fee (averages
2%). This provides them all of the leverage as they control the money.
• Many OTAs who are merchant of record pay after guest arrives.
• HomeAway, TripAdvisor and Booking.com allow certain Property Managers to be the
merchant of record.
• Terms of service (TOS) are rules by one must agree to abide in order to use a service.
• The Federal Trade Commission enforces these truth-in-advertising laws across all
advertising channels, and applies the same standards.
Deposit and Cancellation Policies •Deposit Policy impacts bookings on large ticket Vacation Rentals. • Airbnb used to require 100% upfront. Huge deterrent on advance booking for higher end properties. Moving to 2 payment option plan. • Cancellations range from Flexible, Moderate, Strict & Super Strict. HomeAway just implemented standardized cancellation terms. These have a dramatic effect on conversion rates.
The PROS of AirBNB Free to list your properties. Charge you for every booking. Customer base is different & sticky – young, urban & foreign. Smaller properties book better than larger properties. Good generator of off-season bookings. Does not require Rate Parity. Can add fees to the rent. All bookings are direct online (no phone calls). You get to review the guest who stayed in your property. You can send “special offers” to your guests
TIP: Mark up Airbnb for taxes and to self 22%
insure taxes, reversal of revenue.
AIRBNB Tip: Guest can request a
refund 60 days after departure
AIRBNB Tip
Since guests can use “extenuating” circumstances to cancel up to the last minute
with no penalty to them AND Guests can ask for a refund 60 days after departure,
you need to self insure against this with a large Airbnb mark up.
Also, Airbnb is not collecting Sales Tax uniformly. And Airbnb does not support
“other” fees except cleaning. Recommend you create a large percentage and
increase the rate into the Airbnb channel.
Even if you post “House Rules” (i.e. your contract), Airbnb policies and rules
supersede your House Rules/Contract.The Cons of AirBNB Labor intensive. Time consuming admin. 24 hour response. Content & Prices are static (limited API options). Does not support “complex” booking rules. Closed Communication (only through Airbnb). Customers want more hand holding. Taxes. Are these being paid? Are you liable? “Rate Terms” not easy. Airbnb is the Merchant of Record. (Creates disintermediation). Airbnb reviews are at the account level – not property level. Airbnb is aggressively seeking “super hosts” to manage more and more inventory. Essentially taking RBOs and attempting to make them mini property managers.
The Pros of Booking.com Owned by Priceline. In theory, resources to be #1 in the space Largest international portal – big in Europe. Growing in US. Perfect for different languages and different currencies Have been successfully listing “Villas” in Europe and Asia. Transforming to vacation rentals and moving into North America. Allow booking to your gateway. New Horizons survey reveals that Booking.com is the most popular OTA used by under-30 travel market globally at 40%. Airbnb is 23%
The Cons of Booking.com? Content does not support full rates and fee structures. Content does not update with photos and copy. Virtually impossible to remove properties from their site creating real legal issues for units who want off. (Property sells, property moves to another manager, etc…) Must push Api, cannot pull Api. Very bureaucratic process. Inflexible company culture. Poor interface. Built for hotels. 15% of booking as commission model. High rate of cancellations. Cancellations can be difficult.
The Rise of Expedia? Although VTrips inventory has been “enabled” with Expedia for 2 years via HomeAway, Expedia only generated a handful of orders. VTrips has 1,904 properties enabled for distribution. Expedia is now working with property managers directly to move their inventory onto their platform. VTrips is testing direct Expedia vs. HomeAway distribution. • How many Points of Sale? • What happens with Trivago? • What reviews will display? • How will rates display? • How will features dispay? • What is the conversion? • What is the reporting? • What is the cost/model? • What is most sustainable?
750m unique visitors 2020
The Pros of Trip Advisor/ FlipKey
Trip Advisor is Fastest Growing Travel Portal Site (with community)
TA/FlipKey supports feeds of live data. (note: platform is unstable).
TA/FlipKey is very sticky thanks to robust community.
TA/Flipkey does not currently enforce rate parity. (Although they claim they do).The Cons of Trip Advisor/ FlipKey TripAdvisor has enormous, systemic technical issues. Culture from Top to Bottom of “denial” and “blame the client”. Lack of ownership with software partners on configuration issues. Poor Resources for technical support and administrative support. Internal chaos, staff turn-over create enormous challenges as they re-learn. The most incompetent senior managers get promoted. Mind numbing lack of follow through. Refuse to provide phone #’s. Lack of Transparency on Placement Ranking. Lack of Transparency in changes to their system and programs. Pay on TA/FlipKey does not go through your payment gateway.
The Pros of HomeAway, VRBO and HomeAway:
Owns the core Vacation Rental market. A listing is across 23+ family sites
Can generate significant revenue. for $499 per year or a PPB fee.
Offers “Book Now” function. Ad costs lowered from 2 years ago.
Support data feeds to update all
Rank high in organic search.
content on almost real time.
Huge database of guests. Large technical staff and sales staff.
Rate Parity is not a requirement unless They have phone #’s to call.
you sign their “Pledge” In theory, they can get your
In theory Premiere Partners have benefits inventory on to Expedia.What is Match Back and how does it work? HomeAway receives booking information and updates from your software for reservations that have been either made on HomeAway’s site or been reported to HomeAway via attribution (off-platform bookings) For off-platform bookings, HomeAway will only charge for bookings that Property Managers self-report to HomeAway, using source-codes that reference HomeAway. The fee is 10% of the total booking, less taxes PMs can use the “source code” in some VRS to attribute a source to them/ flag off platform bookings. V12 and Escapia software gives the option to automatically attribute bookings to HomeAway, while other systems may require the Property Manager to manually enter the attribution information. Once attributed, the match back is not removed even if you change the source code. If you feel the opted-in manual program isn’t working correctly, HomeAway will review and partner with the software team and credit commission due caused by errors in the attribution configuration, which may be product related or user. Per HomeAway, if you want “full control” of attribution, it may be best NOT to opt into an auto-attribution program. New Subscriptions (new rentals) & subscriptions renewing after Apr 2 are subject to new Listing Agreement. Per HomeAway, inquiries from pre-April 2 renewing subscriptions could create match back for post-April 2 ads. HomeAway’s new Terms of Service are not “you” decide as in the Discovery Hub video of changes. HA can audit and assess offline match back at their discretion vs. honor system/ you decide Match backs (auto-attributed or not) are an uncertainty for Property Mangers. PMs can ask HomeAway to “turn off” Inquiries to potentially stops Match Backs.
The cons of HomeAway/VRBO? Recent culture of “denial” and “blame the client/PM” – which confuses the guest. Heavy handed and inconsistent policies relating to PMs – which confuses/angers PMs. Staff follow up can be a problem. You may have to escalate issues to get responses. Lack of Transparency on Placement Ranking. Lack of Transparency to system changes. Cost of Subscription has increased significantly YOY. Eliminated PM discounts. Removed Property Manager phone numbers on the site. Eliminating emails from the guest. Moving to closed communication. Moving to generic listings.
More cons of HomeAway/VRBO? Poor communication/ Do not understand Property Mangers. Many new policies seem created for RBO and applied to Property Managers. House Rules, Market Maker and “win/loss” are examples. As a PM, a “race to the bottom with pricing” does not benefit your owner. This is not yield management. Poor testing of updates to their products, updated with bugs and glitches. (owner portal, GTHY) Bugs effect conversion. VRBO app showed different prices than web site. They send emails after a guest books that property is unavailable. The “nodes” are messed up again – and they argue about it. Expedia relationship with HomeAway is not as good as with other 3rd party middlemen. This means you might be better with a middleman. HomeAway is constantly changing their business without advance notice. What will their PPB fee be a year from now? What will subscription cost be next year? Will listings become generic?
The PROS of OTA Middlemen Usually free to list your properties. Charge you for every booking. Have experience in dealing with very difficult large OTAs or smaller niche OTAs especially in Europe and Asia. For Booking.com, they can manage the screening process of bad credit cards. But, then that requires them to be merchant of record.
Trend – Rise of Alternate Channels
• Most Vacation Rental Software (VRS) and 3rd Party Consolidators have
systems that integrate directly with OTAs. There are dozens of
smaller/regional players who can make an impact.
Regional Channels: Global Channels: 3rd Party Consolidators: Others:
• 9 Flats • ApartmentsApart
• Beach Guides • Blue Tent
• Agoda • Atraveo
• Canada Stay • CTrip • Booking Pal • BookApart
• Condoworld • Flat4Day
• NextPax • BYDays
• Luxury Retreat • Flat4Day
• Find Rentals • Red Awning
• Perfect Places • Goholidaylets
• Hilton Head Rentals • Resorts and Lodges • HotelBeds
• Rentals United
• Stop Sleep Go
• Owners Direct • NextTrip
• Tripping • Vacayhome • Perfect visit
• Maui Hawaii Vacations • Trip Villas Connect • Rentals Combined
• Vastays
• Ski.com • Travel THC
• VR Guest
• Vacagent
• SmokyMountains • Zillow
• WukingThe Cons of OTA Middlemen Are you the merchant of record? If not, you may not be aware of what they are actually charging guests. Can be a record keeping nightmare for Accounts Receivable. They over promise and under deliver. Can be very frustrating drain of resources. Some OTA Middlemen redirect your inventory to your competitors. Some OTA Middlemen brand your properties with their logo on OTA sites Most OTA Middlemen do a very poor job with your content – and cannot update it. Some OTA Middlemen BID AGAINST YOU on your branded key words on Paid Search Even if you disconnect their feed, they still keep your listings up as they use them for branding and redirection. It is a nightmare to get them remove your listings. Some OTA Middlemen lie/do not disclose where their orders are coming from. Some OTA Middlemen try to get you to sign 1 year binding contracts.
The Rise of Google in Air Travel Google has been testing air travel for over 3 years by intercepting consumer searches. Google “knows” the consumer’s location and fills in dates and provide meta results In Air Travel, the OTA has been virtually eliminated. Results populate direct sources. After booking air, travelers will be able to tap “lodging” to see the same dates and choices.
The Rise of Google in Lodging Google is entering the Vacation Rental space with initiatives including desktop, mobile applications and voice / bot butlers. Google will revolutionize how travelers search for lodging/ vacation rentals by prompting for arrival and departure dates and other travel preferences in the search results Google’s intent is to allow the consumer a meta search result. The “official site” is available. In general, booking direct provides better room types, loyalty points and “special” prices.
Steve Milo, CEO, VTrips
steve.milo@vtrips.com
VTrips OTA Bookings 12 months – 2016 vs. 2017 results
Online Revenue Online Revenue
Advance Book Advance Book
2016 2017
HomeAway $8,621,280 $15,492,994 80%
Booking $240,521 $1,175,812 389%
Airbnb $303,566 $1,024,003 237%
TripAdvisor $837,768 $13,632 -98%
Others $429,292 $1,722,697 301%
OTA Rev $10,434,443 $19,431,154 86%
Bookings 7443 17599 136%
VTrips is in traditional “resort markets” mostly coastal (not urban). VTrips has expanded in the last 2
years into “nightly markets” driving more transactions (but smaller LOS).
Incremental off-season/shoulder booking increases based on “Last Minute” discounting to OTA.
Total bookings from OTAs increased from 7443 to 17599 as VRP moves into nightly markets and
experiments with deposit policies, cancellations policies & booking rules during “shoulder”/“off” seasonSteve Milo, CEO, VTrips
steve.milo@vtrips.com
VTrips OTA Bookings 5 month trend
Jan-May 2017 vs. Jan-May 2018
Online Revenue Online Revenue
Advance Book Advance Book
Jan-May Jan-May
OTA Channels 2017 2018 growth
HomeAway $7,014,779 $11,376,095 62%
Booking $455,340 $951,822 109%
Airbnb $478,718 $285,086 -40%
TripAdvisor $0 $0 0%
Others $853,609 $925,000 8%
OTA Rev $8,804,463 $13,538,003 54%
Bookings 8190 10359 26%
VTrips Florida markets suffered decline in advance bookings due to Hurricane Irma. VTrips is up
54% YOY based on the strength of non-Florida markets.
We are seeing a higher ADR this year from OTAs. Revenue is up 54%. The number of bookings is
only up by 26%.Steve Milo, CEO, VTrips
steve.milo@vtrips.com
VTrips OTA Bookings 5 month trend
Jan-May 2018 with Google
Online Revenue
Advance Book
Jan-May
2018
Google $9,165,298 40%
HomeAway $11,376,095 50%
Booking $951,822 4%
Airbnb $285,086 1%
TripAdvisor $0 0%
Others $925,000 4%
OTA Rev $22,705,319 100%Questions?
Steve Milo, CEO, VTrips
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