Is your Holiday Rental Management business the next corner shop?

Is your Holiday Rental Management business the next corner shop?

TheShopAroundTheCorner1940-1From corner stores to independent bottle liquor stores, from local hardware to independent caravan parks and independent hotels, a toughening market and vicious competition have wrought change. Many independents have disappeared from our local areas. I miss my local hardware shop, but he couldn’t survive in a world of big-box retailers like Bunnings and Masters – companies whose business strategies kill off the smaller independent stores. Forecasts are that approximately 6,000 of the remaining independent hardware stores in Australia will disappear over the next 10 years. While specialist stores and online retailers are set to grow, the real winners will be the super-barns.

Where’s our industry heading?

It’s not hard to make the leap from the hardware sector to our holiday rental management business: the smaller businesses fall prey to the similar market pressures that have driven corners stores, liquor shops and local hardware stores towards extinction.

History of property management and marketing

The property management industry is dynamic if nothing else! How we did our marketing and found customers, how we managed our properties, and how we treated our guests even 20 years ago all seem quaint. We put advertisements in newspapers and magazines and listed with the local information centres. We listed and waited, fingers crossed, hoping for customers. The logistics of managing arrivals and keys occupied brain power and lots of time. Bookings all went through staff and were manual. We prided ourselves on our independence – we valued it highly and did all we could to protect it.

Up until about the year 2000, holiday property managers called the shots. They were traditional businesses that managed owners’ properties – they took on all the responsibilities of renting the properties and they had control over the conditions under which renters stayed; they managed cleaning, repairs, payments and profits. Owners and customers were passive in this world.

The advent of the internet jolted property owners and managers out of this work paradigm. A new business universe appeared. Some owners and managers jumped early and embraced the new tools and opportunities. Many jumped in the easiest direction: they opened their doors and wallets to clever and professionally built online marketing channels. Priceline, Stays, Homeaway, Wotif,, Expedia, Last Minute and others made it easy for property managers and owners to pay and ‘use the internet’ for marketing.

ChangeIn Australia, these OTA (online travel agents) channels emerged and provided property owners with an alternative to the traditional property manager model. Owners now had a way to self-manage and put the commissions back into their own pockets and return a greater profit for their holiday investment property. Because they were managing it themselves, many owners discounted the rate that the existing manager was charging. Owners then went out to the market and reduced the price because they had an expense removed. They found locals to clean and repair. A new rental management process was born, and it appealed to the holiday maker because it was cheaper – sometimes much cheaper than market price – and it allowed renters to deal directly with the owners.

In this world, price was the key criterion for attracting customers. In some instances, owners marketed their properties at half the price advertised by the property management company. Becoming even bolder, some owners instructed their property managers to decrease charges or they would take back rental control of their own properties. Property managers complied in order to keep their clients. The holiday maker was the clear winner in such a situation. Except that service levels to guests were frequently decreased and local office or assistance began to disappear.

The gravitational pull of the growing mass of online marketing channels attracted more and more owners away from the traditional model at a time when the market made it easier to purchase a family holiday home. Not surprisingly, the channels became stronger as more owners used it. Eventually, the channels came to control not just individual properties but the market itself.

The internet reshaped the holiday property management industry as it has done to nearly every other industry around the world. It created a change of paradigm and a shift in profit distribution: there were more players wanting a piece of the holiday rental pie. Initially seen as a saviour, internet marketing unsettled the status quo and squeezed businesses…sometimes out. Responding to the online channels, many holiday property management businesses have reduced their management fees from above 20% to below 15% in the past decade at the same as a their cost of acquisition is rising in the opposite direction. In this new, competitive world of online marketing, the cost of customer acquisition has risen many times more than commissions and profits. Customers and online marketing channels have been the winners; owners and property managers have suffered the financial losses.

Internet-based tools are the future of property management, and they are already available for efficiency and profitability. Used well, they can assist with marketing, enquiries, quotes, booking, channel management, communication, cleaning arrangements and maintenance. Used poorly, they can swallow the profits and ultimate viability of property management businesses.

The current state of affairs

Today, we all work in a multi-channel reality. How we each manage to adapt to and use this reality for our success as individual businesses lies on a continuum from poor to wonderful. Where are you on that continuum?

The online marking channels have dynamic, engaging, super-fast websites that provide useful, engaging and relevant information. They make booking easy. They attract customers from everywhere. They collect and keep valuable data on customers (and use it for their own marketing). Clever property managers are benefiting from this. Judicious managers are using the online channels to the best of their advantage, piggy-backing on the strengths and global reach of the channels to win the loyalty of customers once they arrive at their properties.

Naturally enough, the channels charge for the privilege of using them, and those charges continue to rise, eating into profit margins (fees currently sit at between 15-25% of each booking). Online channels squeeze their users through fees and contracts. In September 2015, the Australian Competition and Consumer Commission commenced investigations into the pricing practices – including pricing parity provisions in the contracts – of the online travel agency market.

Customers are also bringing about change. This world is information-rich and our customers are information-empowered! They are no longer passive recipients of information doled out by property managers; nor are they customers waiting to be asked. They search – they scour – the sites for information and better prices. They ask for better deals. They are tech savvy and they know it. It’s not just technology that’s changing how we do our business, it’s the use of that technology by customers. Indeed, in recent years, there’s been considerable discussion on how consumers are gaining marketplace control. That is, they are taking power away from marketers and retailers. Much of this power shift has come from consumers’ increasing access to almost instantaneous marketplace information via the web and mobile communications. And as consumers have learned more, they have demanded more. The more consumers know, the less effective traditional marketing approaches seem to be. Successful property managers are coming to terms with this democratisation of information and power-sharing, and they are learning to appreciate that customers:

  • live on line – some eat, sleep and play online; they are connected most of the time
  • expect the latest and most efficient technologies from businesses – not just yours; in every aspect of their online lives, they expect the best
  • compare and leverage information in order to exact the best deals and experiences; they seek to optimise their bookings and benefits
  • use SMS, phones, APPs and every other possible connection tool
  • are beginning to consider such things as add-on activities and eco-friendliness.

As property managers, we need to recognise that we are working in an economy that is becoming increasingly people-centred. Just as new leadership principles recognise the primacy of people, particularly employees, in their organizations, so too must holiday rental property managers. We must put people in the centre. We must keep a focus on the people in our business: trained staff, ecstatic customers, efficient suppliers, real and possible competitors, and potential allies.

Will you become the next corner shop?

Nothing is standing still. Technology is galloping ahead. Marketing strategies are evolving rapidly. Customers are up and running. The balance of control and profits in the holiday rental market shifts almost daily. Longevity in this industry requires us to keep up. Keep up. The bottom line in surviving the dynamic nature of our industry is protecting and improving the bottom line of our businesses. We have to keep up or we get left behind. Efficiency of service, quality of passad-vs-usa42remises and effectiveness of marketing truly matter. But survival in the future will – I believe – require something extra.

Survivors will have to use the best of what’s available in technology and communications. Technologies and the industry are evolving faster than most individual businesses, so keeping up takes focus and effort and investment and awareness. I believe the next dominant species of property managers will be those who evolve to use the latest Property Management System (PMS) software; they will have a new philosophy on the whole business and pick up the majority of bookings from the internet with minimum human intervention; they will have a website that is strong organically and found easily through search engines. Further, they will have integrated information and communication systems that talk to each other. For customers, it will be easy to book and pay on the website.

In the future, there will be no keys; all doors will have digital locks and date and time-stamped door codes that are sent by SMS to client phones at check-in time. The trust accounting component of the system will be so automated and integrated with the bookings and management system that the time spent each month managing the process will be hours, not days or weeks. Maintenance personnel will be notified by SMS and emailed directly from the PMS. The maintenance person will close off jobs directly into the PMS with invoicing and outcomes from their mobile device. In the property management industry of tomorrow, staff will be an expensive luxury, so automation of all aspects will become imperative.

Longevity in this industry will require managers to use the best technologies available. The real change, however, is linked to marketing. After we are a marketing company that does cleaning.

Marketing Survival 101

Survival 101 says managers must be in control of their own destiny, and your destiny is your marketing.

By the way, a holiday rental business is a “marketing business that does cleaning”.

competitive-advantage-differentiation-strategies-unique-selling-proposition-300x2411Survival 101 requires us to use the channels as best we can, but not rely solely on them or they will be making profit off our hard work. We will need to become marketing companies and build a website that attracts and owns our customers! We’ll need to ensure the website is aesthetically pleasing, satisfyingly functional, super user-friendly and full of relevant and useful information. We’ll use our websites to create emotional responses of awe, anticipation and surprise. They will be a vital part of our direct marketing strategies, strategies that include opportunities to build customer loyalty when they arrive at our properties. Without a direct booking strategy, the online channels own our customers.

Survival in the future will also require us to learn from the experiences of the individual hardware stores, the corner store hotels and caravan parks.

Two of the major lessons from other independents are about collaboration. Independents have come together to market themselves under one umbrella, and some smaller entities have joined in order to survive.

Hotels work in chains – they work under a marketing arm and bookings are done in a central location. Caravan parks come under the banner of an amalgamated organisation. Independent hardware retailers join HBT, a national buying group with low overheads that suit the smaller stores. The independents have come together to survive and thrive in an environment where the big-box retailers across those sectors are claiming an increasing share of the market.

The time is right for independent holiday rental property managers to do the same or come together as larger organisations. The drivers (competition, global customers, dynamic and evolving customer needs, online channel monsters, costs) and our capacity to do so (technology, communication, networks) already exist. In fact, both are pushing us in this direction and we must grasp the opportunity – or wither as sole businesses.

Amalgamation as a group will allow the group to afford a highly talented marketer who develops a high quality marketing strategy – something out of the financial reach of most independents. Working as a group, visibility will be UP. Selling power will be UP. Buying power will be UP. Costs will be DOWN. We will thrive not just survive.

What could these groups look like?

The amalgamated groups could be under the same marketing company. Here, properties retain their own independence and identity but share costs of marketing. The marketing company promotes our businesses locally, nationally and internationally; it makes it easier for us to work with partners (e.g. frequent fliers, seniors card) because a group looks more attractive than individual properties.

Amalgamated groups allow the potential for a cross-property loyalty club that offers benefits and deals at regional and national levels, with the potential to extend internationally. Groups can also seek awards from state and national tourism bodies.

The possibilities are endless, this is an idea whose time has come.