Direct bookings mean more sustainable short-term rental businesses: what we can learn from the Coronavirus Crisis
When keen travellers were busy booking their trips months in advance, a “global pandemic” was the last thing on their minds.
But as it currently stands, the travel industry is now facing a potential calamity, in light-of the coronavirus crisis.
Short-term rental hosts who largely rely on OTAs (online travel agencies) are struggling to keep-up with a new wave of cancellations; whilst their guests plea for compensation; or at the very least, some form of communication.
Reports* tell us that travellers who have booked stays with OTAs such as Booking.Com and Airbnb have been struggling the most when trying to request sudden cancellations. On the other hand, property owners/ managers are finding themselves without any control of these procedures, as they are unable to make decisions, or directly liaise with their guests.
The extent of the covid-19 outbreak was unsuspected, to say the least. However, it does beg to question: How many of the thousands of short-term rental businesses, are sustainable enough to survive this global crisis now?
A fundamental decider in all of this, is the matter of “direct bookings”. It has become apparent, now more than ever, that STR businesses that focus on direct bookings more, have far better chances of survival (and no doubt, long-term success) in this ever-changing, somewhat unpredictable, travel landscape.
*From various media sources
The trouble with OTAs during the pandemic
There is no denying that OTAs have contributed phenomenally to the short-term rental sector. According to Skift news, hosts have shared more than 5.7 million listings worldwide, on Booking.com alone (as reported in March 2019). It therefore comes as no surprise, that STR businesses have felt the need to become reliant on such platforms.
However, what’s alarming, is that in our short term rental industry where “personalisation” is key, more and more STR providers are allowing OTAs to “run “ a large part of their businesses.
When hosts list their properties on OTAs, they are essentially, handing over all control to them as well. Guests liaise with OTAs with any concerns or queries (whilst the hosts pay the OTAs a fee) and all parties are bound by the OTAs policies and guidelines.
The trouble is, when a pandemic like the coronavirus hits, STR hosts are left out-of-pocket; and in many cases, completely out of the loop.
One such example is Airbnb’s updated “extenuating circumstances” policy (which is now global). The amended policy states that all guests are entitled to a refund for their reservations, in-light of the covid-19 crisis. The problem with this, however; is that the refunds are coming from the hosts, not Airbnb. Not only will the hosts’ costs not be covered, but they are likely to face weeks (in many cases, months) of empty calendars and minimal income.
On the other side of the spectrum, guests are suffering just as much. As mentioned in a recent article by Forbes, those who have booked stays with OTAs are now fighting a battle just to speak to these third-party companies, putting them into even more emotional distress.
It is more than likely, that these guests who are not receiving compensation, nor even the slightest bit of human empathy, may not return to these short-term rental providers once the pandemic has passed. Facing the brunt of this, will not be the OTAs who’ll have led the procedures thus far; but the STR businesses themselves.
Why direct bookings matter now & in the future
Bookings made directly between a guest and a property manager/ owner are referred to as “direct bookings”. There are no middlemen involved when it comes to direct bookings, meaning that STR hosts have complete control of the entire guest experience.
The immediate and probably most obvious benefit of direct bookings for STR businesses is that it cuts out any costs and commissions associated with OTAs. But what is often overlooked, is that all-important factor of the “relationship” between an STR host and their guest.
Without the mandatory policies set by OTAs, STR businesses have the freedom of directly liaising with their guests; and communicating their principles, brand identity, and individual procedures first-hand. So, whilst the coronavirus outbreak has inevitably impacted thousands of short-term rental businesses, those who are managing cancellation requests from direct bookings, are facing fewer obstacles along the way.
These businesses are therefore more sustainable, despite covid-19; and are likely to see long-term success, following the pandemic.
How “Trust” guarantees more direct bookings
In a landscape where 7 out of 10 rental enquiries fall at the last hurdle, due to lack of trust, consumer-confidence is key. It is clear that more direct bookings is the answer to stronger short-term rental businesses; but how do these businesses go about generating them?
These days, we live in a digital-first world that is abuzz with marketing ploys and creative brand positioning. Whilst this is all integral when working towards more direct bookings; what must not be underestimated in the STR world, is the power of “trust”.
One of the reasons why OTAs have largely dominated the short-term rental sector, is because guests reportedly, appreciate the perceived “protection” that they believe comes with them. It is no secret that travellers value peace of mind; more-so than anything else. So, in order to get ahead of the curve, STR operators must demonstrate that their businesses are first and foremost, built on trust and confidence.
One such way of achieving this, is via approval certification.
Obtaining certification that is recognised by travellers and industry professionals worldwide, immediately sets short-term rental businesses apart from fraudulent operators. Sadly, fraudulent activity remains a huge concern in the STR industry, with £7 million being lost to holiday booking fraud, in 2018 alone (source: Action Fraud).
Even today, the media is awash with stories about unsuspecting travellers paying for “luxurious properties” that in fact, did not even exist. Fraudsters around the world have built businesses by conning others, through their sophisticated technology, and frightening understanding of the sector and their victims.
As the travel landscape evolves, so will the fraudulent activity. It is therefore imperative for STR businesses to not only prove that they are legitimate, but to demonstrate that they care about their guests enough, to invest into approval certification. This is what naturally enables more direct bookings.
Chris Maughan, founder and CEO of I-PRAC, a global membership platform that certifies legitimate short-term rental agencies and property owners, recently stated that, “An incredible 60% of bookings for I-PRAC Approved members, are via direct bookings, rather than bookings from OTAs”.
The numbers speak for themselves.
According to the industry-leader and the company’s seamless website, approval certification is something that is not taken lightly. For example, in order to become I-PRAC Approved, members are required to go through “rigorous checks” and a robust application process, that verifies every fundamental aspect of an STR business and their owner(s).
For travellers, the I-PRAC Approved logo on an STR business’s website translates as ultimate peace of mind. They can rest assured, knowing that their safety and financial and physical wellbeing is guaranteed.
In-light of the coronavirus pandemic, Chris has claimed that “Hosts who have been relying solely on OTAs are facing the most challenging times. All control has been taken from them (most notably regarding cancellation policies), and they are in-turn, losing thousands of pounds”
“Now is the time to start thinking about building a direct bookings business and looking at approval certification such as I-PRAC. Companies like I-PRAC are the bridge between a short-term rental provider and their guests; certification is the answer to more direct bookings”.
Looking to the future
Short-term rental has made headlines for being the most innovative sector in the world. Over the years, we have seen it grow at an exponential rate, and transforming the way “travel” is perceived (and practised), worldwide.
The consequences of the coronavirus crisis have in many cases, been devastating. It is without a doubt that the future remains uncertain and challenging for many in the travel industry.
Whilst industry professionals cannot predict the longevity nor complexity of this global pandemic, it is paramount that they continue to build stronger, and more sustainable STR businesses. Conferences such as The Book Direct Show are bringing short term rental hosts together to develop a better grounding to achieve direct bookings.
The future, for clear-cut reasons, lies with direct bookings. And the enabler for this is all, is trust.
Guest Article by Neely Khan for I-PRAC
Chris Maughan is founder of I-PRAC, the industry leader in host verification for the short term rental industry. Becoming I-PRAC approved shows potential clients you are a legitimate industry operator, thus increasing confidence within your property or agency creating more direct bookings, and increasing your credibility to potential clients.