ASTON INCORPORATED
The Entrepreneurs Pursuit of Personal Expansion, Tactical Success, Limitless Mindset, Manifesting the Impossible and making Legacy Impact on Humanity.
ASTON INCORPORATED
Episode 10- Maximizing Profits in Vacation Rentals: Demystifying OTA Fees and the Power of Direct Bookings
Our latest exchange also sheds light on the hospitality industry's seismic shifts brought on by the pandemic, from market crashes to unexpected rebounds. We share firsthand encounters with the COVID-19 turmoil and how certain markets, especially luxury resort destinations, have weathered the storm differently than big tourist hubs like Orlando and Las Vegas. Join us for these critical insights—the kind that could spell the difference between just getting by and truly thriving in the dynamic world of vacation rentals. Whether you're an established property owner or considering dipping your toes into the rental pool, this conversation is packed with the strategic know-how you'll want to bookmark.
Welcome back, guys. It's Wayne Aston and this is Aston Incorporated. This is my co-host, dallin Aston. Appreciate you joining us again this afternoon.
Speaker 1:So we left our last episode talking about the differences between branding, marketing and advertising and we really kind of started to get in the weeds on, you know, establishing and operating an Airbnb nightly rental business, and the conversation started to go toward OTAs and channel management. So these are two terms I wanted to unpack for the listeners thinking about doing this, because these are critical to your success. First of all, an OTA is an online travel agency. In the hospitality space. We just refer to that as OTAs. There are over 300 OTAs out there and an OTA is a. That's a price line, it is a bookingcom, it's hotelscom. Those are OTAs and with an OTA, anyone who owns an Airbnb property can subscribe to an OTA and they can put their property on a hotelcom website.
Speaker 1:We've talked about the do-it-yourself platforms, airbnb and VRBO. Those are kind of a hybrid OTA in my mind because they're their own platform, but a common denominator with Airbnb and VRBO and like a price line, is that well, price line is probably more meta-search actually, but the common denominator is they're all charging a fee. It's a significant. It's like a 15 to 18% fee for, if you own a property, for you to list that property on their platform and then circulate that out to their platform. So each of those online travel agencies have you should research them. You know they all have their own kind of net. They can cast their viewership and who they're reaching and well, it's crazy because Airbnb.
Speaker 2:I'll just give you a quick example If I get a $3,000 booking, I get about 2,000 on Airbnb. So think about that. That's crazy, it's expensive, that is expensive and yet I still so. Imagine if you could control all of that and it's through your direct bookings or whatever, and we could talk about that a little later. But if you could remove that fee, oh geez. I mean that's significant, but I mean the exposure that these platforms give you is huge.
Speaker 1:Yeah so that's amazing.
Speaker 1:One of the other things to consider, guys, is the meta-search engine. So let's talk about Expedia, because they're probably the biggest. Expediacom operates on a different situation. It's a search engine meta-search engine. They're more of a pay-per-click situation, charging the Lister or the property owner, so you can list your property as a pay-per-click kind of model. But I think one of the advantages of Expedia is that the meta-search will go out to a bunch of the OTAs and it'll aggregate all the options for you. So instead of you doing all the homework, if you want to rent a place, you're going to all these different sites and you're looking at their offerings, whereas you could just go to Expedia or TripAdvisor, for example, and you could just meta-search that and it would bring most of those options. I think that's created a lot of disruptive energy to the OTAs, because to be able to aggregate all that data like that and give you the best pricing options is pretty powerful in an engine like that. One really interesting thing that is, I think, a pivot from COVID.
Speaker 1:Covid was interesting because anyone in hospitality remembers we were shut down in Moab for seven weeks with the pandemic lockdowns. First, we had lockdowns for seven weeks so we weren't allowed to book anything. This is across the world. I mean, you guys all know what happened. The hotels were all shut down and we just were not operating. When the lockdowns lifted, then we had kind of the mask protocols and then it kind of started to switch. All the cities and municipalities had kind of their own protocols and so some markets rebounded faster than others. This is one of the reasons why we keep talking about market selection and anomalies in the market, which is why I personally am focused in our resort properties. We're really heavily focused on the regional luxury resort destinations that are drivable. So contrast that to a major MSA, a major tourism market like Orlando. Orlando stayed down for a lot longer. Las Vegas stayed down. They stayed locked up. The mask mandates had more impact for a longer range, whereas in Moab we were able to open up after the lockdowns, there was some mass protocol. But our driving constituent, our patrons who could drive there, who still wanted a luxury experience, who didn't have to fly Boy. I mean we boomeranged and the fall of that year I guess that was fall of 2020 after COVID we had 24% highest record numbers of nightly rates and occupancy in the history of the county. As kind of a, I call it the boomerang effect.
Speaker 1:You know, after the pandemic came, folks were pent up and we benefited from that, but there was a lot of adjustments inside of the OTA space and how hospitality folks and hoteliers were marketing their property as a result of COVID. One of the biggest changes that I saw that I think is a fantastic change is for major MSAs. I'll use Las Vegas as an example. You know everyone's familiar with the strip and these amazing casinos and hotels, these high-end hotels on the strip in Las Vegas. These are hotels that were doing a few hundred dollars a night pre-COVID. Covid hits and the convention space stayed locked down. Hotels started to open but convention space stayed locked down. You couldn't do public events in these big MSAs. So the hotels were forced into this kind of this conundrum where they had to drop these rates to like. I mean you're seeing like the.
Speaker 1:ARIA and the Cosmopolitan for like $49 a night. So they're operating in the negative, basically just to keep the lights on right. And so when hoteliers are experiencing that, they start to look at the OTAs and their channel management. Channel management you guys, channel management if you're a hotel or you're a condo resort operator, like I am, you'll have a software we call it a PMS, a property management system. In our case, we use Cloudbed, so it's a full-blown resort property management system and there's what's called a channel management component to it, which means I can take all my inventory of units and I can schedule how I disperse them through the channel manager onto different OTAs or meta searches or whatever.
Speaker 1:And so what happened post COVID is Google comes out with Google flights and Google hotels. Guys, this has disrupted the hospitality industry forever. Google has the biggest database of anyone, I think, on Earth, and what they started doing is they started having a meta search engine. It's a Google search engine for hotels, and so you Google where you want to go. You go to Google hotels or Google flights. It's the same process and it will aggregate all of your options for you for free and then push you directly to the property. Now for me as a resort operator. This was magic, because now I put my emphasis on Google and making sure my Google business page is solid, my social media platform is solid, so now I'm getting direct bookings and I'm not paying from Google, which is the biggest net that's cast out For free.
Speaker 2:I'm not paying the 18% to have my property listed specifically with them.
Speaker 1:So I think in many ways it became more profitable after COVID for you to be doing your business and for me to be doing in that resort space. We're in the nightly rental Airbnb space and TripAdvisor Plus is another one. Tripadvisor Plus is another one that's doing that meta search for free and they have ancillary ad revenues and things that allow them to leverage their network for the benefit of hoteliers. It's fantastic.
Speaker 2:Crazy, that's amazing.
Speaker 1:So, guys, when you're contemplating this, you're starting out like Dallin was saying in the last episode, and it makes a lot of good sense. I think, if I'm recommending anything now, we're not attorneys, we're not accountants, we're a broken record Check with your own attorneys and accountants.
Speaker 1:I'm not telling you what you should do, but if I were starting a new business, like you just did, you know last year, and you're going to go buy properties, you're going to have a bill of portfolio and you're going to use certain platforms to have a nightly rental programming, I probably would start with Airbnb because even if you're paying the fee, the exposure is huge. But I would right behind that, I'd be putting serious energy on Google, on the Google business page for your properties.
Speaker 2:Well, listen, airbnb has gotten my properties right off the bat. I mean we listed them and then got some great pictures, got the listing, then we've been holding it, dialing it in ever since. But I mean it's gotten me, you know, four to seven grand a month and it depends on the occupancy.
Speaker 1:Consistent and your occupancy has been north of 60% probably, yeah, yeah so.
Speaker 2:I mean, you're thinking about it. Airbnb, great Dude, that's after they take their fee, yeah, after they take their fee.
Speaker 1:That's fantastic. So there's so much value on that platform that it's worth paying the fee 100%. It's worth it the simplicity of that and the ease of being able to start with a property with one property Get reviews get sales.
Speaker 2:That's the number one thing you could do for your business starting out. Just get sales. Yeah, don't sit here and wait and push your sales off while you're trying to make it perfect. That's a recipe for failure as well. Just start get sales, get reviews, tweak things as you go and then leverage that those sales and that data and those customer reviews to then transition into okay, now let's start talking, talking taking direct bookings. Now, let's start talking expanding the business. Let's start talking maximizing profitability.
Speaker 1:All those kind of things. So to be clear, guys, I mean what you're talking about in the scaling process that Dallin just scratched on was to go from that first property. That's just on Airbnb. That might be the only place, the only environment it exists on, yeah. But when you start to scale, what comes next is you're going to build your own website. You're going to have a booking engine that is embedded in that website.
Speaker 1:That's where the branding and the feel of what you're creating becomes more relevant, more contextually valuable. So it's the scaling plan. So, once you have built a website, once you have an embedded booking engine, once you get really focused on cultivating direct booking business now you're going to be talking about channel management. You're going to be talking about multiple properties and a portfolio.
Speaker 1:So, guys, we're talking about from zero to a thousand units. Like you know, whatever that number is in your mind, you want to own and operate. That's kind of a basic blueprint from a distribution model or a marketing model.
Speaker 2:Yeah, and you have to understand, going back to the first video or not video, the episode before this, you know, when we're talking about advertising, marketing and branding, most people on these platforms are not thinking about that. So that's who you're competing against? Yeah, you know, and so it's important to realize that that's who you're competing against, right, but their great platform is to get off the ground, get it running and use that to transition as you're going. If you're serious about it, that's the direction you have to take, and I feel like just most people aren't going to do it.
Speaker 1:Yeah, so the people that do do it, yeah, it's going to be awesome, big, big, big potential rewards there. Yeah, for sure. And if you're going and raising a fund and you're bringing investors into this equation and you're a steward and you have to review your. You must reduce exposure and risk, and so these are all critical elements of standing a business up and scaling it guys, you have to distinguish yourself from the traditional Airbnb or the Airbnb host.
Speaker 1:Technology is moving really fast right now. It's been incredible to be in the business in the hospitality space for the last six, seven years specifically and just to see the pandemic and what it did, how it changed the industry worldwide and continues to change the industry. And another interesting pivot is the fact that the mask mandates and what the pandemic created really created a new, more sensitive traveler more sensitive to cleaning protocols more sensitive to everything around that the health and safety that we were not thinking about before the pandemic.
Speaker 1:Now hotels, by nature, they have an organization and they have programming around the housekeeping and they're more professionally addressing that protocol. So there's a real potential for a gap of exposure. When you're talking about Airbnb, are they embracing some advanced protocols in the housekeeping and the staging of units? How does that stack up against hotels? Right, and there's advantages to that, because I see a lot of travelers who want to avoid a front desk check in all together. They like that. They can book one of my units and they can just get a code and let them self in, and they could show up at midnight, let them self in. They don't have to interact with someone else. So in one regard it's a little less social. But on another regard, you could lean into this concept that there's a little more privacy around it and lean into it and less human exposure to the whole staff of a hotel, and I think that's been an advantage to lean into post COVID as well. If you're an Airbnb operator, that's to me today is an advantage.
Speaker 1:Well, guys, I think that covers the small segment that I wanted to touch on with OTAs and channel management. Thanks for tuning in. Hopefully you got some value out of it. We'll catch you next time, stay tuned.