Future proof your short stay agency, starting today
Has your short stay agency come to the end?
This is a thought that will be going through many a business owner’s mind right now, but you have to remember everything is temporary, the highs the lows, there is an end to the pandemic we just don’t know when.
It’s time to reassess for sure, but this is your opportunity to wipe the slate clean and come back stronger, leaner and more prepared for the challenges that await in the hospitality industry.
Firstly what can we learn from this pandemic?
Well the big one which has caused many online travel agencies (OTAs) much media strife over the last few weeks, REFUNDS and whose money is it when the holiday has yet to be taken.
In reality unless the holiday has been taken the rental income can not be accounted for, therefore trust accounting is the most sensible way to run your business.
Your terms and conditions must include a clause that excludes you the agent and owner of any liabilities if a contract is frustrated because of events beyond your control. This will protect you from offering a refund if it is not financially possible.
You must also define your cancellation process and the fees incurred based on the notice period and circumstances for the cancellation. Cancellation protection insurance is critical here for the guests and will provide financial protection for you, the guest and your agency.
- Service Fee
- Concierge Fee
- Damage Waiver Fee
- Cancellation Protection
- Supplier Failure Cover
- Up sells & Extras
A sensible strategy here is to build into your ‘display’ or ‘advertised’ price some service / buffer revenue streams. The way most agencies work is that they charge a commission per booking, so like a revenue share scheme. I know some agencies specialise in master leases or guaranteed rentals however after COVID-19-19, I believe these agreements will be extremely rare.
Here is a great article from the guardian on how the leading cottage agencies have upset owners and guests with their refund policies during COVID-19. Even when a refund is issued they are retaining 25% of the booking and providing a credit note to that value.
So the question is how can you break down your income per booking to ensure you are building a sustainable agency that will cope with any global financial or natural disaster.
Let’s take a look at some potential revenue streams per booking, you can automatically apply within your agency pricing strategy.
Let’s break these items down and see how we can account for each one and what that revenue should be used against.
The bulk of your income is going to be from your commission per booking, here at iPro we have three options on accounting for your commission.
- % per payment
- % or fixed amount at time of booking
- % or fixed amount after booking has been completed
Based on current events and the itemised items above I recommend that you account for your commission after the holiday has been completed, this way you can be 100% sure that there is no liability against that amount.
With this setup you would easily be able to set up a trust accounting system where you draw down your income only when it is cleared i.e after guest checks out
Things to be aware of and the reason why most agencies do not follow this, is that you need a lot of cash to set up and start running your business as your income is initially limited or delayed.
This is your direct income, it will cover your credit card charges and provide an immediate income to support your business infrastructure i.e your reservation and customer service team.
A value add item, if you believe your guests would benefit from a team being on hand to assist them during their stay with local recommendations and a booking service, this package will provide you with direct revenue to hire your concierge team.
No one likes charging against the security deposit, you can be 100% sure that it will always lead to a dispute and an unhappy guest. However we have looked at 100’s of agencies and analysed their booking numbers and damage reports and have identified a huge opportunity to increase revenue, this income will be directly used to replace broken items up to a set value which you build into your terms and conditions.
At the end of each season you can draw down the excess as an income. This item would be non refundable but you can include automatically with any transferred dates or when they rebook due to COVID-19 cancellations.
A great addition and should be part of every booking, you can opt for using Booking Protect to manage this via their platform which is fully integrated with iPro. Or you may choose to manage this yourself with a system similar to the damage waiver adding a fee to every booking so that if the guest cancels you have an income that will enable you to meet your commitment with the owner.
Supplier Failure Cover
What should happen if the owner was to have their property repossessed or if your agency was to cease trading.
There are options on the market for you to offer this to your guest and they also have the protection of their credit card.
However by building a revenue stream for this specific event you can protect against unforeseen circumstances with your owners and your own agency.
Up sells & Extras
This is quite standard however I don’t think people maximise this and too much is included within the commission.
Usually this is due to bad technology and just making life easier, trying to save time and administration costs.
However with iPro you can build a complete strategy around your extras and make it extremely simple to update, allowing guests to add to their booking with ease.
Pet Fees, Cots, High Chairs, Hot tubs, heated pools, air conditioning, welcome packs, events, activities, there are many options here.
You cannot future proof your agency with a poor pricing strategy, price too cheap, make no money and attract the ‘wrong’ guests and price too high and you don’t get the occupancy or the number of bookings to make your business sustainable and profitable.
You also have to work with your owners, as their requirements will inevitably have their own expectations and requirements on what their property should be listed at i.e. how many weeks per year do they wish to rent as a holiday let.
Some owners are happy with 12 weeks, while others want over 30 weeks.
Setting the right prices is critical to your profit margins, so we have teamed up with Price Labs to bring you fully automated dynamic pricing which will allow you to automate this process with ‘real’ market data.
Setting flexible nightly and length of stay pricing for each and every property for every season.
You set your defined rules, coming out of COVID-19 this is going to be critical to ensure you maximise your revenue during a difficult period. Here you are going to have to work with owners to see what flexibility and needs they have to secure bookings early or wait till the end of the year of 2021.
The leisure industry is renowned for setting minimum stays of 7 nights, but this is going to be very restrictive moving forward people will want to travel but may not have the time or ability to stay for that duration.
So why not take advantage of our clever pricing giving all properties ability the to book a short break but building in automated length of stay pricing i.e 5 nights is priced at 7 nights
Via the OTA the guest can book 5 nights as that fits their needs but actually pay the 7 night price. This can be a double win as you have a 2 night break you could still rent out. Automating a rule change here to open up a minimum 2 night break when this happens means no manual adjustments from the team it just works behind the scenes.
Trust and Confidence
A big part of your continued success will be the trust that consumers have with your brand, to build trust you need good marketing and exposure however marketing your agency is a whole other story. This is about building a structure to secure the future of your agency for the long haul.
I-PRAC is a global verification and membership platform that certifies professional short-term rental agencies and property owners. Their approval certification is recognised by travellers and industry professionals worldwide, and sets our members apart from fraudulent operators.
This programme will give guests complete peace of mind that they are booking with a certified agency who is going to honour their booking, this certification is vital if you want to set yourself apart from the competition. The reason why people book with Airbnb and Booking.com is that they have more trust in those brands than your agency.
Therefore you have to provide initiatives that inspires that confidence and trust.
I-PRAC is our recommendation this programme protect guests and provides your agency with a stamp of approval.
A huge benefit of joining this programme is that it will also open up a new network of potential customers via their corporate programme.
Corporate organisations use big brands and hotels for their travel requirements due to their internal policies, now with I-PRAC accreditation your agency will be able to accept a whole new customer base.
The global crisis of COVID-19 has meant that every single business owner has had to take stock and look at their business. I believe that cheap accommodation will be the most at risk and will leave the market, consumers want confidence when booking so will be prepared to pay more to guarantee their happiness.
I believe that by dissecting your income and allocating funds from each booking you will become more profitable and more sustainable, it will encourage you to retain money within your business and it will provide you with that peace of mind you may well be missing right now.
Watch this space for when I dissect the opportunity for extra revenue from your owner portfolio.
CEO & Founder