Are Airbnb and it’s competitors the meteorite that will wipe out dinosaur agencies?
From time to time I’ll meet someone and talk about what I do and they’ll shake their head and say something like ‘Enjoy it whilst you can’. The implication is that the wave of technology that has wiped out bookstores and DVD rental shops is about to break over us. The new ‘sharing economy’ has seen near riots where taxis are being put out of business by Uber and clampdowns on unregulated letting in cities across the world but in the free market UK there’s no holding back with Airbnb becoming exponentially larger and the established directories scrambling to adopt the same model.
The original concept of Airbnb was very different from what it has developed into today. The principle was that if you had a spare room or even a couch you could offer it to independent travellers so they got cheap accommodation, you could make a little money plus there would be a fantastic interaction between like minded people. Staying with a local in a foreign city or remote village has the potential to be a fantastic experience and the critical early decision was that Airbnb would take care of the financial transaction removing an awkward part of the process. Like Ebay reviews by guests and owners on both sides of the transaction mean that poor quality accommodation or people behaving badly are weeded out and just don’t get the business. Venture capitalists poured money into the company with last year’s raise of $1.5 billion one of the biggest private funding rounds ever valuing the company at $25.5 billion and even seeing the logo appear on F1 cars
In 2017 the experience is very different, certainly in established holiday locations. Search for accommodation for 2 people in any resort and about 75% of the results will be for entire cottages or apartments and about half of the others are professional bed & breakfast rooms so although there are opportunities for the original spare room or surf shack experience most accommodation offered is standard self-catering – in other words the site has become a directory for cottage owners who don’t use an agency and is also used by some property managers with small portfolios.
So the death knell is tolling for agents – all an owner has to do is list their property answer enquiries and wait for the bookings to roll in. The charge is just 3%+ vat for owners and a modest booking fee of 12% charged to guests.
WHOA WHOA hang on a minute – rewind! Did you say 3% + vat to owners and 12% to guests making a total of 15%? isn’t that the same as an agency charges anyway? Well it’s the same as we charge for booking only and not a lot less than we charge for full service including cleaning and call out.
Unsurprisingly the other accommodation directories have looked at the mountains of cash being made and are scrambling to change their model from annual fee to ‘taking care of the transaction’ for you. Holiday lettings introduced ‘Free’ listings in the last few years initially charging 3% to owners and 3% booking fee which was quietly and steadily increased to 3% + 12% (surprise surprise). We had listings on these directories on an annual fee basis and noticed a severe drop-off in enquiries and it was apparent that we were being moved to bottom of the list. I spoke to my rep and was told that ‘Ranking depends on a number of factors of which the ability of a customer to make a safe payment through us is a significant factor’. A cynic might conclude that as they had our money already there was little incentive to send us traffic over properties that would earn commission.
Then Expedia had bought the Homeaway group for $3.9 billion which includes Owners Direct – the biggest UK site offering annual subscription listings. No prizes for guessing that part of the announcement was that they would be changing their business model to mirror that of Airbnb and the others except they chose to impose the charges on those of us who had already paid an annual fee causing uproar.
There’s no doubt that Airbnb has been a phenomenal success and in its original concept of letting a spare room or a shack in the garden the impact has been huge allowing people to travel cheaply and hosts to genuinely make extra income which could be very significant in a poorer country.
Surely the work of absolute genius though is that they have managed to persuade owners of holiday rentals to do almost all the work themselves whilst charging the same as an agency.
So if you want to write your own web content, take your own photos, answer your own emails, deal with your guest both happy and not, organise your own cleaning, linen, welcome packs and maintenance, be on call 24 hours a day and pay pretty much the same commission anyway then maybe it will work for you.
So what has a holiday agency ever done for us – quite a lot actually!
Simon Tolson owns Rumsey Holiday Homes in Sandbanks and a portfolio of holiday cottage agencies in Cornwall.
Contact Simon on:
t. 01202 707 357
a. 2 Banks Road, Sandbanks, Poole, Dorset BH13 7QD