This is a press release written by myself published on 07/30/09.
please note that the figures used in this press release are for example purposes only and do not necessarily reflect the rates charged by any individual or company.
I think most people in the world have heard something about the current economy; I have no doubt that what you hear is not good. Hardly surprising when it is said to be worse than the Great Depression. That alone is having some effect on the Vacation Rental Industry; the real struggle however is not one that the Rental Manager can control. Anyone who is in the industry in any way is well aware of the Home owner portal sites such as VRBO and Always on Vacation but for anyone who doesn’t here is a brief description. For a nominal annual fee an owner can list their property on one of these sites, they get a listing on the site and can pay for various upgrades etc. The public who are looking for a Vacation Home can then go on these sites, which are some of the best optimized sites on the web ranking high on all major search engines. Once the Guest has put in all their criteria an email will be sent to all the owners matching that and then it is up to them to respond with their price. It’s not hard to figure out which villa gets the rental in most cases, the cheapest. Guests can also search for the home they wish to stay in and email an owner directly which in some ways can be better as the owner then knows he doesn’t have to compete with others. In general I like the concept of the idea, I think the more rentals an owner can get themselves the less expectation there is on Property Managers to place bookings. In the past these portals have provided owners with an excellent source of revenue. But recently all this has changed.
Let’s say I have a home in Florida, it’s a 4 bedroom 2 bathroom with private pool a pretty standard home in Florida, in fact the 4 Bed has the highest competition especially if it doesn’t have any extras to offer. I list my home on 2 owner rental sites. I also employ a management company that looks after all aspect of the home and themselves place bookings. I expect that my property manager will provide me with bookings and my expectation is not too high I want to average a booking a month through them. This is a typical situation which I am sure many owners are in right now. A month goes past and I start to get emails from the owner’s sites, someone wants to stay in a 4 bed and my home meets the criteria, great. I send them an email saying I would like $100.00 per night for the rental; this isn’t as high as they would pay through my management company but hey no one is going to take 20% off for commission either. As this is based on the situation as it is at present I don’t get a reply. 2 years ago I would of gotten a reply accepting I’m sure. The guest managed to get a home almost identical to mine for a mere $60 per night. Great in the eyes of the guest they got a bargain. So what do I do? I decide I have to compete otherwise my costs will be to high, I drop my prices to the $60 level. Now this has a number of different effects. 1, the 5 bed homes that were priced at $140 per night now have absolutely no hope of getting that rate believe me people will squeeze into a 4 bed. So they have to lower their prices. 2, a 3 bed home that was only charging $70 per night obviously isn’t going to get that any more as a 4 bed is less, so they decide they have to drop to $50 per night. 3, the property manager who has 3 beds listed at $100 per night is now completely out of the picture no one is ever going to consider paying that when they have heard they can get a 4 bed at $60 per night. So now what happens? One property manager decides you know what I need to be getting rentals I’m going to lower my prices. Once one goes many will follow until there is no choice but to bring down the rate. But hang on I’m the property owner I still expect my 1 rental a month from my property manager, but I’m not happy with the rate I’m getting! Who is at Fault?
Let’s look at the perspective of the homeowner and the property manager.
The Home Owner:
It is the home owners responsibility to look after their investment, they make decisions based on what they think is best. Dropping the price of their nightly rate is their decision and will always be. The owner has to factor in all sorts of things, increasing competition, state of economy, their personal finances and overall worthwhile in having a rental property. It can be very stressful particularly if when buying the home they were stretched to begin with. Many have succumbed to foreclosure in the preceding months and this may be due in part to not having enough rentals or of course not getting enough for rentals. If it is because of the latter, then is it fair to say they may have shot themselves in the foot? I am not going to cast and judgment. I will say this though it is not the fault of every homeowner, no one will ever know who started off the rate decline but you can’t blame people for following suit; it has a domino effect once one goes them all go.
The Property Manager:
Property managers may look at this situation and pass the book, after all they didn’t tell the owner to lower the rate, and they also didn’t lower their rates. This is a very narrow view for the majority. Property managers also have to compete to get bookings, getting their own bookings is becoming increasingly difficult due to things like owner rental sites and tour operators. Tour Operators provide a vast amount of bookings to property managers but the rate that they give is very low in comparison to their own. Now there is for some reason a tainted view of tour ops by a lot of owners, some people presume that because they have booked through a tour operator they will disrespect the home more, some people just won’t accept them because the rate isn’t enough. Firstly tour operator guest are no different to you and I they are no more likely to disrespect the home than the next person. I will say this though, due to the increase in tour operator guests it has led to an acceptance of a lower rate, owners realize that if they want plenty of bookings they have to accept tour operators which typically give $85 per night in a 4 bed let’s say.
So if the property manager has said to an owner, I can give you plenty of bookings however the rate isn’t great and the owner agree to it then the owner is obviously ok with getting that rate. Is it then not understandable why they are willing to accept such low rates for their own bookings?
Well, tour operator bookings have been around for some time. They are guests that have decided they wish to have the whole package deal, flights, vacation home and vehicle rental in one price. There will always be this type of guest. There is however another way, you book each item yourself and probably save yourself some money. You find a cheap flight and cheap car rental from small individual companies then you look for a vacation home. Let’s say you find one at $120.00 per night for 7 days a total of $840.00 plus your flight which cost you $700.00 and your car rental which you paid $250.00 a total of $1790.00 for 7 nights, bear in mind that you got to choose which villa you stay in from pictures you have a Jacuzzi, games room, TV’s in every room its perfect. In this deal everyone is happy, the guest got what they wanted, the property manager makes $168.00 based on a 20% commission and the homeowner gets $672.00 for a week’s rental.
Now let’s look at the cost break down of a tour operator. You go into a travel agent and say you want a holiday to Florida; you want flights and car rental included for 7 nights. They come back with a price of $2500.00; it breaks down into flights at $900.00, car rental at $450 and vacation rental at $1150.00. You are happy because that’s all you have to do. However, the flight really only cost $750.00 and the car rental $300.00 then the vacation home a mere $595.00 a total of $1645.00. The reason the vacation home rate is so low is because they get away with only paying $85.00 per night to the property manager, if the manager doesn’t like it then they don’t get a booking. Add to these costs the fact that the guest who booked it doesn’t know where the home is going to be or what it is going to be like. Then factor in this, the property manager gets $595.00 because the rate is so low they only take a 5% commission so they make $29.75 that is to cover all the admin and the guest liaison plus any emergency calls. Then the owner only receives $565.25, the guest arrives and the home isn’t what they wanted. This situation is very common. So no one is really happy in this scenario.
If homeowners knew this situation all along then would they have made the decision to drop the price so dramatically in the first place? I’m not so sure they would. Even if they kept a rate of $120.00 someone who is booking all the separate bits themselves still feels like they’re getting a bargain.
Unfortunately even with all this said the situation will continue and maybe even decline more who knows. I can’t see people wanting to change their minds right now due to the fear that they won’t get bookings. It would take a huge stand from a lot of homeowners to turn it around. But who knows what the future holds.
The new restaurant on the corner of US 27 and Woodcrest Way is now open! Santa Fe Cattle Co opened on Monday 28th and has been pretty busy ever since!
Hello again! some of you may know if you have been in Florida lately that there is a new building rapidly being constrcuted. It is situated on the corner or US 27 and Woodcrest Way opposite Winn Dixie. There are as of yet no signs up to say what it is but, I have some inside information!
2009 Eastern Conference Champions, Orlando Magic travel to Los Angeles tonight for game one against Kobe Bryant and the Lakers. Magic have only been this far in the NBA once back in 1995 where they were heavily defeated 4-0 in the series by the Chicago Bulls.
agic star Hedo Turkoglu that stole the lime light with an outstanding performance with 25 points and a career high 12 assists. Magic were hot from Downtown as they almost clinched the record for 3 point baskets made. It must have been the pizza that Hedo enjoyed just before the tip off!