Pros and Cons of OTAs for Vacation Rental Businesses

Pros & Cons of Relying on OTAs for Your Vacation Rental Business

As a vacation rental manager, you have a choice to make: Rely on online travel agencies (OTAs) for bookings, or get bookings through other methods? Admittedly, it’s not an easy choice to make. That’s because there are several pros and cons of OTAs for vacation rental businesses, each of which may affect your decision.

But one thing is clear: You do have to decide. And this article is going to help you do that. Read on to learn what an online travel agency is and whether you should use one to keep your property booked.

Interested in an alternative to OTAs that can lead to long-term success for your vacation rental company? Learn how Magnetic Strategy has helped countless vacation rental businesses reach new heights. Contact us

What Is an Online Travel Agency (OTA)?

OTAs are third-party providers that stand between you and the guests who will eventually stay at your property. The online travel site sells your rooms and properties on its own website, aggregating them with the properties of many other owners in your area. OTA users book the rooms through the OTA website.

OTAs generally operate through one of two business models:

  • The agency model. OTAs receive a commission fee on any bookings that occur through their websites. 
  • The merchant model. OTAs purchase rooms directly from vacation rental businesses, mark up their prices and resell them on their OTA websites.

The term OTA is not unique to the vacation rental industry. Hotel chains have dealt with online travel agents for many, many years and have learned “the hard way” what happens when accommodation businesses depend on online travel agencies too much.

Do a little research on Google, and you’ll find that hotels, the hospitality industry and tour operators have been waging “direct booking wars” to regain their customers so they don’t have to trade revenue (almost 30% commission) to capture travelers.

In the vacation rentals space, Airbnb is perhaps the best-known OTA, but there are dozens of national and regional OTAs in operation today.

OTA Pros & Cons

When it comes to using OTAs to generate bookings, there will be some advantages and disadvantages. Here are some need-to-know OTA pros and cons.

Pros

The pros of OTAs are generally about convenience. These platforms have built massive websites with big initial investments, online marketing spend and put into place standardized processes that you can take advantage of to generate bookings — for a price. Here are the upsides of OTAs:

1. Access to a Large Audience

The large OTAs have invested millions of dollars into advertising, which has built a large customer base for their platforms. While your website may struggle in the early days to generate organic traffic, many OTA websites see thousands of visitors per day.

You may even generate some additional reservations as a result of the “billboard effect” which is a positive side effect of using online travel agencies. Expedia defines this as potential customers seeing your brand on an OTA and then finding your own website to book.

billboard representing one of the pros and cons of OTAs for vacation rental companies.
OTAs have massive marketing budgets and can capture the attention of huge amounts of potential guests.

2. Easy to Use

Online travel agencies like to package themselves as “turnkey” solutions for convenient online bookings. While building your own online booking process can feel clunky and difficult, OTAs have already done the legwork so you can upload your properties and gain access to their existing customers.

3. Brand Trust

Potential guests that are states or countries away from you may not know your vacation rental business by name, but they have almost certainly heard of Airbnb or Vrbo. While they may not trust your business enough at the outset to actually complete an online booking on your website, they likely already know and trust the big OTAs.

Cons

These OTA pros and cons lists may look a little imbalanced, but that’s because, at the end of the day, OTAs are businesses looking out for themselves — not your business. Here are the cons of relying on OTAs for your vacation rental business:

1. High Fees

If the OTA you work with acts as an agency, its commission fee can be as high as 20% in some cases. In the travel industry which is already operating on thin profit margins, that is a large cut to give away for every reservation.

2. No Direct Contact

Some OTAs have set up their sites so that you know nothing more about your incoming guests than their first and last names — no mailing address, no email address, nothing. That limits your ability to capture their customer information so you can build relationships with guests or do any direct marketing to keep them coming back to your properties.

3. Pricing Problems

When you set your rates on most OTAs, you may lose the ability to change prices to your liking due to OTA policies or dynamic pricing. That means you can be locked into a price that isn’t ideal, and making changes can be difficult. 

Meanwhile, when you work with merchant OTAs who purchase and resell your rooms, you have no control over the final price your guests pay, which means their expectations and feelings about your brand are somewhat out of your control, too.

4. No Brand Loyalty

There’s a reason people say, “I booked an Airbnb.” OTAs are all about branding, and OTA users feel like they’re booking directly with the OTAs rather than the individual property owners. But you have worked hard to build your brand. You don’t want the credit for your beautiful vacation rental going to some OTA that has never so much as sent a representative out to see the place.

This is why it’s so important to invest in digital marketing and branding so that your marketing efforts help your site stand out from all the other travel companies competing for customers and you get to keep more of the money when they book with you directly.

5. Different Terms

When you’re working with an OTA, you are subject to their terms. That means cancellations and various other policies can be up to the OTA. 

On top of that, you have no control over the OTA’s overarching business decisions. Imagine if you were a vacation rental owner in China who relied solely on Airbnb bookings. With almost no warning, Airbnb announced that it was ending its business operations in China, leaving property owners there with little to no recourse. That’s just one example!

There are multiple examples of AirBnB siding with the guests over the hosts (who arguably, keep AirBnB in business) and there’s really no recourse for the host but to build their own website with a booking engine.

6. Still Need Your Own Website

In reality, OTAs don’t eliminate the need for vacation rental properties to have their own websites. You still need a way to market your property outside of the OTA’s sphere of influence, and that means you still have to pay for and manage the various aspects of your website while also dealing with the OTAs’ high fees.
But if you can get the guest to book on your site, then you won’t be paying that extra commission to the online travel agencies.

7. Multiple OTAs to Manage

If you’re using one OTA to list your properties and generate online bookings, why wouldn’t you use the others? They are similar, but they reach different audiences. But here’s the problem: You then have to manage your individual rooms and properties across multiple platforms if you aren’t using your own property management software. That can lead to confusion, stress and double-bookings that harm your reputation.

Harmony with OTAs?

To avoid the many cons of OTAs, you don’t have to avoid them altogether. There are some advantages that can be realized based on how a manager utilizes the OTAs.

Strategic Inventory Management

If you have some properties that are traditionally harder to fill, put those on the OTAs and use your direct booking website for the properties that are constantly occupied. This ensures you retain more of the revenue from the popular properties AND you get the less popular places in front of larger audience.

Slow Seasons

Do you traditionally have a slow season in your market? This would be a good time to add enable more of your properties on AirBnB or Vrbo so that they have a greater chance of staying filled during the offseason months.

Incentives

If you must depend on 3rd party sites for reservations, then consider offering an incentive or special rates to book direct on your website as opposed to booking on other websites. This could be as simple as a discount or a special welcome gift for new guests. OTAs offer special rates so why not you?

Alternatives to OTAs

Fortunately, there are several vacation rental marketing strategies that will allow you to compete. Notably, an investment in SEO for your vacation rental website can increase your organic traffic, have your brand show up higher in the search results and lead to more bookings. And when done correctly, search engine optimization will provide compounding returns on your investment over time.

Email marketing and social media can also serve as effective digital marketing techniques to reduce your dependence on OTAs. However, with any of these channels, it’s important to note that you have to use them in the right way in order to see real results. 

For Real Success, You Need Strategy: Magnetic Strategy

OTAs deal in convenience, but that convenience can come at a cost to vacation rental businesses. Although you can easily list OTA pros and cons, relying solely on OTAs to generate bookings can actually harm accommodation businesses if left unchecked, despite any short-term upsides these platforms may provide.

Fortunately, there are viable alternatives to OTAs. And Magnetic Strategy is prepared to put them to work for you. We provide SEO, website design, content marketing, email marketing and a wide range of other services to vacation rental businesses all over the country. We’re ready to help you generate more bookings online, too.

Get in touch with our team to get started. Call 623-226-8518 or contact us online today.

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