Ideas that Help you Succeed
Blog (noun) blawg
: a collection of experiences, observations and opinions to help the vacation rental industry
: a collection of experiences, observations and opinions to help the vacation rental industry
By Michelle Marquis, Chief Revenue Officer at Lexicon Travel Technologies
No one sits down with a blank sheet of paper, calls it, “My Vacation Rental Channel Mix,” and just starts making a list.
What really happens is that you start with one channel — say, your website — and add or subtract them over time. Mostly add. But when’s the last time you audited which channels you use?
We’re big believers in taking time each year to review which channels are driving quality bookings (at an acceptable acquisition costs) and which are not. This article explains why your channel mix is worth reviewing every now and then, and provide some tips on how to do it.
Let’s first agree on a working definition of “channel” in the context of a vacation-rental business. A channel is a catch-all term for any discrete path between you and a customer. If they call to book, that’s a channel. If they book directly through your website, that’s a channel. Each online travel agency (OTA) is a channel. Each vacation rental listing site is a channel. Your particular allocation or revenue from each channels is your own channel mix.
As you probably guessed already, the key is to know that there is a hierarchy to your channel mix. Put another way, not all channels are created equal.
Why Review Your Channel Mix
Anyone who’s juggled work, family, obligations, vacation, and the other trappings of modern life knows that there are only so many hours in a day and only so much of your time and attention to spread around. So it goes with channels.
As the number of available channels has increased, so has the competition for eyeballs and clicks. It’s tough out there. And for every “free” opportunity, there’s at least one that’s pay for play. Some make bold assertions about the size and engagement of their audience, and some don’t make any promises at all.
But regardless of the channel, the stakes are high. If you convert at 4 percent, for example, that means you need to get in front of 25 people to earn one booking. That might be on one channel or across 10 different ones. Some channels are more set-it-and-forget-it, while others require more frequent attention. Some convert better but come at a higher cost, while some convert poorly but don’t really cost you anything.
Without knowing which metrics are most helpful in evaluating your channel mix, you’ll be hard-pressed to make a sound business decision about where you should have a presence. Lexicon is here to help.
What Metrics Are Meaningful?
A channel’s reach is the number of potential impressions, or views, that it offers. An OTA like Booking.com or Expedia, for example, has more than 80 million visits per month. That’s a lot of potential eyeballs.
If you’ve ever advertised in a print or online publication, you were probably provided with a media kit that noted the size of their distribution (or number of unique hits), along with maybe some demographics about their readers. This is all to underscore the channel’s potential value to you.
Reach is an important metric, and generally, more is better. This is particularly true with OTAs, because once you whittle that potential audience down to those who are looking in your area, at your property type, within a particular budget, the number of potential impressions shrinks dramatically. This is where added scale comes in handy, because in the case of Booking.com, 2 percent is still a potential reach of 1.6 million. Even if your conversion isn’t very high, that’s still going to drive a fair bit of business.
2. Return on Investment
As we’ve already noted, a huge reach like OTAs enjoy only costs you on the back end. The listing itself, over which you have a great deal of control, is usually free. So yes, OTA commissions can be steep, but you only pay if a guest books. That’s practically the same as a free consignment, and that rarely happens elsewhere. So we think the ROI for OTAs is in-line with other acquisition costs you would expect from any other high volume advertising medium.
But any investment in a channel should be evaluated on its merits. If a $10,000 ad winds up driving $50,000 worth of business, then might be worth it. That would be a fairly average ROI for the VR industry, meaning plenty of people do better and plenty do worse. Only you can know what feels like a good ROI in your particular case. This example of a 5:1 or 20% acquisition cost.
An important component of ROI is attribution. You may have heard the saying that, “I know 50% of my marketing is working — I just don’t know which 50%.” Well, modern tools like ad-specific toll-free-numbers, custom short links, discount codes, and redirects can help you do all that with ease.
For example, say you purchase a ⅛ page ad in the back of a travel magazine. If the call to action is to drive people to your website, offer viewers of the ad a small discount with a coupon code specific to the ad, like NORTHWOODS10, or set up something called a “303 redirect” with your web hosting service, e.g. libmanrentals.com/northwoods. That discount is probably worth it to know exactly which ad drove them to you, and makes it that much simpler to evaluate your ROI.
Social media is an interesting one in terms of ROI. Advertising somewhere like Facebook can, and often does pay off. But it can be very hard to discern whether a more passive presence in social media is worth the time and effort. In general, it seems that a lackluster, perfunctory presence on social platforms is roughly equal to having none at all. If you like social media and have the time to invest, go for it. But don’t expect calculating the ROI to be easy. Ads are easier to evaluate than the impact of organic traffic.
We recommend tracking revenue attribution in as much detail as possible so when you DO sit down to evaluate your channel mix, you’re using actual data and not gut feelings.
3. Guest Quality
As you well know, not all guests are created equal, either. Someone who comes to you from a more hotel-oriented channel might literally be surprised to find that there isn’t a front desk per se, no continental breakfast, and no vending machines at the end of the hall. Or, they might tend to prefer something higher end than what you offer and leave a bad review.
The problem is, you never know what kind of guests a channel is sending your way unless you actually establish and nurture a presence there. And find a way to track those bookings.
We highly recommend measuring things like average length of stay and the booking window of time before each stay. Each of these metrics help you assess the quality and usefulness of guests from each channel, and establish an optimal channel mix for your business.
4. Channel Quality
To be more specific with respect to channels, it’s not just the site or the publication. It’s also the people, processes, and professionalism behind it. Some channels expect prompt payment from you but don’t give it in return. Others are slow to respond or make you feel literally like one in a million. Still others will have draconian policies and will blacklist you for not complying, even though you thought you were playing by the rules.
Whether you pay now or pay later, it’s still your dollar and you get to decide who deserves it. Even if a channel drives good traffic and ROI, it may not be worth it if doing business with them leaves a bad taste in your mouth. By the same token, positive experiences can make you feel good about the spend even if it doesn’t drive as much business as you’d like.
A big factor these days is data availability. For example, if an online listing site only passes along the same basic guest data kept in your PMS, that’s less useful than one which also shares some data stored in their user profile that allows you to build your guest records.
This is becoming a significant consideration, especially as property managers use OTA listings as “billboards” that drive their fair share of direct bookings. The ability to control the brand and the “message” has long been related to additional cost, which is why ads are expensive and content produced by others (articles, reviews, etc.) are free.
The good news is, it’s never been easier to highlight your unique brand, even with some OTAs. Having your logo and brand voice rubbing shoulders with the Hiltons and Wyndhams of the world is a fine example of how OTAs are helping to level the playing field for the alternative accommodations space.
One note of caution: while many of the channels allows you to showcase your brand, some channel manager partners in our industry mask your brand. They instead use your properties to build their brand. With companies such as Lexicon, your brand always reigns supreme.
If you don’t have a formal brand specification or a clean-looking logo that looks good in all sizes, consider establishing one. Logo, colors, typefaces, tone, and message all play a role in setting you apart and justifying (one way or the other) your prices.
Therefore, a channel (and channel manager partner) that allows you to “express” your brand more boldly should earn a little extra consideration over others that don’t give you any credit for the beautiful homes in your portfolio. The value of your company depends on this.
Evaluating your current channel mix or establishing a new one doesn’t have to be a super involved process. Sure, you’ll need to run some reports and crunch some numbers, but even a little analysis will get you closer to the data that makes for better decisions. As margins get squeezed, your promotional dollar must be stretched even further.
It comes down to prioritizing where you spend your time and money. Only by evaluating the impact of a channel relative to its reach, ROI, quality, guest quality, and branding flexibility can you know which ones to pump up and which to let fizzle.
If your channel mix needs an overhaul, talk to us. Not only can we provide expert recommendations on the best channels, but we can help you manage the time and effort to juggle them.