Promote Your Way to Better Conversion

In business, conversion rate is the ratio of people who take a desired action to the people who just see it, expressed as a percentage. In other words, if 1,000 people see your listing or ad but only 10 book, then your conversion rate is 10/1000, or 1%. The same math applies to running ads or selling window cleaner door to door. 
In e-commerce, a conversion is the ultimate validation of your marketing efforts. Not only did you make it to the end of the elimination process, but you actually got them to commit. This is no easy task.

But what’s considered a good conversion rate in vacation rental listings? How do you improve it? This article will address one of the most time-honored strategies for improving conversion: through specials and promotions.


The Economics of Promotions 
If you’ve ever had an economics class, then you know that supply, demand, and price are closely related. Basically, demand increases as price decreases and the opposite is true for supply. 

Let’s assume for the moment that you charge $200/night for a nice three-bedroom house but you don’t have a dynamic pricing strategy in place. Assuming that price aligns with the market average, then some buyers will regard it as too expensive, some will think it’s just right, and some will consider it to be a great deal.

The distribution of those buyer attitudes will vary depending on a variety of market conditions that are always changing. Dynamic pricing helps you capitalize on those shifts, such as seasonality, to keep ADR as high as the market will bear. This is one of the tremendous benefits of channel management like Lexicon provides.
 
The thing you can’t really influence in this equation is supply. In a market equilibrium, supply and demand are roughly equal and pricing is stable. But sometimes — again, for reasons beyond your control — supply exceeds demand. 
The easiest lever you can pull is price. A temporary reduction in price in order to spur demand is a promotion, a sale, or a special.


OTAs and Specials 
Algorithms, or complex calculations, determine how OTAs prioritize search results. While we can’t know exactly how they all work, we know for sure that listings which drive traffic and convert bookings will be “pushed” more aggressively by the OTA. Badges like “Hot Listing” or “Popular,” as determined by the algorithms, have a huge impact on views. More views equals more bookings equals more money for the OTA (and you). 

At least one OTA estimates that as much as 80% of bookings came from promotional deals or specials. During times of ample supply, you should expect most of your competitors to be running deals. Sometimes the OTA runs their own. Vacation shoppers are just as excited to get a deal as anyone else. Moreover, they’ve learned to look for the special badges and similar visual cues that indicate one.

We believe the “sweet spot” for most discounts should be in the 10-30% range. Any lower and it probably won’t grab anyone’s attention. Cut too deeply and your margins will suffer. Even so, you should do the math. Some promotions, like book 3 nights and get the 4th free, pencil out to a fairly small discount but sound better than, say, 15 percent off. It depends on how much supplementary revenue (e.g. equipment rentals or merchandise) you can capture on the extra day.

Also, pay close attention to upcoming promotions sponsored by the OTAs themselves. Opting in helps you capitalize on the millions they spend in advertising their own platforms — and you’d better believe that opting out will affect your position in search results.

The point is, know where the pricing floor is for your particular situation and make sure you stay above it, but be creative. Meal vouchers, discounted tickets to local attractions, or upgrades can be great options.


Establishing a Baseline for Conversion: What’s Good? 
You may have heard the old sales adage that says you need to hear 10 “no’s” before you get to one “yes” — a conversion rate of 10%. A good conversion rate with OTAs, by contrast, is more like 1 to 4%.

That may not sound great, but consider the volume that OTAs drive. Booking.com alone drives around 428 million visits per month. Let’s say only 10 percent of those visitors are looking for vacation rentals (call it 43 million) and only 1/100 of 1 percent of them are looking within the search parameters your listing meets (location, amenities, etc.). That’s still 4,300 searches in which you appear somewhere. If you convert at 1%, that’s 43 bookings per month — more than you even have to offer.

Now what if you improved your conversion rate to 1.5%? It still sounds low, but it’s a 50% improvement. Now you have 60 bookings in that same month.

Do you see how the economies of OTA scale can work in your favor? Incremental improvements in your conversion can make a HUGE difference. Running specials are one great way to do it.


When to Run a Special (Hint: It’s Not Just About Occupancy) 
Ever pass one of those fireworks stands that always says “two for the price of one” on it, and has since 1987? Well, a sale that’s always in effect isn’t really a sale, which is why you need to vary your promotions often. But is there a situation when you’re happy with your occupancy but would still run a special anyway? 
We say yes, with some caveats.

First, the why: Running just about any kind of special gets you that juicy OTA-assigned tag, whether it’s “Sale,” or “Special,” or “Hot Deal.” People respond to that. If it comes down to you and another property but they’re running a special and you’re not, that badge is hard to walk away from even if they know the value is comparable.

This is where you can (and should) get a bit creative, like offering a free bottle of champagne at check-in or some kind of free upgrade. If you manage food and beverage onsite, offer a free cocktail or free appetizer. Not only does it improve your conversion rate, but it helps create opportunities for you to make more money (e.g. when those guests stay for dinner). All of this primes the pump for the guest’s perception of overall value. And that can lead to better reviews and word of mouth, all for something that didn’t cost you much.

The caveat here is to act ethically. It’s an old (and skeezy) practice to artificially inflate the price of something in order to offer a “deep discount” but savvy shoppers will spot it and the OTA hosting your listing might flag it. So if you offer a discount of some sort, make sure it’s real.

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Summary 
Conversions mean your marketing is working, or at least, not working against you. Though your OTA dashboard may not show the number, all you need to do is divide bookings by listing views and convert it to a percentage. If you see you’re in the 1–4% range, then you’re probably doing as well as any of your competitors. 
If your conversion rate is objectively low — or even if it just seems lower than it should — the first step is always to audit your listings. There’s still no substitute for quality content, especially a good headline, professional photography, and an accurate description. But once you’ve checked all those boxes and know your listings are of the highest possible quality, look next to specials and promotions to goose those algorithms.