Holiday cottage TV advertising disasters

Published in conjunction with our sister business Country Holiday Lets

 

Recent TV ads in the UK to stimulate demand for the holiday let market are as welcome as they are badly timed and long overdue.  For the first time in many years, advertising for holiday cottages on UK TV was absent in the normal peak period for taking bookings from late December to late February.

 

A cunning plan that went wrong?

Perhaps, the majors such as Wyndham Worldwide felt that the internet was the way and decided to divert sales and marketing money into the modern new way.  Perhaps, the majors were getting fed up with the way they were, in effect, subsidizing and helping small operators who cannot afford, in a million years, to advertise on TV.  How so?

When a big company chucks buckets of cash at TV advertising, it stimulates demand as much as informs existing cottage goers to use their service.  In the old days, people would go to the telephone, ring them up, and ask for a brochure; it made sense. Today, aside from what is sometimes called ‘the brochure market’, most people go straight to Google and see a huge array of competitive choice. They are, perhaps, more likely to book with the TV advertiser, but there’s no doubt a large proportion will book through agencies or direct with owners who could not afford to be on TV.

This aspect of the internet forces large operators to advertise, in effect, on behalf of their competitors. They are desperately trying to find a way to get out of this commercial vice. I can hear the little businesses laugh as I type. By ‘little’ I mean, even, the likes of Sykes Cottages and other quite substantial operations. They simply wait with their ads on Google for all that nice stimulated demand, thanks to the likes of Wyndham Worldwide and other helpful TV advertisers. But, of course, this did not happen in 2016/7 over Christmas and the New Year. Meanwhile, their internet advertising and other efforts did not work. People with Wyndham Worldwide have suffered an equally bad May and June from, what appears to be, a direct result of failing to stimulate demand.

 

Grotesquely incompetent TV advertising

Back to the recent ads.

Although very welcome, they are staggeringly incompetent in-house efforts. If an agency is involved, they need whipping. AirBnB screened a series of TV ads over several weeks in April and May featuring a happy family wrecking a kitchen doing home cooking. It could only have been created by a bunch of men… I am a bloke but even I can see the message this was giving to owners and guests. For owners, the message was: ‘if you join AirBnB, your place will be trashed’. For Guests, the message to Mum was: ‘don’t dream you will have a restful holiday. It will be chaos as usual, plus a bit more and, guess who will be working overtime to clear up the mess? Some holiday.’

The HomeAway ad, which has run for several weeks, is close to an obscenity. ‘Book the whole house’ is the theme and you will not even have to share it with a smelly owner who can’t be bothered to dress properly and, most likely, frightens the children. Where are these people coming from? In the UK market, the idea of renting a holiday cottage to share it with an owner is off the wall. If it does happen, I have never come across it and I can be sure that such an arrangement would be a commercial disaster. It is an ugly, inappropriate, incompetent ad, again, it seems created by an in-house team perhaps aimed at the US market? I suspect, just like Euro Ads, the voices have been changed to UK accents but the ad, itself, is generic US.

Both ads display an incompetent amateurism as staggering as it is self-defeating. They are so bad that, although they may stimulate some demand to march off to Google, they could actually be doing the opposite and damaging the holiday cottage market.  Two huge brands have successfully smeared themselves. What are they playing at?

 

Brands in cyberspace

Brands do not work the same in cyberspace and are radically more vulnerable if they get things wrong.  The relationship between legacy media advertising and world wide web advertising is complex. The two are, for some products and services, organically linked.  If you abandon one you could pay dearly.  I suppose, the good news is that far from being a wannabe monopolists dream, the internet does, in some cases, force big business to help small operators whether they like it or not.  In this case, at least two of the big companies have spectacularly failed in 2017 on two counts: the timing of their advertising and shockingly incompetent advertisements themselves.

Corporations sometimes lose touch with common sense and think they know it all. Times have changed, legacy methods of brand maintenance and development no longer apply.  AirBnB and HomeAway have shot themselves in the foot.

 

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Note.  A bit of good news: we have seen a definite improvement in the value of bookings taken over the first week of July. With any luck, the dip in May and June is coming to an end.

Holiday Cottage Business Dreams

Published in conjunction with our sister business: Country Holiday Lets

 

I’ve lost count of the times I’ve heard kindly people say, “its not only about the money.” Running a business in the hospitality sector can be very attractive, particularly for generous souls. But commerce can be cruel if conditions and luck take exception.

Pitfalls

Spain is littered with ‘English Pubs’ bought by people with stars in their eyes. Some survive but all too many collapse when reality dawns that running a Pub calls for the same hard work and dedication, Spanish Sunshine or English fog, sleet and snow. ‘Giving it a go’ should be applauded but, too often, the price of failure is doubled by the weight of disillusionment.

No normal business

Sadly, also too often, something similar happens in the UK Holiday Let business. It is upsetting, because part of the allure of running, say, 3 or 4 holiday lets is the idea that its wonderful to be paid for being hospitable. There are virtually no specialist estate agencies that understand and can be assured to make the best out of the sale of holiday let businesses, domestic house attached or not. The need to understand the value of a business that does not make a return on capital and then clunk that strange figure on top of the residential value of the property as a whole, terrifies the usual estate agency worker. Most solicitors prefer to steer clear of difficult areas such as perceived value in holiday letting operations.

Say, a residential house comes in at £500,000. Then it has 4 cottages in an old barn complex attached bringing in a gross income of £50,000 pa. Allow 55% for direct operating costs and the owners are left with £22,500 .

Notionally, the residential value of the barns- assuming planners agree- would be, say, a minimum of £800,000.  At 4%, a return on capital before tax comes to £32,000. Even if a holiday let business performs well, in most cases of buildings capable of residential accommodation, getting a return on capital is impractical.

Hospitality and, perhaps, an attempt to get a better return on pathetic annuity rates, could be part of a justification for going into holiday letting. Some people are happy to put up without a return on capital because they prefer fleeting guests and not the presence of long term close neighbours. There are many other reasons but most cannot have hard figures attached to them.

Perhaps the best way of working things out is to do a profit and loss account and add to the revenue figures notional values for Hospitality etc:.  Some people, particularly farmers, do not see things in terms of return on capital. They consider land and houses as something they would never sell. So they just consider the direct costs of getting a building ready plus its maintenance and the running costs of holiday letting, deduct the total from rental income and, if the figure is reasonably positive, in many cases they’re happy.

Allow for other factors

If you are thinking of taking the plunge, work out how much value you put on things that can push the profit and loss account into the positive but do not underestimate the size of total operating costs. A rule of thumb for middle sized lets is to take the gross predicted rental income and multiply by .45 to get a notional net operating income- this 45% after costs figure assumes at least 21% is taken by an agent and you do not do your own changeovers. The figures can be quite sobering. In addition, when buying, make sure the quality of the holiday lets is up to scratch.

In many cases, people sell clusters of holiday lets when income is not as good as it once was because they may have invested heavily in modernization years back and, now, another heavy investment is needed. Perhaps coming close to retirement, they decide to move on. Investing to keep up with market, a quality upgrade can easily eat up over £100,000 for 4 holiday lets.

Buying a house and holiday let business can be a trap for the unwary. Eyes wide open, the right buy can make holiday cottage business dreams a success. What else would you expect us to say? Go ahead, but make sure you are well informed before signing on the dotted line.

Legacy Holiday Let advertising is crucial to the Internet

Published in conjunction with our sister business Country Holiday Lets

 

Change

Something strange is happening in UK TV advertising. This could be linked to the how markets are made and react and how the internet displays choice for buyers.

Over the last six weeks or so, (today is 5 May 2017), advertisements for cottage holidays have appeared on TV when they pointedly did not appear over Christmas and early 2017. This is a first, for decades, that the majors held back and the first time they have advertised on TV at this time of year. Early in the year, I suspect they thought it clever to spend more on internet advertising, particularly with Google, which saw an increase in pay per click bid costs. (Certainly, for our booking agency).

Meanwhile, astonishingly, Dior is running a Christmas style perfume advertisement- at this time of year? Something radical is happening. I suspect the major brands have, at last, woken up to the idea that the internet is not a separate market but that the internet and TV advertising- for that matter all legacy advertising, act on one one another. Some methods of advertising do more to expand demand- to make the market- where others present the competition to buyers in the market. Legacy advertising appears to be strong on generating demand and the likes of Google seem to radically increase market transparency providing radical access to competitors- many of whom could not possibly use TV advertising.

The loss of TV exposure early in 2017 appears to have caused a 20%- 25% fall-off in demand. People were not prompted or enticed to consider spending on a holiday cottage break so they did not go to Google. May bookings will be hard hit and early June bookings will suffer. Fortunately, peak Summer and Autumn bookings traditionally fill out, from now onward, with strong fix numbers from mid-July to mid-September for Summer and Autumn stays.

 

Creating and funneling demand

Recent AirBnB, Home Away and other booking agency TV ads will certainly help funnel more people to Google to choose from the competition.  Casamundo features on the Telegraph Web site. These big brands spend fortunes to make demand for little operators- and it seems they have no choice but to do this. The internet is far from the monopolist’s dream, or a Sun Tzu ‘advertise the competition into oblivion opportunity’- such beliefs could be a costly fantasy for investors shoveling money in the direction of the likes of AirBnB.

Recorded UK fall in consumer spending is also a factor. Other strange things, from hearsay, seem to be happening, such as surprisingly weak auction results from provincial ‘antique and fine art’ sales.

 

Piggy-backing on big Brand marketing

It is quite unnerving for small businesses to know that they are increasingly dependent on the majors to generate market demand.  It was a costly lesson for the majors: Legacy Holiday Let Advertising is Crucial to the Internet. Old rules of marketing, advertising and selling are changing. The Internet is far more complex and interesting than many could ever suspect. Its impact on marketing and advertising and, perhaps, entire economies has only just started. These are interesting times.

An advertising catch-22. Bigger is not Better in holiday letting

Published in conjunction with our sister business Country Holiday Lets

 

More research has been done since the previous article on the market for holiday lets in Spring 2017. We have noticed that, although the bones of our advertising campaign have not been changed and spend has kept up, despite much the same click through, overall impressions have reduced by over 20%.  This might indicate that, year on year, fewer people have been going to Google seeking Holiday Cottages or Vacation Rentals. Whether this is due to a decline in consumer spending, per recent UK government figures, the failure to advertise on TV by the majors early in 2017 or a combination, is uncertain.  The problem is an advertising catch-22. Bigger is not Better in holiday letting

 

Unseasonal advertising

Meanwhile, the campaign of Air BnB, Home Away with the arrival of what appears to be a large German operation, https://www.casamundo.co.uk are keeping up what appears to be a combined advertising campaign in April almost as concentrated as legacy agencies used to do in late December through to mid February- but did not do so this year.

The AirBnB ad, featuring a happy family causing chaos in a holiday let doing real cooking, running their mother ragged, appears to be a disaster. If it is in-house, it could be a repeat of the Pepsi ad for that booking service, not for being crass, but for utterly missing the mark. Mothers do not want to go on holiday to do even more work than at home. The old tried and tested formula of trouble free sunshine, sipping a drink and relaxing by the pool or by the seaside worked. James Villas’ ads and many others get this right.

The ad looks like an advertisement dreampt up by men with little idea of the work looking after children. It tries to appeal to women, which is sensible, because women select and either choose or engineer the final choice of rental accommodation in well over 85% of all purchases. Then it wrecks things by showing a scene of happy chaos of home cooking- tons of work for mothers who really, really want a holiday. The net result is the ad will most likely drive a reduced number of people, not directly to the brand’s web site, but to Google generating demand for their competitors. You get an impression AirBnB does not really understand Self-Catering and is unaware of a fatal flaw in gate-keeper plans to dominate the holiday booking market.

 

Advertising catch-22?

Meanwhile, all the majors are in a bit of a bind. They have to advertise and, then, well over 50% of people who then think, ‘why not stay at vacation rental this year?’, go straight to Google to see what’s on offer. There, paraded in the Ad-Words and on the organic results, is a neat list of carefully controlled, look-alike advertisements with the majors paying the most to be at the top. Our sister business is often on the same page usually lower down, directly competing with them in our area. In previous years, some majors had double advertising costs: first, to generate demand, then, to make sure they captured that demand, they spent again to be at the top of Google search results. Meanwhile, smaller operators hoovered up a substantial chunk of the demand so helpfully generated by non-internet advertising paid for by their competitors.

People are getting vastly more efficient at searching as dreams of wannabe internet gate-keepers fade.

 

Cyberspace could punish hubris

The holiday cottage and let market is very interesting. It appears large booking services have significant dis-economies of scale. Any brand impression or potential loyalty generated by non-internet advertising is open to disintegration in cyberspace. Our sister business, Country Holiday Lets- a small high quality regional booking agency, is delighted by these developments.

The initial signs that smaller operators were doomed with the arrival of the WWW and internet marketing may turn out to be, perhaps, little more than pipe-dreams of wannabe, monopolistic internet gate-keepers. The worn adage to the point of cliché, ‘Bigger is Not Better’, is apposite.

 

 

2017 UK Holiday Letting patterns

Published in conjunction with our sister business Country Holiday Lets

 

From the perspective of mid-April 2017, May and June look weaker but we noticed that smaller lets and those with fewer extras are renting well. This leads me to think it is not an advertising problem but something to do with the market. Short notice has, again, become more prevalent. AirBnB, magnified by its incapacity to accommodate deposit payments, a vast advertising spend and the pressure it is putting on the market to accept pricing by the night and one and two day bookings, might be one cause.

We have also noted, for the first time in many years, radically reduced TV advertising in January and February by the major ‘vacation rental’ booking companies. However, in the last few weeks, AirBnB has appeared more often on TV along with a few Home and Away ads. Adwords bids have risen and more middle sized operators are joining in the fray, perhaps, for another reason- it’s easy to blame AirBnB for disrupting the market with its vast spend and loss making, when something else could be going on.

 

Something interesting is happening

TV advertising may have been making the market as much as tapping into it. Go-it-alone holiday let operators normally benefit from the demand created by such advertising because the ads prompt people to consider holiday letting but who may not end up customers of the businesses who paid for the ads. Failing to advertise on TV early in the year could have benefited other types of holiday. Meanwhile, the money they saved appears to be gone, in part, into the coffers of Google. Google is not a market maker, people using Google are nearly always searching for something they have already felt a need to buy.

The pattern would be: see an ad on TV featuring a lovely vacation rental, bookable through, say, a Wyndham Worldwide business. Go to Google and immediately see a huge choice. Wyndham may get a booking but, more likely, some other business will benefit. Brands work differently in cyberspace.

Facebook and, I suspect more so, TV advertising create a wish to buy. They are more sophisticated in this respect although they lack the focus and brute utility of Google or any competent search engines. The ultimate would be a combination of the two- if that ever arrives, Google and Facebook could face the fate of Yahoo, from the moment Google arrived in the late ’90s to its recent demise.

If it were not for the fact we have seen some types of holiday let do very well, moderate May and June bookings for the rest would have caused a major concern about advertising- we are still looking at this- but it seems something is going on in the market. I suspect the majors are equally concerned and have decided to up their advertising to try to fill May and June. Although I thought the UK referendum could have disrupted bookings last year- it did not. The forthcoming UK General Election might have little impact- it could, even, have a positive effect, particularly if substandard, execrable campaigning repeats itself.

The plus side is that the rental receipts of our sister business Country Holiday Lets are up 20% over the first four months, with only April showing no growth. Advertising can be quite complex and, I suspect, is still a dark art. The impression is that if owners find May and June not as busy as usual, a radical change of advertising may not be necessary. Despite this, we are constantly checking our advertising because things can change quite quickly.

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A final note. We tried out buyer location focus advertising on Adwords for a few weeks in late 2016. It was the first time that the usually top quality well meaning Google advisors unintentionally steered us the wrong way- perhaps because they do not understand the complexities of this market. Google may change how it works, but we strongly advise anyone thinking of using this facility to think very carefully before experimenting.

Cottage owners without an agent cannot afford poor I.T.

Published in conjunction with our sister business Country Holiday Lets

 

This may sound like a tough call.  Below these three paragraphs is an explanation of why many people, me to an extent, fall into the trap of failing to keep up with I.T..  If you are running a holiday let business and have decided to manage and directly control all the advertising, taking bookings and finances it is, now, essential to be up-to-date and willing to constantly learn new things about Information Technology.  Those who do not keep up end up, all to often, punished by change; cottage owners without an agent cannot afford poor I.T.

The days when putting a few ads in newspapers was about all that was needed have long gone. Advertising, today, requires constant attention. At Country Holiday Lets, the sister business to Holday Lets for Sale, click bids are often adjusted one or two times a day in response to the number of pages viewed, time on site and the click through rate. And this is only a part of the time and effort needed to squeeze value out of advertising spend   In the old days, active effort on this front was little more than leaning across to pick up a pen, write and send a cheque along with copy to various newspapers or magazines.  Booking systems, computer hardware, digital photography, automated booking and payment systems and so on have radically changed, although the fundamentals of quality, relationships with owners and service to guests have not changed one tiny bit.

Anyway, here’s a bit of my story. I do hope it helps others who may share a natural dislike of change on one way or another. Also, I hope it helps to rip out some of the hardwiring holding back a postive response to the opportunites offered by change.  It’s easy to say, but often much harder to follow through.

 

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computer

 

 

Why people still ‘don’t get I.T.’

 

I come from an age when most houses did not have a telephone. Agency lorry drivers in Manchester, we used to go down the road on a Sunday night to ring for work on Monday morning. If there was no work, we went into the agency office to stand in what was little more than a pen waiting for last minute calls to cover sickness, urgent extra work and other contingencies. It was not the easiest of lives but when you are young, this sort of thing can be more of a challenge than a prompt for unhappy sourness. But I could see genuine weariness and resignation in many of my older colleagues, as if drained of passion.

Determined to get on, I decided to learn how to touch type. This was prompted by my brother saying to me that if 15 year old girls, (good old sexist days), were able to learn, there was no excuse for a 22 year old with a fancy, useless degree to do exactly the same. I taught myself using a crib for the keyboard layout, following the golden rule not to look at the keys. People told me it was a waste of time. Voice recognition would, they said, make touch typing as dead a skill as hot metal and its associated type setting were soon to be consigned to the rubbish tip of history.

Forty years on, here I am touch typing this article. Some skills do not die so readily. But this attitude can turn against you. There was no great reason, beyond pig-headedness, to persevere with learning to type. The weight of received wisdom pointed to what was a Quixotic ambition perhaps, even, an utter waste of time and effort.

In our holiday rental / cottage business we still come across quite high powered, retired people with lovely places to rent but who cannot, or will not, feel at home with I.T.. Things have changed so much in that sector that if you are not up on I.T., it is not a business you should be in. They appear to be mentally hardwired to older, sometimes more friendly ways of communicating. I found, for instance, that I had to make a positive and determined mental effort to learn how to use a mobile phone and how to text.

Hardwired, way back in the ’70s, phones were attached to the wall by a cable, usually living on a small table or in an alcove by the front door. You could ring or receive calls and used them to talk to people and nothing else. The idea of having a mini-television screen, in colour, on a thing the size of a wallet which you could use to play scrabble with someone in Japan or Capetown, virtually for free, would have been utterly and totally beyond our imagination.

Most people take exception to things that disturb their imagination. The key is mental focus and determination. Older people tend to have much more remembered. If things change, it puts a different perspective on all those memories. As we are, partly, our memories, radical change can seem to threaten who we see as ourselves. It is a bit like an assault.

Change demands we flex our character and run with it rather than try to fight a rearguard action against the inevitable. For too long, management, business colleges, HR and others have moaned about what they see as obstinate weakness in those who appear to reject or oppose major change. If they realized the reason why, they might eventually approach this critical issue with a bit more sophistication and, ironically, change things for the better.

As for me, I have yet to buy a mobile with a screen, still clinging to my 2010 Nokia pay-as-you-go. But in other areas, essential for Country Holiday Lets such as internet advertising, booking systems and so on, there has been zero choice but to grab change by the scruff of the neck and master it.

It was lucky my older brother pointed out the obvious- I often think him as my fingers move across the keys almost as if they had a life of their own. It was not the skill that was the key point, after all, touch typing did look as if it was on the way out. Determination to master new skills is essential to stop change getting the better of us.

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This was prompted by recent events and referring back to an earlier article on ‘Leadership Correctness’

 

 

Charles Cawley

Country Holiday Lets

6  The Buttercross, Leominster, Herefordshire.   HR6 8BN

Office Hours: 01568 612467  After Hours and Weekends: 01568 708761

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Bigger is not better. The large booking agencies have not wiped the board

Published in conjunction with our sister business Country Holiday Lets

 

Four years ago, it looked like the days of small and medium sized full service booking agencies were over. The popular wisdom was that they lacked advertising muscle and the crossover marketing benefits of national coverage as well as economies of scale. In addition, the smaller ones would be unable to establish a brand presence. The myth of ‘bigger is better’ is, still, very much alive but events are revealing its true nature. Smaller agencies have not gone away.

Many minnows have disappeared mainly due to  owners retiring or because they could not, more often, would not keep up with a new much more complex world of advertising and marketing. Gone are the days when you just put a few ads in the press and waited for results. Using things like Google, Facebook, Twitter etc: needs constant pro-active attention daily, sometimes even hourly, to ensure minimum cost of sales. Despite the large agencies doing this quite well, bad attitudes towards owners and guests linger… the shocking habit of calling owners’ homes ‘stock’ as if they were owned by an agency is still the rule rather than the exception. As for economies of scale:  a booking service recently tried to take us over and it turned out they had twice as many staff in proportion to the number of holiday lets they worked for.

Owners intent on using a large booking service should check for the bad attitude about their ownership of holiday cottages. Sales people are quite careful to cover this but even they will, sometimes, make a slip. They will never volunteer any compulsory discount systems in their terms and conditions gambling that their customers will fail to read them thoroughly. Once signed, if revenue estimates of the sales person do not materialize, owners tied into the agency are then obliged to discount prices up to 20%, rubbing salt into the wound. This sort of disgraceful behaviour is still common practice. Smaller agents, focused on a good relationship with owners, would not dare to behave this way.

Legacy attitudes are one major reason why larger agencies have not swept the board. A second one is that the idea that small brands cannot survive in competition with giants is passe. The way brands behave in cyberspace is very different from pre-Internet times. Nearly everyone searching for a holiday cottage no longer just sticks ‘cottage’ into a search engine to see a nice selection of the big booking agencies. Searches are often focused down to, for example, key words like: ‘Long Mynd Cottages’.  A popular sleep 12 holiday let with our sister business appears half way up page one for this search: http://www.countryholidaylets.co.uk/cottage-collection-our-cottages/viewproperty/the-old-stables/89

Small and medium sized booking agents are quite capable of holding their end against the internet booking giants. In the case of The Old Stables (see the link above) we exceeded rental predictions made by a huge rival by 18% despite it being a major national service. It has no hot tubs and no en suites but, because it is in the ‘special’ category, we consider it high quality.

The large brands also suffer from being of more interest to the media. Thus, AirBnB unfairly suffered from a report of a dead body found in the garden of one of its lets in France. It hit the UK press. Small regional or niche brands are not so exposed to such ‘brand smearing’. (Wyndham Worldwide is a master at niche branding but appears to be testing larger scale branding with its cottages.com). Such diseconomies of scale are a major issue for booking services dreaming of becoming internet gatekeepers. They lend an edge to smaller operators.

Owner operators were also predicted to be forced either use a large booking agency or die. Most of the major listing sites have transformed into part service agencies trying to get the financial benefits of being an agency without the necessary service levels. They are being found out, but it is taking a time. People do not like switching agents and a successful change is very rare. Disillusioned by bad attitude owners are, often, less open and trusting. Can you blame them? Many new relationships with other agents are hobbled from the start. Competition between booking agencies is almost always about getting cottages when they first come onto the market. This benefits poor service and part service operators because their reputation has not, often, gone before them.

Another key benefit smaller operators have is the ability to focus on high quality. Faced with limited selection of what appears to be either high quality of sound and good value, uncluttered by questionable holiday lets, guests gather confidence that buying with the help of a quite small operator is much more likely to be a success than risking it with a larger one. In addition, the amount of work needed to trawl through pages of cottages to get to a half decent short list is radically more than using a small focused high quality booking service.

Just as small high quality shops were not wiped out by the big supermarkets so the dreams of domination by the huge booking services will never be realized. They have grabbed a large slice of the market but the continuing existence of smaller operators combined with the remarkable survival of go-it-alone people shows that they will never have it all their own way.

Bigger is not better and thank goodness for that.

 

Changes in booking patterns: market disruption and legacy cause/effect issues

Published and distributed in conjunction with our sister business: Country Holiday Lets

 

There could be a strange reason for changes in booking patterns in recent years. The arrival of new booking services is one possibility along with changes in the nature of the market itself.

 

MARKET PATTERN CHANGES

All of 2016 was strong month by month for values of bookings taken with the exception of December.

It started well.  Then, we have noticed a sharp reduction in the value of advance bookings for taken from the second week on. Advance bookings for 2017 are healthy, but this was a quite marked aberration. We’ve seen odd events like this several times before. Early January has also seen a depression in booking values. This trend was seen last year and was first detected in January 2014 but, with hindsight, there were signs of it in early 2013.

But new services could be skewing the market.  Their attempts to dominate by, it seems, a plan to advertise rivals into extinction are primitive. An example of potential problems ahead is below.

 

SIGNS OF TRYING TO INFLUENCE SUPPLY PRICING

A well known five star BnB owner in Herefordshire received an e-mail from a wannabe internet gatekeeper suggesting they reduce their rates. Other owners received a similar message. As I would expect, she told them, in no uncertain terms, what she felt.

A copy of the exchange taken from Facebook is below:

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 The wannabe monopolist’s e-mail:-

“Hi *****

Right now, 90% of listings in Herefordshire and mid Wales are getting more views on their listing details pages.

One reason may be that their base prices are a bit lower than yours

If you would like to get more clicks or taps and search results to ‘***** near ludlow’, try lowering your base price

(Button featuring the words): ‘Lower your base price’”

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The owner’s reply:-

“Let me think about this for a minute…. No.”

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Her business is successful and the best quality. What is this booking business playing at? .

This could be a sign of monopolistic attitudes and market disruption.

The ensuing Facebook discussion indicated that low price was a feature of many accommodation providers who appeared to be doing better with that wannabe gatekeeper business.

If you mix high quality with low quality business on booking sites,  low quality gains from the company of high quality and high quality loses. Proximity reduces the trust in any quality offered. If a choice of only high quality is offered the chance of someone paying a premium rate and booking is far higher.

Wyndham Wordwide is a master of niche marketing where some internet bullies (not necessarily the anonymous one mentioned) seem to be trying to advertise rivals out of business. The plan appears to be able to manipulate supply price and charge monopoly agent fees, but they will not get away with it.

The internet has made brands radically more fragile and old style loyalty to brands over decades is disintegrating at the touch of a button (or two). Niche demand is a long established fact of life in holiday letting. The idea that all niches can be bundled into one brand creating long term success is primitive and bound to fail.

Only massive loss making, coupled with investors believing it’s good business to wipe out rivals advertising them to extinction keeps them going. The idea of eliminating rivals by service and quality whilst making a profit seems to be less of a priority.

 

PRIMITIVE MARKETING

New arrival AirBnB appears to be trying to serve many different accommodation niches under one banner. This wannabe mega-brand gateway monopolist has abjectly failed, so far, to eliminate thousands of small, middle sized and large booking agencies in the self-catering sector. The primitive view that niche marketing is unnecessary has left many smaller local rivals still trading well.

Besides the potential damage to the whole market caused by massive and largely futile advertising to try to establish an internet gateway monopoly, something else quite interesting seems to be happening. Because super-large monopolist ambitions appear to think niche markets will succumb to brute tidal wave advertising muscle paid for by ignorant investors thinking it clever to tolerate nil profit for many years,* this primitive marketing seems not to understand established booking cycles. But there’s a twist.

Traditional booking patterns for UK self-catering in our area were roughly:  January, February, early March: booking fix values at 2.5x the annual average per month; July and August at about 2x annual average per month; the rest of the year, generally, either annual average per month or lower.

For decades, self-catering businesses ramped up advertising.. in latter years, click bids and other internet advertising, to match the cycle. But at some point, instead of the advertising responding to demand patterns, its quite possible advertising  pre-empting the patterns, was creating the cycle it thought it was responding to.  Then along came AirBnB.

Booking and demand patterns for the bulk of AirBnB are radically different for self-catering.  For instance, the holiday cycle is nothing like demand patterns for commercial or BnB accommodation. Weekday rates are often far higher for BnB than self catering which puts a premium on weekend breaks and so on. Why should AirBnB spend its vast advertising budget to mirror the demand pattern of self-catering when that bully brand has other fish to fry?

This year, the absence of Wyndham Worldwide and other self catering brands on the TV, to any extent, was palpable. But Google adwords saw the usual increase in click bids from it, Sykes and others.  It is possible that AirBnB has done the sector a favour revealing the need to respond to demand in a more efficient way. Legacy self-catering booking could have been creating a self justifying reason for advertising timing when natural demand patterns have moved on.

 

WRONG-HEADED FAITH IN FLAWED AMBITIONS

Market disruption caused by AirBnB is not going to stop for some time.  The model based on a quasi-monopolist gateway dreams is too fundamental to its bully brand ambition. Investors have pumped many $billions into a flawed dream and the company has said it has no profit ambition until 2020.*  With so much riding on success, it will take some time for the market to see off such radical and determined faith in a loss making.

Meanwhile, the rest of us must persevere and learn what we can from what appears to be the collective idiocy of investors. We need a King Canute to demonstrate to these deluded businesses that nobody on Earth can command the markets without, in the long term, getting drowned by their own conceit and hubris.

No profit until 2020?*  What planet are they on?

 

* Source: Fortune Magazine

Buying a Holiday Let or Cottage

Many factors apply buying a holiday let or cottage. The whole adventure almost as complicated as it can be exciting. They come in two lists:

 

Buying factors:

Budget / price

Objectives of ownership

Management

Marketing

Resale, resale, resale

 

When you are searching for a holiday let, it is important to be very clear about why you want one. The money will determine the size and/or the quality of the property. How you operate the holiday let, combined with ownership objectives, will have a major bearing. Some owners, particularly of lodges, can get a return on capital at, say, 5-7%, where the vast majority of bricks and mortar holiday cottages have little or no chance of performing in such a business like way.

Ownership objectives are very important. Some buy holiday lets, partly, as a resevoir of capital, combined with the privilege of personal use and running costs covered by holiday let income. This is not, strictly, business like. The bottom line in business is to clear a net profit after all costs including interest on capital treated as a loan. But for most holiday lets this is not the approach.

Many consider them as a hybrid of business and residential. People living in their own houses do not expect any ‘return on capital’, beyond the comfortable feeling of not having to pay rent to a landlord. If they are lucky enough to have a holiday let, either attached or close-by, the general aim is to use it as an additional source of income and many owners take pleasure in providing for holiday guests. Some deliberately choose what can be a lower income option of holiday letting, as opposed to residential AST letting, because they prefer guests as opposed to long term tenants at close proximity.

Although quite complicated, it is useful to be very clear about how you see this economic compromise or ‘property lifestyle balance’. The factors that lead people to buy holiday lets can be numerous and often flummox most run-of-the-mill estate agents.  It is vital before buying to check and double check resale characteristics, however dampening this is on the excitement of the adventure.

In some areas, such as Herefordshire and Shropshire, it is common to take well over a year to sell a property- residential or a holiday let.  Certain types of property, like listed black and white cottages, may appear very desirable but they can be primitive, very expensive to modernize and have an increasingly focused and reducing niche market appeal. Modern housing standards have moved on so much that single glazing is, now, often seen as hopelessly out of date, inefficient, expensive and, lets face it, plain cold. Never buy a holiday let without carefully checking running costs and re-sale potential.

Once you have cleared the decks, have a good idea of the money and your objectives, it’s on to the Let itself.Pullastone

 

The let itself:

Location

Number of guests to be accommodated

Niches of demand

Style of holiday let

Garden

Parking

Views

Internal features and extras

Income, costs, contribution or net profit

Harmony01 Front

Location will have an impact on income and management and will, of course, have be relevant to any personal use.  If you decide to buy on the Cornish Coast as opposed to inland Herefordshire, differences will be radical.  The former is often referred to as ‘The Bucket and Spade’ Market and, the latter, the Walkers’ Market.

Niches of demand depend not only on location but on the features and numbers a holiday let can accommodate.  Holiday lets come in three basic forms: 1. Standard; 2. Formula;  3. Special  Standard are often converted residential. Formula are built as holiday lets or fully converted such as barns. Special are such places as castles, water mills, landmarks and so on.

Artists Retreat is an example of a ‘Special’ where Parks Cottage is a superb example of a Formula and Rose Cottage, a Standard. The Old Stables, sleep 12, is a Standard but very close to a Special.

Niche demand will vary as will attitudes towards what are considered the most relevant aspects of quality depending on which type of let.  There are many factors discussed in other articles so just one is considered here.

Sleep 2 demand tends to be volatile being a less essential spend compared, for instance, to a family reunion or holiday.  It is more open to foreign competition and is much more weather dependent.  On the other hand, sleep 10 has a much less flexible demand as such places are often used for family holidays, reunions and other less weather sensitive groups.  The competitive lure of Spain or France is much lower for larger groups. The rate difference between, say, a sleep 10 in the South Shropshire Hills compared to the Cornish coast can be as great as the differences in demand niches and how they behave.

The holiday letting market is complex, radically more so than the residential housing sales.  It is, therefore, important before getting too excited, to take a long hard look at how the rest of the country sees the cottage and area you have in your sights.

 

This is a very brief outline about buying a holiday let or cottage and there is a huge amount more under the Articles and Advice tabs on the menu bar.  I do hope it helps you avoid some of the pitfalls and helps provide a good foundation to buying well and working a successful rewarding holiday let. That is all part of the adventure.

 

Major change in UK holiday letting market

Written in conjunction with our sister business Country Holiday Lets    For quality and service.

artists05a

Artists Retreat

 

Demand rises

Rather than remark about post Brexit changes, I thought a more general focus would be useful because several things seem to be on the move. The Pro-EU anti-EU stuff can be dull and ideological- we have to get on with business.

Over the last few weeks, demand has risen. We estimate by about 10%. Agents appear to be doing better than go-it-alone owners, partly we suspect, because people switching from foreign holidays are more used to booking through agents.  The reduction in the value of Sterling has helped a little reducing the attraction of abroad and prompting more foreign visitors.  The latter are not a key to our business although I have heard that London’s tourism is doing pretty well out of this.

 

Internet bullies

Internet bullies, such as AirBnB who seem to think it possible to advertise rivals into extinction, are not having their way. This is due to increasing search skills; the wish for a focused selection in the area to be visited; vulnerability to brand smearing; and, perhaps, a growing tendency for smaller agencies to survive offering high quality for guests and owner service. Meanwhile, some moderate and lower quality cottages are migrating to the mega brands.

It is a complicated scene. Listing sites appear to be in the doldrums and the great days when single cottage operators saw significant benefits from organic search results are long gone.

 

Google finds things harder

Meanwhile, Facebook appears to be causing Google discomfort as the National and international booking agencies find it of growing use. Because it cannot focus as effectively as Google, smaller regional agencies and go-it-alone owners cannot benefit the same way as big operators. However, we have seen the cost per click significantly reduce on Google Adwords over the last two years indicating that either larger operators have trimmed their budgets or they have found somewhere else to advertise.  But if Facebook finds a way to emulate the focus and edge Google still has for advertisers, it could face the same fate it dished out to Yahoo in the late ’90s when it developed its algorithms and sent Yahoo into a long decline to the extinction of its independence a few weeks ago.

Aside from Facebook competition, Google may also be suffering from maturing cyberspace branding reducing the need to advertise on the internet. Combined with an increasing search ability and an increasing market share of younger people, the great days for Google Adwords could be coming to an end.

Over the years, we used to get calls from Google. In 2010 – 2012, they were to assist and help us use Google, with no overt selling angle. Then, things went quite. Recently, we have received calls which are equally helpful but sound more urgent. It is clear these helpful people are focused on getting us to spend more. The old deal was implicit: helpful Google will show you how you can spend more and make more. Now, it is helpful Google.. but spend more anyway.

The last call rushed us into increasing by 10% click bids on a location basis of the entire UK… I commented that we would try this for a time; sure enough, spend went up 10% but total time spent on our site did not rise in proportion. The style was urgent and slightly bullying… in a ‘so helpful’ way. Google is under pressure.

 

Holiday letting becoming more attractive

Many people now see ‘abroad’ as dangerous. This is driving people to stay in the UK. Enquiries for consultancy from Holiday Lets For Sale have increased with a couple coming through in the last week or so from major AST landlords toying with the idea of quite large scale holiday letting. I would not have advised them to do this since the appalling weather of 2012 and the 2013 Christmas N/Y floods.

But times have changed.