In a recent survey of more than 3000 small businesses in the leisure industry we asked the question …
What are the two or three things that concern you most in your business?
Not really surprisingly two of the top three were about customers namely …
- Not enough customers
- Not a regular supply of customers
- Not enough time to do everything
These were followed by many comments about cash flow, recruiting and keeping staff and the cost of advertising.
But a number of replies were concerned about the way big businesses use their size, budgets and influence to put the squeeze on small businesses.
So is competion fair?
One of the replies was from Nick Marshall who with his wife Lizzie has been running holiday rentals for nearly 25 years and owns Cairns Holiday Homes in North Queensland Australia.
Nick has seen lots of changes in this time and none moreso than the effect the Internet has had on his business and no doubt on many other small businesses
Here’s what he had to say..
Dear Cliff.
Thank you for the feedback regarding the effect of large corporate interests taking a huge bite out of holiday rentals for doing little more than listing properties.
This was bound to happen. The internet, in its early days at least, offered a far cheaper method for small businesses to potentially be seen. The only way that small business could advertise in the mass media was through the traditional media of the press, radio and tv. For most of us that meant small ads in the classified columns or, at much greater cost, taking out an ad in the weekend travel pages of a national newspaper.
Twenty five years ago that was costing me nearly A$300 per week. In Australia the “rivers of gold” as the Fairfax newspaper group’s weekend advertising columns were known was decimated by the swing to the internet and the rise of eBay and many other alternatives. Not surprisingly they took action and bought a site called Ozstays which became Stayz.
That site had been started as a listing site for holiday homes and apartments in 2001 but soon started listing hotels, motels and resorts – probably because the founders realised that the more listings they had, the more they could sell the site for. Stayz was purchased by Fairfax for about $12 million in 2005 and then sold to Homeaway for around A$220 but that included more than A$150 million of debt. Even so, it was a very good return on investment. Homeaway, which has grown by a string of worldwide takeovers, was after the 50,000 odd listings and gross margin that exceeded 56% in 2012.
None of this should surprise but I really do not see how these very large businesses can survive with their present business model. They are all actively trying to separate the supplier from the customer until after the booking has been made.
Unfortunately, the majority of holiday homes do not have a brand name (such as a hotel might have). Customers are taking a real risk when they book a home without the opportunity to talk to the managers or the owners.
The large sites like Homeaway, those operating under its name and AirBnB are expecting the public to trust their own brand name. Unfortunately, problems are happening ( trashing of properties, theft, prostitution etc) because none of these corporate sites are able to check out their clients. Flipkey is, I think, in a slightly better position because of its association with TripAdvisor which is the giant in customer feedback for all things to do with holidays.
Sure, these large listing sites do now attempt to verify ownership but their whole model is based on the owner or manager providing all the details of the property (copy, photographs, calendar data) when they list.
Homeaway recently passed 1 million listings worldwide and AirBnB has around 600 thousand listings.
With the amount of debt these corporations are carrying, there is no way that they can support their customers by providing a service that answers questions about individual properties. By preventing the pre-booking connection between the customer and the owner or manager, they are essentially saying “Trust Us!”
I do not think this will work because trust is breaking down everywhere at the moment. This provides an enormous opportunity for home owners and managers to get off their butts and build their own websites which will better serve their customers.
Of course, it is very hard to have a one property site which is going to be seen because the gateway is Google and there are only so many page one spots. Having said that, there are still many home owners who are not making use of Google Local for Business to be seen.
Property owners have to get together with other property owners in the same region or even the same suburb in large cities. Some areas already have well run websites specialising in that area. Support them.
Getting a good domain name is not as hard as it might seem. A name containing the name of the suburb, the village, the town, the region or sub-region or region is often available. Building a wordpress website is the easiest and least costly part. The hard bit is keeping the website updated and running an interesting, relevant and useful blog on the site to build up authority.
It is hard work and very time consuming. The days of list and forget are over – unless an owner wants to spend thousands more for elevated listing positions. It takes commitment and contribution by the owners to make it work.
Those who don’t take the plunge now will be lost in the listings. There is a wealth of good advice on the web – Matt Landau and Heather Bayer for example. This subject was touched on at the Vacation Rental World Summit this year. The cost of the webinar recordings is a small price to pay for the great advice offered.
The web is about doing it yourself rather than expecting others to do it for you.
Yours sincerely,
Nick Marshall
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Some pretty insightful words from Nick not only about the effect of large businesses but also about the difficulties businesses of all sizes face in the rental property market, and some advice to owners and future owners of rental properties.
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We also heard from Christopher de Hrussoczy-Wirth, Kitsilano Cottage, Vancouver, Canada who sees the financial clout big businesses have on the industry and how they infliuence local government, and from Uwe-Dorte Bockwoldt of Tyll’s Dive, Roatan, Honduras who says that much of the solution is in their own hands.
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Christopher wrote …
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First would definitely be the incursion by big captial into the highly successful realm of residential based accommodations industry. The folks behind the vast infusion of capital into the directory listing and booking parts of our industry are ill suited to support and cater to the actual needs of what started out as a bunch of Mom & Pop operations. We really don’t want or need corporate types telling us how to run our businesses. Yet their deep pockets have given them a strangle hold on a segment of the accommodations industry that is now being victimized by its success.
Another concern that is escalating is the prospect of increasing local government regulations, mostly being driven by major hotels who see our industry as a threat to their bottom line.
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Uwe-Dorte wrote …
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Hi Cliff
Have enjoyed your tips and hints.
The travel and tourism industry is very competitive and as small businesses we are invariably stretched for time and in many cases don’t have the necessary skills to compete with bigger businesses.
As a very small business, The ups and downs during the year can be concerning. We are aiming to get a a more steady flow again.
We do not need to be crazy busy, but need steadiness. We are building it up getting more and more repeat divers.
We are sliding down our rank in Tripadvisor. We do encourage new divers to make a review. But having so many repeat divers coming several times a year for years, it is hard to expect them to continue putting on reviews after each visit. The bigger shops have bigger turnover and many more people writing reviews.
Am afraid I am not promoting what we do good enough.
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So many thanks to Nick, Christopher and Uwe-Dorte for their feedback and to the many otheres who took time to reply to us. It is very much appreciated.
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Cliff Chapman
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If your businesses is being affected by “Big Business Practices” then we would love to hear from you.
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Hi Cliff
With the business in Africa in tourism it is almost the same trend to problems but l think there are more than mentioned above. I have been working in tourism for the past 10yrs at first as a worker and second a owner of Honeybadger Tours.
Problem bedeviling us as why we do not grow yes it is the cost of advertising on the internet , you would get as much as possible who will advise you to market more in the internet you never know if the intentions are dengue or cash milking as well
Trust is one such big problem that has done me a big blow in growing and securing big deals for safaris or hunting. You turn to wander what to do for people to trust you and make sure all is done in the trust way. People would choose to pay last day before they go to safari instead of 3 weeks or further down the time.
The other big problem is getting connected to have payments easy instead of cash or bank transfer
I am sure with a working capital and ideas of business in tourism one can grow easy but with the above not solved its a big problem , this make have few bookings and fewer clients into your bag
We hope more will be done to improve the image of small business and why it will be very nice to book a a safari with small companies than with big companies, like l have seem most overland companies having full booking but when you talk to the clients they are not satisfied but they continue booking there so you turn to wander which factor is important making a clients happy or say what they want to hear
HI Cliff,
A great read… I can feel Nicks frustration in his letter. Some great feedback and remarks
“there is no way that they can support their customers by providing a service that answers questions about individual properties. By preventing the pre-booking connection between the customer and the owner or manager, they are essentially saying “Trust Us!”
At the end of the day its the property owner who knows there business, not the mega sites. Hoping our refreshed site can help support businesses like Nicks and others in providing the customer to book directly with the property.
loving your insight
James
Thanks James
Unfortunately no matter how true or unfair big business practice is, we’re not going to change it.
As we know, building relationships builds trust.
Takes me back to my school days … “must try harder”.
Cliff
Hi Joseph JosephNyabezi and thanks for your comment.
You have put your finger on probably the biggest problem small bsinesses suffer from and that’s the question of trust.
It’s difficult for small businesses to build a reputation without the resources available to large businesses, so they have to work hard at building personal relationships with prospective customers to compete with the big boys..
Cliff
We received the following comment by email from Dena and Keith Rowlands who own River Ebro Apartments in Mora, dEbre, Catalonia, Spain …
Oh, how I agree with the comment made by Christopher de Hrussoczy-Wirth, Kitsilano Cottage!
We have been renting out for around 10 years and the industry has changed beyond recognition. I am sick to the back teeth of high advertising costs set by corporate monsters who have gobbled up almost all of the small independently owned ad sites. Owners of one or two properties cannot afford all the premium positions paid for by agencies and we slip further down the listings in an ever growing number of properties – that are fed in by all their subsidiary sites. And it is not just the advertising costs it is the way they wish to muscle in on the way you do business with your guests, wanting payments passed through their own payment system, charging clients for that service with the sweetener of “peace of mind insurance” and not releasing YOUR clients email to you until the payment has been made! Then to add insult to injury some sites do no release that payment to the property owner until the guest has checked in! I refuse to do it! This is a far cry from the original concept of booking directly with the owner and building up a relationship of trust.
I’ve been meaning to vent my irritation about this on our blog and ask for feedback from our guests but haven’t had time to do so.
Would be interesting to hear their views too don’t you think?
kind regards
Dena and Keith
River Ebro Apartments
For a special holiday in rural Catalonia
http://www.riverebroapartments.com
Thanks Dena & Keith
Clearly this is a big problem that is affecting many small businesses especially in the holiday rental industry.
Cliff