This is not always easy. Commercial relationships are not always personal relationships

1. Honesty is the best policy

Evaluation of your property and its potential income and levels of involvement require a certain level of honesty. The short-term rental market is cutthroat, so many agencies are chasing properties to add to their portfolio and may overestimate income just to get the owner on board. 

As a matter of definition, agencies and managers are often interchangeable. However, agencies do not generally employ housekeepers, cleaners, laundry facilities or maintenance staff; they subcontract it. By the very nature of the name, managers are more likely to be full-service. Which is better? There is not a lot to determine which is better or not, both have good actors and bad actors. Full service has more communication control but has to run two businesses in one. Theoretically, a pure agency can focus on income and marketing, and a specialist third party can run the operations. We have used the word agency below, and the context is predominantly related to leisure destination operators, not urban businesses.

This is the agency’s key wish list for top-tier, top-income properties.

1. Quality properties 
2. Excellent locations with walk to popular places, quiet neighbourhoods
3. Lots of parking
4. Ideally, 2+ bedrooms
5. Bathrooms to match bedrooms
6. Pet friendly
7. Child friendly
8. Garden
9. Full suite of amenities, incl. hot tub.
10. Very flexible on stay durations
11. The owner does not get involved and invests when required

You can look locally and use a price and income projection tool linked below to estimate your income, but look carefully at all the criteria above and compare your property to the top ones shown!

When it goes wrong:-

If the agency is not producing the forecast, something is wrong. Are there market changes, have you not followed their advice on accommodation presentation, etc? Ideally, underperformance must be included in the contract, such as a break clause to remove yourself early. As mentioned above you can quickly check trends and, to a degree, estimate the performance of other properties using the same tools as managers—links at the end of this document. Also, ask for other owner referrals before committing and compare your prices and calendars on Airbnb, Booking.com etc.

Agencies generally accumulate properties via referrals from happy owners, so if the level of accommodation has been static for years, this may be an indicator. Hostile cost application on early termination is not in their interests for this reason, but surprisingly, some still force the issue. Other agencies may pay this penalty clause so you can see earlier adoption of your property, too.

 2. Agency activity

• Agency website: Traffic, search presence, conversion capacity, SEO, regular content updates. Is the site – a standard template with limited content, low traffic, no increase, etc? Websites need continual work and investment to increase opportunity, deliver the brand, create confidence, and maintain page one ranking for top keywords and phrases. If you can’t be seen, you can’t be booked. The rule of thumb for quality websites with guest browsing is one booking per 100-150 unique visitors. Suppose the website and social media do not produce bookings. In that case, it’s down to distribution, and the large OTAs and meta-sites rank properties according to price, number, and quality of reviews, as well as the opportunity to book shorter stays with flexible cancellations and ideally no damage deposits. The latter is a barrier, and many agencies charge a damage waiver and accrue income across all properties to remove this hurdle. If your property is not in a well-known location, OTAs are not the best option to promote via niche messaging and promotions either.

• Marketing: Well-established, quality, larger companies naturally have a more extensive mailing list and loyal clients, and these clients also create referrals. Most companies will use OTAs (e.g. Airbnb, etc.) but are very circumspect, like to have a limited dependency on these behemoths and are very active in marketing to ensure multi-channel inbound opportunities. There is also a wealth of niche markets that can build income, such as mid-term out-of-season, digital nomads or writers. They all need engagement, connectivity, and conversation to ensure data is up to date and terms are keen.

• Social media: How active is the company on the main channels, Facebook, Instagram and Pinterest? When was the last update made, how frequently, and how much engagement? Are there guest “closed social comms” systems to promote accommodation such as WhatsApp groups for rebookings? Are they a company on LinkedIn that involves itself in the industry and continually educates itself, even speaking at conferences?

• Pricing has moved to more of an automated function but is only a part of the equation. Most agencies will adopt a revenue management strategy to ensure all properties are priced accordingly. Each is given specific attention and treated individually with regular human intervention and monitoring. Dynamic pricing can only match certain property elements, and much of the data needs to be more accurate when scraped from OTA sites. Multiple systems are becoming more common in cross-checking and providing data to the revenue manager. A blocked calendar may look like a booking, but it may be the owner’s staying or renovations, for example. Scraping happens every 24ours and OTAs change their formatting too, which causes issues. A simple API issue or location scrape challenge may mean no bookings, even in high season. Few successful companies seldom let data tools solely govern their bookings and revenue manager jobs are on the rise and necessary.

• Mixed distribution opportunities are used and are effective in niche (pets, food, walking etc) markets. Some can be based on subscriptions to very focused web platforms. Good agencies will invest in this.

• DMOs (Destination Marketing Agencies) can add traffic and bookings to a rich marketing mix and can be subscribed to.

• PR: Although expensive and complicated to track, PR can be helpful, primarily when an agency undertakes charitable work, which many do.

• OTAs typically form 40-50% of leisure destination bookings (<25% in high season) and 90% of significant city bookings. OTAs also need content and pricing strategies to ensure properties get listed in the first 15-20 shown, where the primary booking volumes come from. This means regular content updates, deals, and a smart revenue management strategy when using OTAs. 

• Company and property reviews: The STR and digital industries are governed by public reviews. A great property can provide a poor experience due to poor management. It always makes sense to check reviews of the company and properties. The agency may have no company reviews at all or many plaudits. Airbnb’s top companies have a “SuperHost” status, and properties can be called “Guest Favourites”. However, it is generally recognised that a 4.8+ rating on company and properties shows a good agency and property portfolio.

• “Owner Mixer and Updates”: Does the agency send a regular update on activities, market trends, suggestions, etc? Is there a yearly get-together of owners to present information and get feedback?

3. Commercial Terms

Larger, well-positioned quality properties are always sought and more negotiable on terms. Agencies undertake a lot of work (as Airbnbers often find out), and generally, a commission approach is offered. A booking is made, and a percentage of the booking value is invoiced to you (generally plus VAT). The agency handles all the bookings, finances, guest comms, review requests and complaints, etc. Some agencies pay before arrival, some after, and some monthly, and this needs to be addressed early in the discussions. Never forget that an agency is just that: a middleman. The booking contract is between you and the guest, like Airbnb and Booking.com, not the agency, and you are held liable, so you need to cover H&S and have all the correct insurances in place.

The commission averages between 15% and 25%. The agency will likely charge the guest a booking fee and may make more money from accumulated damage waivers, insurance upsells, etc. It is worth noting that 90% of agencies will uplift the price to an OTA by the OTA commission and any card charges. If guests book directly, they can benefit from a price reduction. Your income on an OTA will generally be calculated from the price minus the commission uplift.

An agency investing in a good brand and direct booking strategy benefits owners and guests and reduces dependencies on the large multinational businesses that mint money from volume and frictionless booking experiences, even if guests know no better. With an oversupply of properties in the industry, a keen understanding of all these aspects is essential. Simply adding properties to an OTA and hoping for the best is not an option.

Before adopting an agency ask all these questions and ensure your contact understands the business in detail and will work for you to get the best results

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Tools to use (country-specific)

• https://www.trustpilot.com/ for company reviews
• Airbnb: Type “Airbnb and the Manager Name” into Google, find a property, and then go down the page to get the manager’s rating.
• Archive.org to see how often the website has been updated over the years and, hence, the company’s longevity.
• General competitor price and income checking; Pricelabs.com (circa $9 per month)
• SemRush (Please get in touch with us for a quick summary report: [email protected])
• Uber suggests checking keywords and matching these to Google searches for your property listing or agency name.
• Check individual social accounts. Very regular posts (not just properties) and check followers.

Reference Article by Yes Consulting based on Airbnb for OVO Network.