TripAdvisor's decision to expand travelers' fees for vacation rentals will please Wall Street and could put pressure on Booking.com, which adamantly eschews such fees, to do likewise.
With HomeAway slated to follow Airbnb and begin charging travelers’ a fee for vacation rentals in the first quarter of 2016, TripAdvisor has expanded its booking fees for travelers when they rent a vacation rental on TripAdvisor through a property manager.
At the same time, beginning December 9, TripAdvisor will lower property managers’ commissions to 3 percent, from the current 12 percent to 15 percent. Individual owners will continue to pay a 3 percent commission on bookings — the same as the reduced commission for property managers.
Under the change, TripAdvisor will begin to charge travelers a variable fee of 5 percent to 15 percent of the rental under its property manager business model.
When TripAdvisor introduced two years ago a business model that had property managers listing their vacation rentals for free and paying a commission on bookings, there was no booking fee for travelers.
There previously had been a traveler booking fee in TripAdvisor’s business model for individual homeowners.
Lowering the fees that property managers pay was a demand that property managers made to TripAdvisor when they got into a dispute with TripAdvisor/Flipkey over a technology migration.
The 3 percent fee that vacation rental property managers will pay to TripAdvisor matches individual vacation rental owner fee on TripAdvisor and also the Airbnb host fee.
HomeAway currently charges hosts 10 percent commissions in its pay-per booking model but plans to lower that when it introduces a traveler booking fee, which will be 6 percent on average.
“We are constantly looking for ways to provide the best experience to our customers, whether homeowner, property manager or traveler,” said Ben Drew, business development director, TripAdvisor Vacation Rentals. “Our earlier model was very successful for the thousands of property managers worldwide who signed up to it and have taken an ever-increasing number of bookings through it over the last two years. It’s been the fastest growing part of our business, but we’re part of a quickly evolving industry and now it’s time for a change.”
“Bringing the property manager and homeowner commission models in line makes us a better, more competitive marketplace,” Drew added. “We’ll deliver better value to property managers and, in turn, bring more professionally managed inventory to our sites, providing travelers with a greater choice of properties to book safely and securely through TripAdvisor.”
Steve Milo, founder and owner of the property management company Vacation Rental Pros was less effusive about TripAdvisor’s moves.
“After seeing Airbnb make major gains on professional property manager listings with a more attractive and more transparent business model, TripAdvisor has finally been spooked,” Milo said. “It is about time TripAdvisor is offering professional property managers the same rate parity that they have offered for over a year to rent by owners. This shows the vacation rental space is so competitive that no one company, even the size of TripAdvisor, can succeed without the inventory of professional property managers.”
The TripAdvisor news of lower commissions for vacation rental managers and the introduction of a traveler fee in the property manager business model came in a December 8 email, headlined “Lower commission for 2016,” sent to property managers.
TripAdvisor noted that when it introduced a commission plan to supplement is subscription program two years ago, it charged a property manager commission but not a traveler fee.
“Now to make it even better, it will be less expensive for the manager to be listed on TripAdvisor,” the company stated.
HomeAway got a boost when Expedia Inc. announced it would acquire HomeAway for some $3.9 billion and HomeAway planned to introduce a consumer booking fee for the first time in the first quarter of 2016.
One of the advantages HomeAway stated it saw in putting itself up for sale was to manage the risk associated with requiring vacation rental owners and managers to make their properties online bookable as well as the introduction of a booking fee for travelers.
TripAdvisor’s introduction of a traveler fee on vacation rentals by property managers will not necessarily be material to TripAdvisor’s financials in the short term because vacation rental transactions are not material to TripAdvisor at this juncture. But those traveler booking fees could be material to TripAdvisor in the future.
TripAdvisor’s decision to begin charging travelers’ a fee for vacation rentals from property managers will please Wall Street and could put pressure on Booking.com, which adamantly eschews such fees for all of its vacation rentals, to do likewise. On the other hand, much as HomeAway saw a competitive advantage for years in not charging a traveler fee while Airbnb and others did, Booking.com management could stick with its beliefs and continue to avoid turning off consumers with booking fees.
Here’s the text of the email from TripAdvisor Vacation Rentals:
Lower commission for 2016
It’s our ambition to present the best possible set of homes on TripAdvisor and we’re constantly searching for the optimum way to do that. We feel that offering the best possible value for your business will be positive for everyone.
When we launched our commission product, we charged an owner fee only – and it has been a hugely successful model amongst managers over the last two years. Now to make it even better, it will be less expensive for the manager to be listed on TripAdvisor.
As of December 9th, the fee for managers will be only 3%. This covers the cost of processing credit cards.
In exchange, we will charge the traveler a fee to make a booking.
We’re excited to announce this because it makes it easier to be part of the largest global travel website. Why this change is good for everyone:
• As a property manager, you will pay less commission, the fee will be just 3% for accepted bookings
• Managers will pay the same fee as individual owners going forward
• We think this will create a stronger marketplace with more managers able to participate
Thank you for choosing TripAdvisor Vacation Rentals. We sincerely appreciate your business and look forward to working with you in 2016.
If you have questions, please email firstname.lastname@example.org
The TripAdvisor Team
Photo credit: TripAdvisor's home page for vacation rentals. TripAdvisor