OTA Channel Challenges

6/26/2018

If smaller property management companies want to be on OTAs, they have no choice but to work with their Property Manager Software System (PMS) or a Channel Manager (aka OTA Middleman).

The problem with this model is that it can be inherently inefficient, expensive and in many cases from what we've seen, often more trouble. For example, there is not a direct API connection between HomeAway Software (HASP) and Airbnb. Other PMS systems like LiveRez have severely limited their API options to third-party sites.

The alternative is to work with channel managers who offer property managers the ability to connect to channels through them. Companies like Blue Tent, Booking Pal, Next Pax, Red Awning, Rentals United, VacayHome Connect and others have experience in dealing with very large OTAs and smaller niche OTAs especially in Europe and Asia.

Although their business models vary by channel, these channel managers are usually free to list your properties and they make their money on a percentage of every online booking they deliver. For some channels, they can even manage the screening process of the bookings themselves and whether the guest has a valid credit card and the booking meets your rules.

The challenges of working with these channel managers vary by company. However, property managers would be wise to avoid binding long-term contracts and they should definitely check references diligently.

These are items property managers should carefully consider when dealing with channel managers including:

• Are you the merchant of record? If not, you may not be aware of what they are actually charging guests. Can be a record-keeping nightmare for accounts receivable. Historically, some channel managers have had severe cash flow issues and use the float of customer money to fund their business expenses. If you are in a strict trust accounting state like North Carolina this might actually be illegal.
• Channel managers can sometimes over promise and under deliver.
• Some channel managers redirect your inventory to your competitors.
• Some channel managers brand your properties with their name and logo on OTA sites
• Some channel managers do a very poor job with your content – and do not update it.
• Some channel managers bid against you on your branded keywords on Paid Search
• Even if you disconnect their feed, they can still keep your listings up as they use them for branding and redirection. It is very difficult to get them to remove your listings.
• Some channel managers do not disclose where their orders are coming from.
• Some channel managers try to get you to sign one-year binding contracts.

Smaller property managers may conclude that these choices sound like the lesser of evils. And, they are right. Companies with core competency in technology that allow them to master configuration, API and online distribution have a decided competitive advantage. As in any marketplace where there's a large amount of disruption, there is an opportunity to gain market share for those who have competency in areas where the disruption has created opportunity.