The Covid Effect
During development we were conscious of the fact that the platform needed to future proof, so that it could adapt to market forces and emerging trends, allowing our B2B partners the opportunity to always be one step ahead of their clients’ needs.
However, nobody could have predicted the Corona Virus and if anyone did then no one would have believed them! Established business and well-known travel groups were the first to suffer as their overheads became a burden and they started to burn cash quicker than they could generate it.
As uncertainty in the travel sector grew, holiday reservations and vacation plans started to become less of a priority and major high street agencies were forced to either furlong or retrench the same staff that had been defending their brand but now were no longer an asset but a cost that was becoming too heavy a load to carry!
Airbnb but more noticeably Luxury Retreats are the latest market leaders to feel the effects of the economic shift that is looming caused by Covid 19.Their plans to restructure due to the current situation were clearly inevitable, but has it been a blessing in disguise and the excuse they needed to vertically integrate all their products under one self-contained automated platform with a fraction of their current workforce. Although they have shaped the travel sector over recent years, they have not been profitable. They are however extremely investable, as their market share is unprecedented, as is the valuable data pile they had accumulated from their aggressive moves and purchases in the last 5 years. Acquiring Luxury Retreats was one of the most notable and the fastest way for Airbnb to build a business culture in the luxury travel sector, accelerating their objective to offer multiple products under one central brand.
But did they need all the costs involved to do this? Clearly not after they recently retrenched 25% of their total workforce, which was primarily made up of around 85% of the staff from the companies that they acquired along the way. The reported sales price was a mixture of cash and shares so although the purchase price seemed high it wasn’t all tangible until of course the time that Airbnb goes public. The IPO that they have been aiming for now seems an unlikely option at least for some time for the travel giant.Nonetheless they still bought the data and the transferable relationships that allows them to breathe in the near future.
But will those assets be as valuable now, given the owners don’t feel their money is safe in the Airbnb escrow? Shockwaves went through the market when non-sanctioned refunds flew back to consumers, without any thoughts for the owners who all of a sudden faced an uncertain future, with their earnings not guaranteed or being held in safe hands.
Before Airbnb purchased Luxury Retreats, other potential buyers were lining up to take the travel sector by the scruff of the neck which helped to inflate the end price but it also sent investors into a frenzy hoping that they hadn’t missed the boat on the newest investment golden egg. The tech driven travel industry became the talk of the town and when the remaining bidders couldn’t match the never-ending cheque book of Airbnb, they’ve settled for smaller industry players. Travel Keys were bought out by Accor, however, the collapse of this franchise was inevitable even before the outbreak of Covid. It was simply due to the non-operational compatibility of so many smaller travel companies under the one umbrella that caused the ground to shake and the market to swallow them up.
So where does this leave the smaller boutique agencies?
It leaves them in a strong position going forward says Nick Thompson CEO of Invenio Homes.
There should be a maximum of four components in an agent chain he said!
There does not need to be more but there could even be less if the client’s agent has a direct relationship with an owner.
So, the burning question remains, why would clients go through agencies that don’t have the stock direct? It is just another layer that simply adds to the cost of the rental that the consumer unfortunately picks up! The chain is too long and as every agency needs the incomes to operate, payment must come from somewhere! Prices are therefore inflated, and client’s expectations are often not met, leaving the feeling frustrated as well as cheated.
Some people however justify paying a little extra with an established brand for the protection that they perceive it offers, however “Covid has proven that the protection they paid for isn’t always there when they need it”.
“Credit notes are as unstable as coupons” says Nick Thompson at a keynote speech he hosted for his 500 strong collaboration network during the height of lockdown, when so many questions needed to be answered and so many people were lost in misinformation.
Will the property be available when the client wants to rebook?
It is impossible for clients to plan over a year in advance?
Imagine if a client booked in January 2020 for their holiday in August 2020. Now the credit notes or travel vouchers are not valid to 2021, this is 20 months that they will not be able to enjoy the money that is now out of their reach with no guarantees. What happens if the owner takes another booking that falls in the same period that the client wants to rebook before the original client can arrange their travel plans? It will be difficult for many to make concrete plans so far in advance, especially when there are such dramatic changes happening daily in everybody’s life.
What happens then?
What if the house is sold in the meantime as the owner’s economic situation and a continued travel downturn force them to liquidate, before the banks force closure on an asset they can no longer support? As so many people have geared their mortgages against the expected rental incomes the possibility is justified!
What if an exchange rate swing puts extra pressure on outstanding loans?
What happens if the customer’s personal situation changes for the worse?
What if the destination that they have booked becomes a ghost town in the following years as businesses close due to economic hardship?
Why should their money be tied up for so long?
Having the fewer layers between the merchant and the customer is clearly a safer bet going forward, however clients can never be sure that the agency they are dealing with is genuinely direct to the clients dream home, so there will generally always be some kind of collaboration. But Nick thinks two degrees of separation is more than enough, otherwise you are dealing with too many contractual conditions that may conflict, leaving you exposed and vulnerable as many are currently experiencing.
As the customer’s agent, you have the opportunity to put pressure on the terms and conditions to protect your client on each rental, only being as close to the source as possible will allow you to do this. Working with big corporations does allow this as they have an SOP that you need to comply to. They are just too big to be flexible and will more than likely leave you with hardship, small print and a help desk that is already inundated with irate clients.
“You have the opportunity to work with better partners and call the shots. Bigger isn’t always better! We have seen the biggest fall because their quest for domination outweighed common business practices. Taking away the layers will allow you ease of communication for any problems that may arise in the future no matter how big or small. That is why the Invenio Homes business model works! We allow agents direct access to our trusted destination portfolio partners.These suppliers are direct and don’t offer 3rd party referrals so that your customer has the best price and you have the confidence to know that the product and services live up to all other properties that are displayed in our B2B agent network dashboard. This means a low barrier to entry and low prices for your clients.”
The model works as the layers have been taken away and the fear of being bullied by a monster has dissolved. “While it is true that a tall tree gathers the most wind it’s also the tallest trees that falls in a storm” he said during the Q&A session during his recent agent update.
Stay small and nimble and pivot to where your business takes you at any time. Your customers are your assets, so you need to protect them. Working with other agents that value this and are open to defend the needs of your clients will always put you in a stronger position, giving your client peace of mind as well as allowing your own expectations to be managed right from the start of your their journey which, as we all know now, is the time of booking not the time of arrival.