Recession, recession, recession. This impending recession is making wall-to-wall coverage in the press, on the radio, and on TV news.
Let’s face it, it’s praying on our minds. It’s already being reported that Americans are suffering from recession fatigue and Europeans are reeling from increased fuel and heating bills.
Google Trends shows this very clearly in the graph below
There are many heavy-hitting articles along the lines of “Prepare for a ‘long and ugly’ recession” and “Long, Moderate and Painful: What Next US Recession May Look Like” springing up across the internet.
After the devastation that Covid inflicted on the hospitality industry, this is the last thing that we need. But there are things that you can do.
In this article, I will explain how people change their spending behaviour during a recession and share some of the things that you can do in order to improve the chances of your vacation rental business surviving.
The overall trend
More and more travelers are looking to save money on their vacation/holiday rental accommodation. This behaviour is increasing and will accelerate as we head deeper into recession.
As people’s disposable income becomes stretched, they change their behaviour.
The things we buy.
No matter what or where you sell your products or services they fall into one of four categories.
Essentials – Obviously, food, water, and heating (if you live in a colder climate) fall into the essentials category. But if you need to drive to work then a car and fuel are essential. Medicine is another that many can’t do without.
Treats – Eating out, nights at the cinema or theatre, drinks at the pub, and Netflix subscriptions can be classed as treats. They aren’t essential but they make our lives better. We all enjoy treats as and when we can afford them.
Postponeables – Vacations and holidays are postponable, as are buying a new car or new clothes. Upgrading any appliances, home furnishings, or mobile phones are postponable and these transactions will be put off in times of financial hardship.
Expendables – Things that we want but don’t actually need, fall into the expendable category. I may want a speed boat or a sports car but I don’t need either one. Those dreams are very much put on hold during a recession.
How people behave
Understanding how people react to a change in financial circumstances is key to getting our businesses through harder times.
Different people behave in different ways during a recession. This behaviour will depend on their financial circumstances and their nature.
Some will slam the brakes on their spending, while others will take a pained but patient approach.
The comfortably well-off won’t be as affected as those with less disposable income but that’s not to say that the well-off won’t be more careful when it comes to spending.
Others will take a live-for-today approach and carry on spending regardless.
It’s very important to understand how people in general and our potential guests, in particular, behave when they start to feel the pinch financially.
Even those who only shop in the essentials category at present may stop buying more expensive (mini-treat) groceries like organic fruit and vegetables. They may swap from branded goods like Kleenex to a supermarket’s own budget brand paper goods or shop for daily use items at budget outlets like Aldi or Lidl. I’ll come back to this later.
People buying in the other categories will also make spending adjustments
Let’s take the treats category as an example. If a couple eats out regularly, they will either eat out less or move up into the essentials category. They may still treat themselves to a nice meal and a glass or two of wine on the weekend but they will cook it themselves, at home, in order to save money.
The same goes for things that are postponable…
They will also start paying a lot more attention to the overall cost of their trip. Overpaying for something falls into the expendable category and everyone except the exceptionally well-off will be leaving that category.
How are travelers behaving?
Here at HiChee, we can see that more and more potential guests are looking for alternative booking options where they may find lower prices for the same property, for the same dates, and for the same number of guests.
Many are finding properties on Airbnb, Booking (.com), or VRBO but before they book they are then using Google to search for the property title.
Just in the same way as consumers move from Whole Foods to Aldi, or Kleenex to unbranded paper goods, in order to make savings on the same or similar products, travelers are looking to move from the big brand online travel agents (OTAs) to individual property managers and hosts in order to make savings on the same property.
We know this because that’s how tens of thousands of potential guests come to our site every day and each and every one of them is looking to compare prices and find the best deal.
Here’s a graph from Google Trends that shows people in the UK searching for the term cheaper.
More and more people are spending time searching for money-saving options.
At HiChee, we list all of the properties on all three of these OTA platforms, your Airbnb, Booking, and VRBO listings are already on our site and they are being seen by these price-conscious consumers.
What’s in it for you?
In nearly all cases, a potential guest can get a lower price if they book directly with the host or management company.
We have a tool called Magic Search that site visitors can click and it returns a Google search using a combination of the image and other factors. This often flags up a direct booking website so that the potential guest can find the best available price for the property that they are interested in.
We’ve seen an increase in the use of this tool along the lines of the Google Trends Graph.
Add trust with verification
Hosts and managers can also verify their property on HiChee and their details are displayed alongside the prices of the OTAs. This verification is completely free of charge.
It’s super quick and easy to verify. You just follow the instructions and move one photo in your listing. This shows us that you control the listing and that listing then displays a ‘True Verified Host’ badge.
You can also add your own website URL, your email address, name and profile photo and your details appear alongside the OTA prices.
Potential guests can enter their dates and compare your rates against those of the OTAs.
Potential guests can click on the “View Direct Site” button, and they’ll be taken directly to your own website.
There’s also a ‘Contact Host’ button where an interested traveler can email you directly via the platform.
The ‘Contact Host’ option offers real direct email contact with guests that are not censored before they are locked on a rental platform.
You don’t even need your own website to add this direct booking option to your HiChee listing!
Lastly, you have the option of adding a negotiable badge (particularly enticing for driving inquiries) and/or a crypto currency badge if you are open to that type of transaction.
The trouble with booking direct
As managers and hosts, we know that we’re not scammers and that what we are offering is legitimate, guest friendly and safe. But first time buyers don’t know these things and they, quite understandably, have doubts like,
Can I trust this person or company?
Is this a ghost rental?
Will I lose my money?
During a recession, when money is more precious, these doubts increase and form a bigger obstacle in the direct-booking process than normal.
By verifying your listing/s on HiChee you raise the trustometer and lower the fear factor that deters travelers from booking direct.
The potential guest can see that you are the same owner as on the listing on Airbnb, Booking, or Vrbo. They can also see that HiChee has verified you or your company, provided links to your own website and, better still, delivered a communication channel where they can ask questions and build a relationship with you before booking.
Even if they don’t book direct
Some travelers will always prefer to stay on brand and book through an OTA. After all, Airbnb offer Aircover, Vrbo provide their Book with Confidence Guarantee, and Booking (.com) have very flexible cancellation policies.
Booking via these companies brings a certain peace of mind and some travelers will always display brand loyalty for these and other reasons.
BUT, maybe the traveler has found a place on Vrbo but it turns out that it’s cheaper to book through Airbnb or Booking (.com), or vice versa – that price saving may bring your property from over budget to within budget.
As people move off brand looking for better deals on their accommodation they will be carrying out more research at the pre booking stage.
Preempt this by carrying out your own research for your destination. Look for local listing sites that charge less commission that the big 3 travel brands. Seriously consider listing with those that are high in Google’s search results.
If I Google search for Vacation Rental Florida, the top ten results are dominated by Airbnb, Vrbo, Vacasa, and Kayak. But also on page one is Florida Rental By Owners
This site doesn’t charge traveler or booking fees, so booking through them will be 12 – 25% less expensive than booking through one of the big box rental sites. These saving could be the difference between snagging a booking or your property sitting empty.
Lower booking prices increase demand and results in more bookings, increasing occupancy, and maintaining profits.
In this particular case, a listing subscription starts at $199 a year which, in the grand scheme of things, isn’t going to break the bank.
Look for local, destination specific sites that serve your location and rank well in Google. Bear in mind that there’s little point in listing with companies that appear way down the search results and they just won’t be getting the required traffic and eyeballs that your property needs for conversions.
Be agile. Get recession ready
As we move deeper into recession and disposable income becomes a thing in short supply, people will have no choice but to postpone big ticket purchases like vacations/holidays.
This has already started to become an issue in some locations and will start to become much more apparent in the traditional January booking window when people are paying the price for Christmas spending and worrying about upcoming winter energy bills, rising inflation and heavier mortgage repayments.
Hosts and managers could be facing empty inboxes and equally empty calendars.
Short term stays will become more popular
Consider reducing your minimum night stays. As mentioned above, potential guests will change their behaviour and move into the treats category. They may not be able to warrant the expense of a 7-night stay but they could stretch to a 3-night getaway.
Of course, shorter stays bring logistical challenges. In particular, rescheduling cleaning rotas and increased cleaning fees on a per night basis, along with more meet and greets and changeovers but may be the only option as opposed to empty properties.
I’ve lost count of the times that I’ve heard hosts say that they would rather be empty than drop their price on a booking and that’s understandable when demand is high but that mindset may need to change as bookings become hard to come by.
Seriously consider yearly income over nightly rates. Bills still need to be paid, maintenance still needs to be carried out, and recessions don’t last forever. If short-term changes get you through hard times and keep you in the game that’s preferable to being hard-nosed and going bust.
Also bear in mind that travel, in itself, is becoming more expensive due to increasing fuel prices so people will look to take their holidays closer to home.
Carry out some research on Google and look for smaller, destination-specific, listing companies that rank well in the results. See if they are a good fit for your rental. If they offer good value for money and overall savings for the potential guests then give one or two of them a shot.
Verify your listing on HiChee
Consider verifying your property listing on HiChee. As people look to move off-brand it pays to be clearly seen alongside other, higher, pricing options.
Price is your silver bullet.
Verification allows the guest to know you control the listing and are not a scammer so they have increased trust with a direct transaction
Verification effectively allows you to decrease the price of the booking to the guest while keeping the payout to you, the host, exactly the same. It’s like having a sale but not having to lower profit margins.
Verification for the host is fast and easy only involves moving a single picture on the major rental platforms to confirm identity. No other information is required.
Do you agree with our Short-Term Rental Hosts Guide On How To Survive The Recession thoughts?
Have you seen a dip in bookings?
Are you worried about business in the upcoming year?
What are you planning to do to boost bookings?
Let us know your thoughts in the comments section below. We would live to hear from you.
Alan has been working in the vacation rental sector since 2004, when he first created a listing site for his property management company. He has been helping short-term rental owners and managers to stand out in an over-saturated marketplace for over 12 years and has written thousands of articles in that time.
He has written books on vacation rental photography and was the first in the industry to create online marketing courses for hosts.
He has given keynote presentations across various subjects at The Vacation Rental World Summit, VRMA, VRMintel, Host, and The Book Direct Summit.