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Players, Fans & Tricks of the Trade

Written by Simon Tolson on

The Agency model is shifting yet in the end stays the same

It may seem like the football has just finished especially as we had our glorious run in the Euros to fill in the gap but the Premiership season gets underway this weekend and by the time you read this I’ll be reflecting on Arsenal’s thrilling first game  win over Liverpool.  The transfer market has gone completely nuts with the amount of money in the game with records being broken everywhere and mind boggling amounts of money changing hands.

I expect you are wondering what tenuous link I’m going to use to make an analogy between football and holiday letting again and I’d hate to disappoint you so here goes:

In my world the owners of the houses are the players and the guests are the fans.  Without a collection of great properties I don’t have a business- no matter how ardent our fanbase is, if I don’t have the right range of quality properties to offer them then they are not going to supply the revenue.  Agencies are therefore competing for the best properties with the key difference being there is no transfer market, if an owner leaves you get nothing and you don’t have to pay a fee when a new cottage signs a contract.

If this comparison with the beautiful game is going to hold up then guest would be paying increasing amounts each year (true) and more and more money would be going to the owners (a bit true but not the whole story)

Let’s have a look at some of the things that are changing, we can call them strategy, tricks of the trade or even dirty tricks, it’s all a matter of perception.

Charges ‘paid by the guest’

Originally the model was simple, your agency took money for a booking, passed it on to the owner and kept an agreed percentage.  Commission was generally higher but everybody knew where they stood.  Then came the booking fee which is presented as being paid by the guest so doesn’t affect the owner.  All of us nudged this up to £20-£30 and chewed our knuckles every time we added a pound or two lest it affect the booking rate.

Then along came Airbnb with the service charge to guests which started at something like 3% and has risen to 8-10% showing that if presented correctly both guests and owners would accept a much larger fee than we would ever have dreamt possible.  The commission to the owner can therefore be as low as 3% and so a new model is born.

I’ve been over this a few times in this column and maybe it’s my unimaginative mathematical brain but if a guest pays £1000 and the owner receives £850 then the agency is charging 15% whether you call it £100 paid by the guest and £50 paid by the owner or no fees but 15% commission.  The valuations of global directories in the billions of pounds rather demonstrates that I’m the dinosaur but I stand by my logic.

Additional costs to the owner

Many agencies now have investors to answer to and like a public company need to show that they are increasing profitability per property as well as through growth.  Putting up commission rates is a difficult and contentious thing to do so as well as charging the guest the strategy is often to charge the owner as much as possible.  Joining fees, admin fees, photography, video and especially recurring charges such as inspections, testing and certification all provide an opportunity for incremental revenue plus if you can get away with it charging for a sign to advertise the company or even just for a first meeting.  How about charging the owner commission for staying in their own house if they use it too much?  Nice work if you can get it.

The key point here as with anything from mobile phones to running a car you have to take all the costs into consideration when working out who is offering the best deal.

The Name Game

I am so naive!  Increasingly I would meet owners who were talking to several agents and would ask me what I would call the cottage?  Apparently a quality agent will give you a carefully researched marketing name making the place more attractive to guests and preserving your privacy by not publicising the actual property details.  One day the penny dropped- the name is owned by the agency so if you decide to move then your previous guests won’t be able to find you and search traffic for the name can be directed at another similar property.  I am such an amateur!

I was brought up in Poole so my local team is Bournemouth- definitely not one of the big boys but doing very well by playing attractive football.  There’s still some mileage in just trying to do things the right way for both the players and the fans or in our case the owners and the guests.

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