Sunday, 16 June 2013

Digital Keys Disruption - Part 2

In our last blog post we looked at the options the owner of an accommodation property has if they want to rent out their place for vacation/holiday rentals. The main point of the last post was to demonstrate that there are a lot of players inside the accommodation space trying to get a piece of the 'tourist dollar' pie. 

There is a company already disrupting the tourist accommodation booking space called Airbnb. Digital Keys is a technology that has the potential to disrupt this space even more. 

In case you have been living under a rock and never heard of Airbnb before, well they are according to their website "a trusted community marketplace for people to list, discover, and book unique accommodations around the world". According to to recent reports, Airbnb is currently valued at $2.5 billion, and taking more bookings per night then the entire Hilton Hotel chain.

So lets have a look at what happens if you 'the owner of a holiday/vacation rental property' choose Airbnb to manage your holiday accommodation using the $100 per night tariff as a guide(see last post for more information).

Commission – 3% is the commission advertised on Airbnb. This leaves you $97
Of course the cleaning and other costs(e.g electricity) can apply in this situation (if you don’t want to do the cleaning yourself)
So using the approximate figures from the last post for cleaning and other costs,(see here) it means you would be left with the grand total of $53 from your $100 per night booking. As compared with around $20 if you went with the traditional options.

What do you get for that Airbnb commission?
Essentially you are getting all the services of an Online Travel Agency, a Global Channel Management System company, a Property Management System(PMS) (you can log into the Airbnb ‘host’ software, and most of the services of a PMS are available here) and you also get most of the services of the Onsite Property Manager too (albeit virtually). 
Airbnb offer up to one million dollars in insurance (the security deposit service); they essentially vet the guest for you and take a copy of their ID (e.g guests can verify themselves through Facebook log-in and uploading a photo of their ID to their account).  But the problem is Airbnb (and others like them) are missing the one important service provided by the Onsite Manager, and that is ‘the key distribution’ service. Without this service, there still needs to essentially be an ‘Onsite Manager’. This is where Digital Keys can enter the equation.

Digital Keys can be used to automatically distribute to the guest the keys to their room, and the keys will only work for the duration of their booking. Human beings don’t even have to be involved in the process at all. However, hosts like to play a part in the vetting process, so they can then distribute the Digital Keys themselves after they have approved a guest. Digital Keys can be set up to automatically sent to the guest via text/email/download through a Digital Keys app after payment and booking is made. The PMS can automatically be updated too.

The Bottom Line
With so many players competing for the shrinking tourist dollar (there is a global recession going on right?), you can now begin to see why there are so many battles going on in this space. Here are a just some of them.

Hotel Chains vs Online Travel Agencies – see here for a good article about this battle

Hotel Chains vs Airbnb (and the like) and from the same blog  

Property Management Systems vs Computer Reservation Systems here is a great report that talks about the history of CRS and PMS here 

In short Computer Reservation Systems existed well before Internet and home computers, and they originally offered a lot of the interfaces to Travel Agents who took the bookings.  As this was very sophisticated technology at the time, (see the wiki page for their history) there were only a few companies who had mastered the art, and there was a lot of supporting tech infrastructure, so essentially they could charge the hotels whatever they wanted. It was not uncommon for a hotel to pay up to $200,000 to install a CRS e.g see here Now with all the technology we have you can buy a similar system online for $100, or build it yourself.

Specialist Vacation Rental Management Companies vs Onsite Managers vs Real Estate Agencies
Specialist Vacation Rental Management Companies are springing up everywhere offering some of the combined technologies, and perhaps a ‘more specialized core service’. The Real Estate Manager may be getting left behind because their core business is selling properties.

Online travel guide websites and online meta search engines (allied with OTA’s) vs the Hotels.
If you can help the Online Travel Agency get the booking (so that the hotel or the others don’t get it), then you can share in the OTA over inflated commissions through affiliate type programs. This is where travel guide sites such as Tripadvisor comes in. Essentially they are allies of the Online Travel Agencies.

By now you can begin to appreciate that there are tens of thousands of companies, of varying sizes, value and power, all competing in a very hostile hospitality space to get a shrinking tourist dollar. Digital Keys technology presents the final piece in the equation for any company wishing to offer the entire end to end solution of automatic accommodation management (without having the need for any human interaction).

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