Holiday home rental agencies future in Mauritius?
April 8, 2014
What are the future outlooks of agencies in the holiday home rentals industry of Mauritius?
In the perspective of a tour operator who acts as a reseller, working with property managers and owners of such vacation rentals earning a return on short term rentals from tourists. A personal view of the current and possible future outlooks for agencies and sharing from an insider perspective what are the barriers and with a dose of a rather pessimistic frame of mind!
I have been involved with the Mauritius vacation rental tourism industry for more than 10 years now. I have also collaborated with various hotels for the last 8 years. Today, I want to write and look at the vacation rentals industry from various perspectives if there is still a future for agencies in this sector or if it looks rather gloomy. Many traditional offline travel agencies have been hit by the internet; will there be a next wave of clean up where many small online agencies will also be put under the carpet leaving only the big players to stand?
Things to ponder upon and I hope my colleagues in this industry will read this article and deeply reflect on their own future.
Since many of my readers on Google+ live very far from Mauritius. Many of you might have heard of this destination for the first time. A short intro about the island: Mauritius is a tropical island located in the Indian Ocean and lies to the east of Madagascar. Mauritius has a surface area of around 2040 km² (788 square miles) and owns a very large area of the ocean surrounding it. Mauritius is on one hand, popular for its luxurious resorts, beaches and turquoise azur blue lagoons of mesmerising beauty and on the other hand, popular for its mosaic melting pot population. It is an island where various cultures, religions and races live together and have been excellent at the practice of hospitality and in the reception of guests coming to stay from all over the world. Mauritius is known globally for maintaining a hotel industry of excellent quality, very high standards in design and service in top locations which are often referred to as paradise. Many countries also recruit personnel from Mauritius for their resorts such as Dubai, as the island has specialised itself very highly in this sector and offers skilled labour. So this should give you a bit a picture of Mauritius and I’ll add some links at the bottom for you to discover more.
The topic of this article will be slightly different from the more common articles of the island that you get to read in my blog. In general my blog offers you articles about places you can visit, question and answers about things such as where should I book my beach villa etc.
This article will be more a pensive reflection of the home holidays rental industry with which I have been collaborating and earning my daily bread with. I want to share my insights, whether positive or negative and areas of which I cannot make any prediction but leave room for thoughts and also welcome your input in the comments section.
How is the home holiday rentals industry structured in Mauritius ?
1. First you have the owners, the landlords, they are at the peak of the pyramid. They own the places, therefore pocket in the most on the rental fee. There all sorts of owners, some own just one beach villa, others own a whole series of them. They have various ways of marketing their properties. Many advertise them on portals such as HomeAway / Homelidays. Some have their property fully managed by a property manager and others work with various agencies and whoever supplies them a client first gets the villa which indeed makes it like a race on a first come first serve basis. A landlord when collaborating with an agency will wither supply them a TO rate which stands for tour operator rate which is in general around 20% lower on which the mark-up gets applied for reselling. Thus meaning a client booking with an agency or owner can benefit from the same or similar rate.
2. Then you have the property managers. Property managers usually work directly under contract with the owners. Their job is to manage the place, to make sure its clean and tidy, garden is maintained, the pool is clean, reception of guests and making sure everything is running smoothly and fix problems that arise etc. The lucrative part of the property manager is also that in many cases they get the exclusivity of the property that they manage in regard to its marketing to agents. Which means in other words, property managers will have the exclusive right of reselling the place to various agencies and tour operators and all bookings from whoever they are sourced will have to go through the tour operator. Property managers sell their offers to the public on a public rate and resell their offers to tour operators on a reduced rate. The tour operator gets the rate usually at around less 30% on which they are advised to not mark-up more than 20%. The public price of the property manager is 10% more expensive in that case than the selling price of the tour operator or agency. This is also to create a fair advantage for their partners who are investing in Marketing to sell their offers. Hotels also operate a bit similarly.
3. Agencies and Tour Operators work with owners / landlords and property managers. They market their offers to the public and collaborate with other travel agencies abroad. A mark up is applied on the rate. Clients book the offer and pay directly to the agency.
The buying prices, selling prices, mark-up margins are just examples. These can vary and differ for each property and supplier/reseller.
How easy is it to set up a holiday rentals agency that offers beach villas and apartments online for bookings in Mauritius?
Some people create a business plan, others just get started and figure out later how to solve the rest. Figuring out later how to solve the rest is also a great way to constantly make mistakes and bang against walls. When you have the experience how things work, good for you, if you don’t, you will fall on your face from time to time. If you can have a mentor to guide you – better!
If you think the idea of running a travel agency is cool, think twice. The ease to set up is one thing. To get bookings is another. A beautiful website that no one can find in search and no one knows about will not generate bookings. A good website if you don’t know how to set one up can cost you a great deal. This is one part of the investment. You will also need to have a marketing plan how to acquire bookings.
Let’s have a look into the steps how to get started and after that I will present how you can stand out and more.
A. Business Plan, Licence Applications and setting up your company
1. You need to have an idea where to get the properties that you will offer or eventually first the website to show you mean business to make collaborations. But not yet trade.
2. Your activity will require a tour operators licence granted by the Mauritius Tourism Authority. They will be very meticulous. You will need to submit a business plan. You will need to go through various steps with them. They will also look at your office and even send a sanitary team, police and firemen to check if you fulfil all of their standards. Consider that getting this licence can take up to a year, sometimes less, sometimes more! Each time their committee rejects your application you will in many cases restart from scratch. Its very bureaucratic!
3. Since you will be operating a business which include risks you might consider setting up a limited company to reduce your liabilities. This is a very easy procedure in Mauritius. You just go to the companies division at Cathedral Square and they will guide you through. You can have your limited company in around 3 days. I wouldn’t recommend you setting it online through MNS as for me it took 3 months but I also did it for fun as I acted a bit like a beta tester and informed MNS of constant bugs I was encountering which was now 8 years ago. So I would expect that the MNS system is way better now – you can try but if you go to their premises you can also get advice on the spot.
B. Setting up your website
On a scale of 1-10 I would say the difficulty of merely setting up the website is kids play and give it a 3 (10 being the toughest). Why? You can nowadays just take for example a WordPress CMS (content management system) and purchase or use one of its free templates and display some information about Mauritius, blog and post the properties that you offer. You can also hire an agency to do that for you if you are not savy in this area.
But does that mean you are in business?
Will this kind of website impress property owners to work with you?
…I doubt it.
So you do need to make sure that your website not only looks awesome but is also very user friendly and is ideally optimised for search engines to crawl it. No, that doesn’t necessarily guarantee you good rankings in the immediate!
What do rankings mean?
Your customers need to find you in Google with very competitive keywords such as Mauritius Beach Villas, Mauritius Apartments, Mauritius Holiday Rentals etc. If you are not found with those terms, you will not get business.
Is it easy to get found?
How long can this take me?
A long time. Years.
How can I be found?
By working hard. I will go more into details about this in the marketing section.
C. How easy is it to get properties on board of your website? Making collaborations with landlords, property managers to resell their offers, that is to get bookings on which you earn a commission.
If you look at my website today > http://www.isla-mauricia.com you will see that I offer beach villas, bungalows, lodges, hotels, apartments, guest houses and luxury villas whether RES or IRS. I have more than 100 offers. Rome wasn’t built in one day, my portfolio neither. Right now where we stand, our showcased offers took us around 8 years. I also did things a bit differently. Not only do we describe our offers in English, French and German. You will also see that we describe them very precisely and in various sections also including the fact sheets with numerous details of the places. It takes time to visit the places, get to know the owners and property managers, do photo shootings and then compile everything in a way presentable online. You can make it simple or extended. I went the longer route and made it very extensive. But this doesn’t answer the question how easy it is to get the properties. Now let me tell you my story:
When you have a beautiful website, but no properties on there, no one wants to work with you. You can send out beautiful emails, make nice little phone calls here and there and still have no success. And on top in Mauritius, try to get a landlords contact details… Mauritius beach villas do not have a house number, no name, nothing. You have to catch the security guy, or gardener, or the maid and ask them for contact details. Once you got hold of the property owner you need to get a meeting with them. Go see them, and have some convincing arguments why they should work with you. On top, everything you do for them, will be for free. So, as you can see this is already one barrier to get started.
If you manage to get a few villas to put on your website, this still doesn’t make your website look like a place for other owners to consider collaborating with you right ? This is also called social proof. When you start from scratch, you have no social proof. Also, you need contacts and recommendations.
Now with the age of internet you can find various landlords proposing their villas on portals like HomeAway / Homelidays and other home holiday rental websites. You can contact them and check if they would like to work with you. Many will not care to respond to you because they already get a lot of bookings on those portals – which landlords have to pay more than EUR 500/year.
Also take into account that you need to be on site, here in Mauritius when you are starting to acquire new properties. It also depends on what type of properties you want to market. Each property type has its specificities. If you want to focus on cheap apartments you can easily find these. If you want to market luxury villas, this gets more difficult. And if you want to market luxury apartments managed by property managers then there again you will need to convince them why they should work with you.
This gives you an idea of acquiring properties.
Getting properties is one thing, but will I even have enough availability to resell!?
Now, this is something no one is going to tell you. You need to be active in this industry to discover the dark side of availabilities…
While you might be working so hard on one side in acquiring properties and bringing them online and getting some YES’s from here and there of owners who just don’t mind featuring their villas on every possible website. You really have to consider if its really a property that you should focus on. If you are mining the web for villas on websites such as HomeAway you can see the villas calendar and you will see that in many cases they barely feature any availability! For those property owners that you contact directly, definitely enquire with them if they have any availabilities or are constantly fully booked!
Here comes another dilemma. You might want to showcase some villas on your website even though they are never available so that you can attract demand, get attention and get other owners to work with you. But you will also get requests for those villas and you will constantly need to propose alternative offers to those requests.
What I can personally tell you is that there is a great scarcity of availability in the area of beach villas and luxury apartments. There are so many agents and tour operators already reselling these places and many owners also sell on their own meaning most of the time, for the peak season especially, it will be like winning the lotto if you can really secure a booking! (By lotto I mean statistics wise not that the booking value will be extremely high!)
So this is another area which is problematic and if you are going to open an agency to propose beach villas, you will run into the problem that there are barely any beach villas available for the season that most people request.
You could be a winner if you can get clients to book those villas during the low season.
How does the competition look like, are there a lot of agencies and tour operators selling the same properties and competing against each other?
Since the barrier to entry of starting a let’s say beach villas agency in Mauritius isn’t that difficult if you already have some contacts or friends that have some villas. It means that there are a lot out there doing it. Even owners of villas are often tempted of running a little agency and showcasing the beach villas of their neighbours, relatives and friends. You also need to consider that many agencies run in Mauritius are often not the main bread bringer for many. It’s something they do for fun, part time, on the side. If a request comes in, they process it and make some pocket money aside. And there are many of them filling the whole landscape with many many small agencies.
Many tour operators and agencies often also compete against each other and offer the very same villas! I also have on my website in this section > Mauritius Villas properties that are featured on other websites and even on big companies like Agoda!
Property Managers often work with several local agencies and tour operators. Sometimes they will get a request of one client, through several agencies and then a price battle starts. It’s often insane how it ends… Mauritius is a small island so obviously after a while some agencies get wind of it that the potential client is shopping around and start making discounts, and this keeps going on until the agencies are bled to barely make a profit… The winner in this case remains the property manager because they have exclusivity and at whatever agency the clients are booking, they will get the booking in the end.
Will clients trust my website to carry out their booking?
When you start off new you might have the factor of trust playing against you. Why should a potential trust to pay to you by bank transfer? You will need to provide various elements of social proof. On top in Mauritius many owners and suppliers especially if you are a newcomer will want the bill fully settled one month prior to the arrival of your guests!
How do I get clients?
Since most agencies are based online, the acquiring of clients also happens through the website and traffic will generally come from Google. Thus most small agencies are dependent on Google and their rankings. If you are just running the agency as a side project you might not be so badly hurt if you lose your rankings through search engine updates such as Hummingbird, Panda and Penguin (Google algorithm updates have been given these names). I mean by this that you weren’t depending on this to earn your living therefore you will be less hardly hit if you lose your rankings. For bigger agencies, being dependant on google rankings, if they lose them, this could mean their end. This is very risky and shaky ground to build a business.
Think twice about your clients acquisition strategy. If its going to be mainly through Google then I would recommend you to forget about setting up an agency. If you think you will get your clients through social media, then here again I would like to hear how you think social media can be a provider of clients. If you think Social Media is your marketing channel to sell where you will get bookings by just placing some ads you might end up burning a lot of your start up capital.
AND it takes a long time for a website to rank in the top 10 and for some keywords you will never rank in the TOP 10. So this is pretty tricky again. Can you wait for a year until your website starts producing requests?
To be depending on search traffic is very risky ground.
If you google for certain Mauritius keywords you will see mainly big brands in the TOP 10. I used to say way more other local websites in the TOP 10. Times have changed and its very unlikely that you are going to beat those brands in a short run. Yes, you will need to focus on building your brand!
The days are over where you could simply make a website, build some back links and start being in the top 10 and get your leads.
A summary of barriers that agencies and tour operators face.
If you are in the beginning phase or planning to set up an agency I have listed above the following barriers you will face:
-The time frame factor of acquiring the tour operators licence
-Costs of producing your website and making it stand out
-The obstacles you will face in getting properties on board of your website
-Availability issue, many properties are often already booked out way in advance
-The factor of social proof, will your website be trustworthy as a new comer ?
-Dealing with the competition, you are joining an industry that is saturated
-You cannot depend on Google search and Social Media as your revenue stream
-There are low seasons and high seasons
-Tourism is a very fragile industry, bad news can mean a drop in arrivals
If you are an existing agency you will have similar issues and:
-You might have enjoyed good rankings for several years but after the latest google updates came out, namely Panda and Penguin your website might have significantly dropped from top 10 to page 3 or lower… (Panda and Penguin are names given to the algorithm update of google.). You might need to perform some clean up operations for your website. Have also a look here where I have left some more notes about Panda and Penguin and also look at the Google Hangout where you can get more insights.
-An increase in competition, a dilution of requests
-You get requests but the conversion rate has gone down, your offers can be booked elsewhere to, you offers aren’t unique any more
-It’s too expensive to book marketing campaigns such as Adwords because to many other bigger players are bidding the prices up and you can’t afford that. On top you need to do this with a PRO else you burn your money in no time!
-Changes globally, trends, people might be booking other destinations instead of Mauritius
-You are too small to send the impulse in Europe for potential clients to search for Mauritius, if the Mauritius Tourism Promotion Authority is doing this, who will? Bigger tour operators can market Mauritius Hotels but as a small agency hotels might not be your successful product but more beach villas and apartments.
Why would you run a holiday home rental agency? Is there still a use, and importance nowadays for having an agency since most of the information can be found online.
I run the accommodation in Mauritius portal “Isla-Mauricia” because I like conversing with clients and giving them advice about Mauritius and assisting them in booking the right place for their stay that comes even better than for what they are looking for. I estimate that most holiday rental agencies have a passion in assisting clients in planning their stay in Mauritius.
An agency also presents a place which individuals can contact to get advice about Mauritius and plan their stay. But a lot of information can also be found for free online. Many property owners that advertise their properties on portals like HomeAway can also be directly contacted and who will know their offer best and the region therefore also able to give good advice. This means that an agency is not crucial “anymore” to exist regarding this aspect. So this is one point. And on top many travellers believe, conversing directly with the owner and cutting out the middleman is more authentic in having a more closer relationship to the locals and saving on the rental fee.
In Mauritius, apart from the fact that any property that is rented for tourism needs to have a tourism licence, there is no framework or regulation how the selling of availabilities is performed. This means in some cases a “dog eat dog” situation can occur. And don’t expect this to change soon. The market just follows the eco system of supply and demand. The suppliers follow whatever from where the demand can be supplied at what ever cost. Not everyone follows this trend but many do.
For example: If a villa works with a few agencies, should they also market their villa themselves on HomeAway?
While on one side we might say that this seems unfair to agencies, the economical framework of today doesn’t show any grace and destroys the weakest components.
Yes, agencies also have several raison d’être.
+They can advise clients objectively
+They can make several proposals to a client according to criteria, making a client save time
+They are a point of assistance if something goes wrong in Mauritius
+They can organise airport transfers, car rentals and visit you and assist you in organising activities
So the strong focus would be the advising part. But I see that the points of the existence of an agency is just fading away and being replaced by bigger brands that can offer most of this in a different way. From owner to client without the need of a middle man. I would also say that the current positive points of an agency or tour operator who mainly operate online remain on shaky ground.
What can agencies do to survive?
To expect survival through SEO (Search Engine Optimisation) and managing Google’s upcoming algorithm by being active on Google+ and other social media portals is looking at high hopes and a dim future. You can tweak technology as much as you want, there is no 100% formula and prediction possibility that merely working for better rankings will actually work. While you should be active on social media and be publishing quality articles you need to have a sound business model that gets clients also through other streams of media and even offline marketing.
If your operations are successful offline these might in turn workout for you in achieving a brand that is known, and the search giants will want to feature your brand. This is why the focus on brand building is so important!
I believe that to many online agencies are depending on rankings and they are the ones that will be swept out first.
Having collaborations with some travel agencies and tour operators abroad might be one thing to focus on. But even some of these are very dependent on the web. If you can work with a known brand even better.
Turn into a brand! Use all means of marketing to get known. Also meet people out there. Go on events, go on tourism fairs etc.
But now let’s be realistic, a small villa rental agency will at times not really have the budget to spend to do such huge marketing efforts. On top its getting more and more tough for agencies to acquire availabilities to sell!
To survive is what many businesses go through during their first 5 years, some survive and grow, others have to pack up. That’s how it is.
How do I see the future of the holiday home rental industry in Mauritius?
Personally, I believe the times are just going to get tougher and tougher for small agencies and tour operators to survive. If you are running the agency from your living room and getting a few bookings per month and you are fine with that then good. If you have ways of maintaining this in a stable form maybe it will keep on running for a while but nothing is constant. Times and Markets change and your business model might reach its end of lifetime circle at some point.
For established agencies they will face an availability issue since the market is very competitive. When demand is higher than supply, prices go up and not everyone gets a share of the cake. There are too many small agencies out there proposing the same beach villas and apartments. On top property managers are working with tons of agencies and tour operators abroad. This means most of the products you propose are not unique and you are competing with bigger brands who can sell on very low margins. And you cannot win the price battle. As a small agency you cannot make packages with flights included, there you also loose. The management of availabilities remains an issue when it comes to beach villas and luxury apartments.
Getting found in search issue
Many agencies will simply lose their rankings in google and disappear in nirvana. Those agencies will also have to close doors and kiss good bye their business.
Agencies compete with their very own suppliers issue
While beach villa owners and property managers might be collaborating with you as an agency, they also sell directly to clients. Some clients feel better off booking directly with the supplier than through a middleman. You might end up doing all the counselling and advice work and the client then moves on to book direct bypassing you. Many property owners also advertise their properties on lots of portals which are big brands. You will have difficulties facing them or competing against them.
Dog eat dog attitude of landlords and property managers
On top that I mentioned that many landlords and property managers sell directly, many of these do not respect their engagement or contract towards reseller agents once the client that came through the agent first contacts them or is in their property. There is a true and common dog eat dog attitude when it comes of getting money.
Lack of loyalty from landlords and property managers
There is also a loyalty issue with agencies clients and property manager or landlords. Once a client arrives on the property, property managers and landlords tend to target them with their own advertising. Worse yet, if your client came through you as an agent but also gets in contact with the owner or property manager there are situations where they do know that you got the request but offer your very same potential client requesting a better deal!
Landlords and Property Managers not respecting their public price policy
It also occurs that landlords and property managers often resell cheaper to direct requests than sticking to their arranged policies put in practice in the first place to also make the business more ethical for their agent partners who do the work of marketing and counselling the clients of their offers!
How should the industry be regulated?
The market seems to be regulating itself. The strong ones survive. The small ones, most of them will fade away. A few will stay for a while but for how long…
There is a competition commission in Mauritius that just started operating recently. It will require definition of various issues if they are the right commission to jump in for fixing certain issues.
Will agencies and tour operators fade away?
Yes, they will!
How do you see the future of this industry?
There will be a few major players online that will list rental properties.
Smaller agencies might get integrated in some bigger portals to showcase their offers.
Price comparison portals that sell offers of various tour operators.
Owned websites of agents might have great difficulty in acquiring new clients through search engines.
This is just a small wrap up conclusion that can be extended but the general overview is mentioned in the whole article itself which are also details from which you can derive other conclusions as well. While I personally have a more pessimistic view for the future of small holiday rental agencies you are most welcome to join the discussion and add in other variants of this industry.