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How Frankenstein can affect your business

It has been a very quick growth, our market has experimented an impressive growth during last decade, we could easily say that the market has experimented the biggest growth on its own history. 

Guess why? 

First of all to the great contribution of Platforms as HomeAway, Airbnb, Tripadvisor, Booking.com The last one has clearly aligned their strategy and have bet on the Vacation Rental sector, and the enormous amount of public who has chosen the way to spend their free time and holidays. The hospitality sector has evolved and changed too much and too quickly. 

Secondly, because the technology developed by IT companies has also made it easier to manage an important number of units and easier to keep control of the whole business activity converting it into a sustainable and profitable business. (If you look back at the size of Vacation Rental Companies and you look at them now, you´ll realize that technology has lots to do with their new circumstances).

I would concentrate in 2 visions and compare them, the most present in the European market and the most dominant model in the American market, both markets have grown simultaneously but at a different speed and with different conditions.

My position as Vice President of one of the few (only) European companies to move to the US market to try to present its products and services may not be very objective (I promise I will try anyways), but the truth will come out of the data that now we get to know, specially in terms of cost and efficiency.

The US market has grown pretty fast, with lots of startups pushing hard in micro services and specialized in only parts of our Business. Some examples are the Check in App, the Cleaning App, Channel Managers, Revenue Management Companies, Data, yield management. This model is known as the Marketplace, where you can obtain as many implemented solutions to create your own tool.

The European Market, (more traditional, but also more stable) model is the other way around, European companies, most of them older than any startup in the US market, Avantio may be an example with 18 years of experience in the sector and with a product developed and evolved during the years, that is based in the real and true All in One (backend) solution that is based on having all the same services integrated in the same Database, this makes things simpler and easier to manage.

These 2 models are today on top of the table and the comparison may give us a clue where the Technology sector will move on in the very immediate years.

The Marketplace model is showing a lot of contradictory reactions from Professional Property Managers, most of them realize that yes, you can have the dream solution but, what about the cost? And what about the evolution of those integrations? What will happen with the API synchronizations? Is it working perfectly?

So we have in our hands what we at  Avantio call the Frankenstein solution, a living body that breaths and works, but results inefficient, clumsy and sometimes time consuming to repair errors, when not talking about the cost of some overbookings or relocation of your customers.

And on the other hand, the All in One Solution where all is integrated in the same system and uses the same data.  

Native compatibility may be the word to use here. When you use the same DB, you don’t need to synchronize API´s, you don’t risk using old data and any query or order to the Database, is “for sure” real live.

Assuming that you can’t have everything at the same time, the weak point of this option may be that you will not have access to all functionalities that the sector may be offering at the moment, but do you really need them all?

Only few apps and solutions are really giving value to the core business, if they are truly well integrated, they will work, but simple API connections and several backends is the wrong strategy I am sorry to say.  

I have been in contact during the past 2 years with many professional property managers in the US, Caribbean and South America. I have learned so much from the US market that now I feel comfortable to speak about the problem and perhaps suggest one solution.

In my experience and opinion there are 3 basic tools you need to have to manage your business correctly.

  1. One Powerful PMS that responds to your business needs in terms of payments, accountant and management of the Booking. This PMS should also be able to automate as much process as possible, including communication with customers, property owners, customers etc.
  2. One complete and advanced Channel Manager, a tool that will allow you to spread your properties instantly to all OTA´s where you need to be visible. But not only spread and publish your listings, also take care of the ranking and visibility inside those OTA´s, achieve a high level of compatibility and flexible enough to allow you to make your own business rules and policies independently of which platform you are working with. 
  3. One Website that will allow to promote your business, rent your properties online, be as much independent as possible, it has to be multilingual and multicurrency and with an intranet to allow your providers, owners and customers to interact with you without taking so many resources and time.

Besides that, any functionality added is a gift, with more tools you will have a better result, but only if they are designed to automate protocols or process, because if they are time and resources consuming, they are not sustainable and they will not let you grow.

Since I moved to the US, obviously I find more and more property managers stoked on their Marketplace Model (Frankenstein) asking for help and trying to find an efficient solution. They want it, but from the perspective of creating their own Frankenstein, and this is simply not possible, at least not with the core business pillars (main needs to manage the business).

With the all-in-one solution it is possible to integrate different solutions, specially if they are truly integrated, I mean that to have access to the services you don’t have to login into another software. (You will not believe how many people I see with 10 tags open at the same time on their browsers, each one for a different function).

European and American Tech companies have evolved differently, especially now that some governments have started making local regulation and legislation, transforming the market and obviously forcing a technology change too.

Avantio has spent this year more than 40% of their own tech resources only to be able to comply with Italian, Portuguese, French, Spanish, Colombian, German and US legislations, including some legal differences from different US States like Florida or North Carolina.

At the same time, OTA´S, mainly Expedia, VRBO, Airbnb and Booking.com are reinventing and evolving their platforms to give all power to the final customers, adapting new API´S connections, new technologies, new business rules and options.

It has been hard for Avantio to keep the rhythm, but it has been easier in respect to other competitors that due to their Marketplace model, their evolutions not only depended on them, but also on their partners and at this level, you see and understand why historical PMS in the US are almost gone, disappear or bought by some capital venture companies, trying to make Frankenstein even Bigger.

How far can Frankenstein keep on going? The market will regulate it I believe. PM´s can´t afford to pay 15 % of their revenue in technology and payment platforms to obtain only a 10-15% revenue, and prices can´t increase as much as the technology that PM´s are adding.

The future of the sector will (yes or yes) depends on the technology we choose to develop our markets and for this reason, I am writing this article.   

It is important to educate and provide the best technology and services to the market not only thinking on a self-benefit but also the options that we are open or closing.

We feel that there is a strong technological burnout today in many Property management companies trying to compete against their competitors, and at the same time trying to run away from trouble and time consuming of their respective technologies. 

One Problem, one solution

Run Away from Frankenstein now that you still can, the solution will be to evolve the technology and simplify the process and protocols we use on our daily business, making the market more sustainable and affordable for Property Managers, OTA´s and Tourists.

José Vázquez
Vice President of Avantio

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