Referrals are a common way for businesses to grow, and rent-by-owners (RBOs) aren’t any different; you likely already know that word-of-mouth marketing from happy guests can be one of your most powerful assets.

But what about referrals from other businesses — and other vacation rental owners in particular. Is it weird to get referrals from your competitors, or is it a potential source for new bookings that you’ve overlooked?

How referrals work

We make referrals almost daily, whether we’re pointing guests to favorite restaurants, unique boutiques or a local taxi company. In general, we make referrals to help other people get the information or service they’re looking for.

But referrals can also be part of a more formal arrangement, whether through networking organizations like your local chamber of commerce or using vacation rental-specific networks. Some networks offer incentives for referrals; for example, Matt Landau shared the idea of the Vacation Rental Referral Pledge, which encourages a 10 percent commission. Other businesses might offer a fixed cash incentive or other type of reward.

Why referrals can help build your business

Building positive relationships with RBOs in your area can be a smart move, whether you’re interested in referrals or not. Who knows the challenges of running a vacation rental in your area better than other owners? “Ask them their experiences, how booked they get,” suggested owner Pat Luftman in an interview with MyVR, whose local network also sends referrals to each other.

I think building a vacation rental coalition can be an effective part of your overall marketing strategy, and it’s one of the best ways to deal with what can otherwise be frustrating situations:

  • Large groups looking for additional accommodation (i.e. weddings, family reunions)
  • People who want to book your property for dates that are already taken
  • Inquiries that may not be a good fit (i.e. people who want to bring the family dog to your pet-free property)

Sending guests to a property across town costs you nothing; whatever the reason, this inquiry isn’t a good fit. But saving them the hassle of starting their search over again builds goodwill and could turn into a booking or referral in the future.

When you’re on the receiving end of a solid referral, you’re helping a fellow owner out of a jam while benefiting from a new booking. And, however they find you initially, a happy traveler can always lead to more business down the road.

Things to watch out for

Referrals work because people trust the source; a business owner won’t risk their reputation by sending a new customer to someone who can’t deliver.

That means two things within a referral network:

  • Your property and customer service must be top notch or the referrals will quickly dry up.
  • You need to be confident that the properties you refer people to have the same high standards you follow, or your own reputation will take a hit.

Incentives can be effective and having them in place — and detailed in a written agreement — can help avoid strife. Referral agreements work without incentives, too, but it can be frustrating if you consistently make referrals and get none in return. If you get a referral fee or other incentive, however, you’ll always receive a benefit.

MyVR has a referral tool that lets owners share leads with each other and, if you refer a traveler to someone else, you can track whether it converts into a booking.

Whether you pass referrals back and forth as part of being a good neighbor, or turn referrals into a whole new revenue stream, is entirely up to you. But it’s something I think every owner should consider adding to their business-building strategy.

What works and what doesn’t when it comes to sharing referrals with other RBOs? Share your advice in the comments section below!