When did it all start? 

The first ILS for student housing in the UK was launched in 2000 (1). The listing/advert model proved popular and Accommodation for Students was the only national player in that market until Rightmove joined the party in 2010.

The first student accommodation marketplace launched in 2011 (2), 11 years after Accommodation for Students and 15 years after the travel industry saw the launch of travel marketplace Expedia (3). It’s easy to draw a simple parallel between the travel industry and student accommodation. But to compare booking a night in a hotel and booking 51 weeks of student accommodation overlooks the very fundamentals of the sales process within the student housing industry, namely: 

Technology, whether proprietary or integrated, will only get you so far when big life decisions and expensive purchases are at stake. 

Some marketplaces were born out of the Education Agent industry. The founders of several marketplaces worked for or with Education Agents placing international students into universities around the world. Seeing a gap in the market for helping these students with their accommodation, these marketplaces were founded between 2011 and 2015 working exclusively with the Education Agents from which they were founded. 

These original marketplaces gave PBSA operators unique access to source markets in China and India in particular. They solved the issue of how operators reach growing markets of affluent and mobile students in target locations. 

Marketplace commissions started to become a line item in PBSA budgets across the UK.

However in 2015 everything changed. Those early pioneers transitioned their country-specific services in China or India into global student accommodation marketplaces launching into new markets (US, Europe, Australia), broadening their sources of student bookings through aggressive marketing campaigns in the UK domestic market. 

Some marketplaces grew organically by growing brand awareness and increasing their agent relationships and some took to fundraising from experienced investors and venture capitalists. Between 2015 and 2019 the four major student accommodation marketplaces raised over $135 million between them (4).   

With investment though, comes expectation and in a nascent industry there has been little first-mover advantage. Some marketplaces have struggled under the weight of a heavy investment round and have tried to scale, break into new markets like HMO or direct-to-landlord when consolidation was needed. Some have also tried to 'crack the US' which is a very different PBSA market to the UK or Europe due to the decentralized nature of the industry, size of the properties, geography and student cohort - I could go on. 

I’ll admit that’s very easy to say with the benefit of hindsight and with a more mature market post COVID pandemic. However I can’t help thinking that there has always been a misunderstanding about the very nature of the student accommodation marketplace industry, even from within. 

In my opinion a student accommodation marketplace is a ‘Service Business’. Students are spending anything up to £20k a year to stay in student accommodation so their purchase is very considered. It’s not as transactional as the travel industry. A good tech platform and payment or systems integrations create a smoother booking journey but in my experience those prospective students typically want to speak to someone online, on the phone, on whatsapp, wechat or even in person before they book. 

This is an issue for one reason: The valuation of a tech company is far greater than an agency or service business. 

The student marketplaces who raised significant sums of money achieved head-spinning valuations based on their companies being positioned as tech investments against a backdrop of total international student mobility trends and Gross Booking Value (GBV) which is the total annual rent that the commission is calculated on. This focus on GBV is a misnomer given that the commission (and therefore revenue) for each booking is a small percentage of GBV and varies wildly between cities depending on the level of maturity. 

So how are marketplaces doing in 2021? 

Things can only get better... 

In 2022 we see a buoyant PBSA investment market even after the 'Annus Horribilis' of 2021 (5) (I daren’t say post-COVID yet). This means more beds coming to market and more cities closing the supply/demand imbalance. Simply put, the market is strong but it is getting harder for operators to hit 100% occupancy in certain locations (you can guess which two cities spring to mind). This should open up more opportunities for marketplaces who can help operators fill beds in oversupplied markets.  

If you think operators had it tough during COVID then spare a thought for the marketplaces who rely on international students and only get paid their commission after check-in. I accept that in a nascent industry some first-movers will need significant cash injections to fine tune their value proposition before achieving profitability. It is clear from their published accounts (6), emergency cashflow fundraises and recent changes in ownership that marketplaces have had a rough time in recent years. None were left unscathed with numbers dropping across the board, sweeping redundancies amidst huge uncertainty but some were better prepared for COVID from a financial and strategic standpoint.

There are very few global student accommodation marketplaces that I’m aware of (feel free to correct me with evidence) that are, or have been sustainably profitable without investment. Believe me I've checked and I found two that are profitable without capital injections. This is not a cashflow friendly business or in my opinion, a sustainable one with the current industry model. This is due to: 

• High cost per acquisition (CPA),
• High cost of service operations,
• Cashback incentives.  
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A race to the bottom? 

Some marketplaces are paying out more in cashbacks and incentives to tempt the student away from competitors, than they are receiving in commission from the operators. This can work in a fledgling industry with a first-mover advantage to drive volume combined with significant financial backing. However, given the large number of marketplaces today, this tactic of using vouchers to attract bookings combined with a high CPA through agent partners, google ads or any other channel has precipitated a race to the bottom and brought many to their knees. 

Operators and marketplaces are also bidding on the same keyword sets, driving up the Cost per click (CPC) and there is only one winner there; Google. There is no way to fix this. Marketplaces now dominate most industries where their service provides a useful comparison exercise for the consumer (insurance, travel etc.). So too student housing marketplaces now make up a significant proportion of the digital real estate when searching 'Student Accommodation London' for example. 

But it’s not all bad news. Most marketplaces have shown a good recovery in 2021/2022 booking numbers and by all accounts the vast majority of their international cohort checked-in September just gone which is a marked improvement from the previous year. 

Diversifying service and source

As international student markets have recovered in late 2021 (EU numbers and Brexit aside...), so have most marketplaces. That being said, some marketplaces have used the pandemic as an opportunity to diversify their student source markets or their offering altogether. They have survived but they may look very different in the source of their students and their services. 

More recently I've seen marketplaces building their own property management systems for operators to use. I've always been wary of this but some of the new platforms I've seen are genuine contenders against some of the legacy PMS that operators are still using. Some PMS providers are also using marketplace services to attract bookings and clients to their systems (7).   

One thing that is becoming more common amongst marketplaces is inventory sharing. The larger marketplaces are offering their property inventory to partners (agents, universities, media, other marketplaces) in return for enquiries, bookings or traffic. Usually some for of revenue share agreement will allow the partner to earn a commission from the marketplace, who earn a commission from the PBSA operator. Margins clearly decrease with a revenue-share partnership model but inventory sharing can certainly provide volume for the marketplaces. It does however reduce the control that operators have as to where their properties are shown and by whom unless they have specified this in their contracts. 

We’ve seen a big focus on domestic student bookings from marketplaces who traditionally provide bookings from one source market. I think this marketplace globalisation trend will continue at pace although most Chinese marketplaces have ridden the storm and remain focused primarily on China. 

Marketplaces are seeking new source markets for two reasons:

1. They may have investors who demand to see global scalability.
2. They seek to diversify their student base to mitigate any significant issues with their main source market.
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After the turbulent market of 2021/22 there is no longer exclusivity between operators and marketplaces. This allows for more competition where the marketplaces that deliver the best service to the students and most bookings for the operator will thrive. Gone are the days when a marketplace could dictate exclusivity with an operator over a particular source market. There are far too many in play now to warrant exclusive partnerships and most marketplaces seem to have adjusted their negotiations on this topic. 

Why work with a student accommodation marketplace?

A good marketplace should be an extension of your sales and marketing team. They should help you to book students who might otherwise go elsewhere. It’s competitive out there, more PBSA beds are in the pipeline and operators are increasingly looking for marketplace partnerships to drive bookings and reach new markets. It has taken 10 years but marketplace bookings are mainstream. Some PBSA operators are now taking up to 40% (8) of their total student bookings from marketplaces. I would estimate that on average across the UK, marketplace bookings constitute around 20% of total bookings for operators who don’t have nominations agreements. 

• Marketplaces give operators an opportunity to reach international markets at source. Particularly in India, China and South East Asia. They have unrivalled access and people on the ground in these markets. A good marketplace can break down language and cultural barriers to help a student commit because they understand and can relate to them.  
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• PBSA Operators can consolidate dozens of education agent relationships through one marketplace.
• Marketplace relationships can negate the need for establishing and managing an international office in China or India. 
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• There is a digital arms race and Google is the arms dealer. PBSA Operators are now bidding on each other's brand and property keywords in google (you know who you are). Marketplaces have the scale to achieve top organic rankings on key google search terms. PBSA operators who work with marketplaces benefit by giving students more opportunities to see their brand. 
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• Good marketplaces can integrate into systems and processes so it’s no extra hassle working with a marketplace than your own sales & marketing team. 
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• Commission is set by the operator and market conditions. The more supply in the market or the higher the occupancy targets, the higher the commission will be for the marketplace. This should always be set by the operator although there are some marketplaces who now have minimum commission criteria for certain cities in order to rank high with the operator.  
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Give your properties a competitive advantage in a crowded market. PBSA is a relatively nascent industry, so for a long time student accommodation operators were “shooting fish in a barrel” as a former investor of mine once said. There were so many students and so few beds that there was no need for operators to work with partners to fill those beds and there were so few PBSA buildings that students didn’t need to compare them. Demand far outstripped supply. Whilst some cities (Bristol, Bristol and Bristol) still have too few beds for their students, any operator with beds in Coventry or Sheffield will attest that some markets have matured to the point of saturation. 

How can PBSA operators attract more marketplace bookings?

Let me start by saying that I know not all of these measures are going to be popular. I’m also aware that there is a correct way to sell these ideas and processes into PBSA operators. I’ve tried to consider areas that can generate significant improvements to the relationship between PBSA operator and marketplace that will ultimately result in more bookings for the operator via the marketplace. 

• 1. Monthly reconciliation and invoicing 
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This is priority number one for all marketplaces. Reconciling and paying on a monthly basis for students who have booked and paid deposits or first instalments is the only way to solve the cash flow issue facing all student accommodation marketplaces. It doesn’t need to be overly complicated, just a simple reconciliation which gives a total amount to invoice tracked against each student booking number. The invoices are paid monthly and any cancellations are accounted for in August and September. Two large operators have already moved to this model which is a welcome boost for their partner marketplaces. This model is the reason that some traditional PBSA marketplaces have moved into the HMO market. With HMOs the marketplace will typically retain a percentage of the first month's rent which eases cashflow. 

• 2. PPC bidding on brand and property search terms
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I feel a little dirty for suggesting this but hear me out. I know how it feels when competitors bid on your brand or property keywords on google so why would I suggest you let a partner bid on them? Well, quite simply, because it works and it increases your chances of a booking. Property or brand keywords offer the highest converting traffic to booking figures from any marketing channel for marketplaces. 

“That’s not surprising because the student is already looking to book with that operator” I hear you say. 

That’s true but in peak season operators are bidding against each other's brand terms. It’s dog eat dog in August and September so allowing a partner marketplace to bid on keywords helps your property have more of a chance of being seen (and booked) by a student searching on google. 

I’m aware this is divisive and can cause a disconnect between a marketing department who guard their CPA and a sales team who just want to fill beds at any cost. I know because I’ve mediated that argument between the two departments many times both as an operator and within a marketplace. However if the focus is occupancy at all costs then why not choose a property or two that you want to trial and your marketplaces will jump to it. Just make sure that if you do allow a marketplace to bid on brand or property search terms that they aren’t linking back to a general city page where they could book another property. Students should be clicking through to the relevant property page on the marketplace directly from google.  

• 3. Accept deposit payments
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Allowing your marketplace to take deposits on your behalf can more than double the marketplace conversion rate. I’ve worked hard at each marketplace I’ve worked with to improve conversion rates. PBSA operators don’t have time to sift through hundreds of leads when only 10 convert. In my experience the minimum conversion rate that operators are happy with (in a normal pre-COVID year) is 50% including cancellations (system dependent). Marketplaces should have invested enough in their teams and systems to ensure they can qualify and close their bookings even though we all know students are notoriously flaky. 

Allowing a marketplace to take a deposit payment or Advance Rent Payment (ARP) on your behalf ensures that there is a closing element to the sale and reduces the drop off rate. There is a psychological barrier that is broken down in the sales process when students hand money over. They simply stop looking around, the attrition rate falls dramatically and the conversion rate increases by more than 100% in my experience. 

It is only currently the deposit payment that marketplaces want to take. I’m not aware of any working with PBSA operators who are asking to take the whole payment and I’d be very wary of any that did right now. One day maybe, but not today. 

• 4. Increase commission rates 
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When I was fresh into the industry I remember asking the following question to a panel of marketplace CEOs at a Class of 2020 conference: 

“Your commissions are acceptable right now, but how do we (as operators) know that you won’t keep hiking them every year until they are at Booking.com levels (18%)?”

Cue lots of head-shaking and dismissal of the travel industry comparison. 

“18% is on short stay bookings where the marketing costs are greater and turnover on a daily rather than annual basis.” One of them exclaimed. 

Let me clear a few things up: