The mainstreaming of vacation rentals, regional consolidation, regulation and technology-driven operational efficiency were themes at the closing session of the annual Vacation Rental Managers Association conference.
Panelists from TripAdvisor (which owns FlipKey), Airbnb, HomeAway and Booking.com spoke on the theme of "The Next 30 Years."
They framed their discussion amidst the changing demographics of people using vacation rentals, specifically, the shift towards more Millennials renting short-term in urban areas.
The definition of “vacation rental industry” is at its core challenged, because the rise in urban room rentals expands the geography of the industry from its traditional beach and mountainside locations.
Mainstreaming, or the continued category growth of vacation rentals
One of the most intriguing topics was whether or not there is a category growth opportunity in vacation rentals. Moderator Andrew McConnell, CEO of Rented, asked the panelists if they believe, due to new entrants like Airbnb, that the industry is seeing new customers in the category.
Is the pie growing, or is the industry nearing peak penetration as far as supply of inventory and demand for rentals? Is the invigorated interest driven by major players like Airbnb opening up new markets and travelers?
The consensus is a resounding yes for growth. Airbnb’s David Burden sees a stickiness being created within the emerging community of first-time renters, especially as many of those visiting urban destinations “would not have been able to afford travel to begin with." He says:

"Creating that stickiness within that community opens up travelers to new destinations and experiences. There’s plenty of room to grow the pie.”
In fact, Burden quoted an Airbnb internal study that found that 47% of people aren’t even aware that vacation rentals are an accommodation type.
Booking.com’s Angel Llull mentioned a total of 50 million room nights booked across 800,000 vacation rental properties last year, leaving a healthy room for demand growth -- as that figure is only a small chunk of the 300+ million room nights booked during the year.
HomeAway’s Bill Furlong also sees a significant growth opportunity, if inventory matches demand:

“It’s either you draw more people that currently stay in hotels to vacation rentals, or you get a higher share of wallet from people who do take vacation rental stays but most of the time stay in a hotel. That’s the category growth opportunity, and it’s important for us to push out vacation rental inventory to where travelers are booking their travel.“
Furlong also pointed out that the industry, as a whole, receives better ratings than the hotel industry — yet faces a serious challenge of getting certain travelers comfortable with renting a vacation home. This creates plenty of opportunities to grow the category over the next 30 years, such as cross-selling vacation rentals over hotels to larger groups.
Regional – not global – consolidation
The on-stage panelists were also in agreement that there wasn’t likely to be any global consolidation in the space, especially given the fact that there has been little consolidation in larger markets like North America.
The nature of vacation rentals is also a different dynamic given the fact that homeowners have competing interests as far as profitability, protecting the asset and the desire to use the asset periodically. As Homeaway’s Furlong emphasizes:

“There are economies of scale but they are usually local economies of scale. I’m not sure yet if there are national economies of scale.”
Regional consolidation will continue -- as we’ve seen with HomeAway's investment in CanadaStays, HemenKiralik/Flat4Day, and other localized vacation rental sites -- given the local expertise that makes those geographically specific products successfully.
In addition, there’s still quite a bit of churn when it comes to startups and services being created around the vacation rental industry, creating horizontal opportunities for consolidation. “If there is a marketplace that still has space to grow a lot,” says Booking.com’s Lllull, “and to innovate, it’s in vacation rentals. I don’t necessarily [yet] foresee a huge consolidation."
Technology-driven operational efficiencies
Making it easier to rent was one of the most important changes in the coming years, according to Airbnb. The goal of all the platforms is to make the most money as possible for renters/owners while ensuring high satisfaction among guests.
To do this, there are dozens of products and services to drive down the effort it takes to manage a rental: on-demand cleaning services, welcoming concierges, professional managers, automated locking and entry locks, security systems, revenue management software and vacation rental management software.
There are dozens of products and services now competing to drive more profitable operations for rental owners and managers.
Another core operational efficiency is the prevalence of instant booking. For the demand to really ramp up, booking needs to be efficient for both the guest and the rental manager. Enabling instant booking across the widest swatch of inventory increases both profitability and satisfaction. Says Burden from Airbnb:

“Everything on your site has to be instantly bookable. And that’s where companies like HomeAway and are moving.”
However, one interesting comment from Airbnb came when a question was asked if the company would consider becoming an OTA platform of sorts for independent hoteliers as a demand-side generation tool. Airbnb’s Burden seemed receptive, but without any near-term plans:

“No real plans to move into the hotel and B&B space, at least until we have developed a product that is amazing for vacation rental managers.”
The “rising tide of rental regulations”
The final major trend unfolding in the industry is the most obvious one: regulation. Especially given the difference in approach between Airbnb and HomeAway, where HomeAway is pursuing more relaxed regulation that will allow second home owners to rent out their homes legally and Airbnb settling for legislation that focuses on renting rooms in owner-present homes.
This fight is ongoing, and will certainly stretch into the decade ahead, as each municipality develops its own approach to the short-term rental issue. The two most dominant players will continue their respective approaches, with the OTAs benefiting from the increase in inventory as more vacation rentals are made legally compliant and brought online.
Regardless of the law, this industry continues its relentless march forward and shows no signs of stopping. The VRMA had a record number of attendees – marking a nearly 30% increase over the record set prior – making for a compelling future to unfold over the next 30 years.
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NB: Images of Paris vacation rentals via booking site Paris Sharing/Flickr/Creative Commons.