Now that year-long negotiations with the Vacation Rental Managers Association have collapsed, Pegasus Solutions says it is continuing to develop a vacation rental switch and will bring it to market on its own.
"We are not stopping on the switch," says Connie Rheams, senior vice president of global strategic sales at Pegasus Solutions.
There had been high hopes among some in the vacation rental industry that a vacation rental switch developed by Pegasus at the behest of the VRMA, with its 600 property management company and associate members in North American, Mexico and the Caribbean, would do much to bring professionally managed vacation rentals online and distribute them widely via online travel agencies and other intermediaries.
A vacation rental switch might also serve to give owners and managers of professionally managed properties some distribution leverage against the seeming runaway train that is HomeAway, which simultaneously is trying to boost its own portfolio of professionally managed properties.
With the VRMA announcing last week that it is replacing Pegasus and seeking a new vendor to develop a vacation rental switch, Pegasus Solutions issued the following statement:
Pegasus believes in the opportunity and the need to create an online marketplace for vacation rentals. This is what both consumers and owners want. We are going to do this and it’s unfortunate we could not come to terms with VRMA after a year of discussions. VRMA has a great opportunity as an association to make this happen for their membership. The standards for creating an online merchandising platform were largely agreed to but the commercial side proved difficult.
It is our hope VRMA will see that we have embraced the standards that we all agree are good for this new online marketplace and endorse the solution to the members. Rather than focusing on collective bargaining for commercial terms, VRMA can play a key role in driving the industry standards by providing a consolidated voice for their membership as other travel industry associations have done. We know the professional managers need this solution and we will deliver it.
So, what do those references to "standards" and "collective bargaining for commercial terms" mean?
In separate interviews with Alex Risser, VRMA president, and Rheams of Pegasus Solutions, the two discussed some of the key issues and gaps in the negotiations.
One Contract or Many?
Risser and Rheams indicated that the VRMA sought to represent its vacation-rental-owner members and associates through one contract with Pegasus, which sought to have independent contacts with individual members.
Risser says the issue was one of control, with the VRMA not wishing to get into a situation where it might one day end up "standing on the sidelines."
"We wanted to make sure, in controlling the switch, that we had the clout," Risser says.
As with the Pegasus switch for the hotel industry, Rheams explains that if Pegasus provides a service to a company, it needs a contract with that company. Rheams says the VRMA may have downplayed the challenge if it had to assume the financial liabilities of all its members using the switch.
"I think the scope may have been bigger than a typical association might bite off," Rheams says.
Risser says the two sides couldn't agree on required transaction volumes. "We didn't have an experience base to set them," Risser says.
And the VRMA feared that failure to meet certain threshholds would mean the contract would be cancelled and Pegasus would be able to market the vacation rental switch on its own, with the VRMA "taken out of the formula," Risser says.
Rheams agreed with Risser that there was disagreement about minimum volume levels, which had to be established for the vacation rental switch to gain traction with online travel agencies and other distributors.
Much as the hotel industry did several years ago, the VRMA advocated standards about the way its properties should be marketed. Risser says this meant that intermediaries would have to show that these vacation rentals were professionally managed and displays would also include a VRMA seal of approval.
Rheams says Pegasus could attempt to push intermediaries to display vacation rentals according to these standards, but, at the end of the day, Pegasus Solutions and the vacation rental switch would be "a pipe" -- a supplier of inventory -- and wouldn't be able to enforce the standards.
Risser says the VRMA supported a pricing model with "a minimum barrier of entry to participate."
But, Rheams didn't see fees as a major issue in the collapse of the talks. "The pricing model was not the issue at the end of the day," Rheams says.
So, where do things stand now? What's next?
Rheams says Pegasus Solutions has two project managers dedicated to the vacation rental switch, and the company plans to move ahead on its own, using its existing sales force, to take the switch to market.
Whether Pegasus can do so without the VRMA and what allies Pegasus may find, remains to be seen.
Interestingly, Rheams says the switch can be marketed to professionally managed properties and to vacation rentals by owner, as well, giving the switch more potential.
Some people have argued that is doubtful that Pegasus would have done much work on the switch without first coming to an agreement with the VRMA, especially because Pegasus was footing all of the development costs.
But, Rheams was having none of that.
"We are well on our way in terms of delivering this product," Rheams says, adding that Pegasus performed due diligence with OTAs and others. "There is a tremendous amount of work that has been done to ensure we are delivering a relevant product."
Rheams adds: "We would definitely still welcome a deal with VRMA as long as it's a deal we think makes sense."
Meanwhile, Risser said last week that the VRMA had viewed Pegasus as "an excellent option," although the two parties couldn't come to terms.
The VRMA has put out a Request for Letter of Interest [pdf] and hopes to announce a new developer of its vacation rental switch at its October conference in Orlando.
Risser says 6-8 companies had responded a year ago to the initial RFLOI and that two companies have expressed interest now that a new request has been issued.
Asked whether the VRMA now finds itself starting the switch project from scratch, Risser says the association has learned a lot and has a "clear understanding" of the technology.
"We are much farther along than back on day one," Risser says.
And, Risser says he doesn't rule out new discussions with Pegasus.
"We admire and respect them," Risser says. "There are no burned bridges."