NewsStartup pitch: Vacation Futures creates the wholesale vacation rental marketplaceThis article was originally published onBy Nick Vivion | January 13, 2014 [video_popup width="805" height="454" video_link="http://vimeo.com/83777280" video_image_link="https://www.tnooz.com/wp-content/uploads/2014/01/shutterstock_137269382-e1389629735370.jpg"]Vacation Futures is a travel startup looking to open a specific part of the vacation rental market: the wholesale vacation rental marketplace.This allows the sale of available weeks by property owners directly to property managers, rather than having to deal with each individual renter.Basically, property owners remove the risk of not renting out their homes by selling blocks of weeks to property managers via the VacationFutures marketplace.The home owner gets guaranteed income, and the ambitious property manager can bid more competitively on building their book of business.This creates a new marketplace with its own dynamics, thus the "futures" in the startup's name, and will allow savvy property managers to develop a portfolio of properties that might actually allow them to make more money than on commissions.By identifying "distressed inventory," or properties that owners are looking to take less money in exchange for upfront cash, property managers can make even more than they would otherwise.The three person team is comprised of co-founder/CEO Andrew McConnell, co-founder/Head of Sales Mickey Kropf and Lead Software Developer Pierre Lebrun.The team created the following Vine, and shared more about their new company in the Tnooz Q&A below.Tell us how you founded the company, why and what made you decide to jump in and create the business.I was having lunch with some family friends who started discussing their vacation homes. They both used VRBO, and thought it was great because they didn’t have to pay any commissions to property managers.The more they talked about what managing the homes themselves actually meant, the more they started complaining about the time commitment. Both of these guys are professionals – one is a physician, the other a dentist.I asked them how much their time was worth per hour, and it was a lot. I then asked how much time they spent managing their properties, and again it was a lot. And then I asked if they thought they were as good as managing the homes as those professionals they fired, and they said no.I was baffled, so I asked them, “Why wouldn’t you just sell all of your weeks to those professionals? That way you would know what you are making, and you wouldn’t waste so much of your own time.” They both said, “Well yeah, if there was a way to do that, of course we would."I called my co-founder, Mickey, later that day to run the idea by him. We have known each other since college, and after he finished playing professional baseball he has always been in the real estate space.Together we investigated it more, saw there was nothing like it, kept hearing from homeowners and property managers that they wanted it, and got a better idea of just how big this industry was, and so VacationFutures was born.Please share your funding arrangements.We participated in The Startup Factory’s (previously Triangle Startup Factory) Spring 2013 class, and with that came our initial outside investment. After that program, we closed our Series Seed round in September this year, all raised from individual Angel investors.What is your estimation of market size?The number most frequently cited is the $85 billion that HomeAway used in its public filing for the US and Western Europe. Of this, not everyone is a good candidate for our marketplace.Some homeowners prefer to micromanage their homes because they really need that sense of security that they personally know each and every guest. That being said, two-thirds of homeowners say they prefer our option to the others out there and end up listing with us, so I would say our addressable market is closer to $56 billion.In addition, it is estimated that at least half of vacation homes are not even rented out today. Certainly many of the people who own these homes are so rich that no amount of money would induce them to rent them to a stranger.Of the rest, however, we think by making the process so easy, and the income guaranteed, we could eventually move them off of the sidelines, and grow the overall rental market.Please describe your competition.The competition mainly comes in the form of alternative ways of renting vacation homes. Namely for homeowners they can try doing it themselves, go with a property manager on the traditional commission basis, or simply not rent it out at all.From speaking and working with hundreds of homeowners, we have found we are the preferred choice for a majority of them.For property managers, the competition comes in the different ways they can acquire new inventory.They do this mostly today through direct sales and marketing, so we are just providing them with a cheaper and quicker way to do what they are already trying to do themselves today.We don’t see the main rental sites (HomeAway, Airbnb, FlipKey) as competitors because we do not compete in the nightly or weekly rental market. All we do is grow the number of properties being rented, so if anything, we are complimentary to them.Revenue model and strategy for profitability?We are entirely free for homeowners. They can list on our site for free, and they keep 100% of any amount bid/offered by a property manager that they accept.We charge a subscription fee to property managers to do deals through us. It is free for a property manager to view properties, to bid on properties, and to go to due diligence on properties.When they close a deal, however, we charge a subscription fee for that day where they can close as many deals as they want during that day.We would like to move to a transaction based model based on a percentage of the deal value, but at present that North Carolina Real Estate Commission will not allow us to do this despite the fact that virtually every vacation rental site in the country does it.What problem does the business solve?For homeowners who wish to earn money from their vacation homes when they are not using them, there are only really two options today.The first is to hire a traditional property manager. These managers almost always charge the homeowner a commission for their services. Meaning the managers make the homeowners take all the risk that a property will or will not rent, but then take a percentage (typically 20-30%) of any revenues earned.The other option is for the homeowners to manage their homes themselves.Doing this, they get to keep 100% of the revenues, but they still take all of the risk that the property will or will not rent, and on top of this they are now responsible for all of the work the manager would have done (on average over 8.5 hours per week according to HomeAway).On the other side, vacation rental managers have gone from having nearly 100% market share 20 years ago (they were the only game in town), to 42% market share today because of the growth of sites like VRBO, FlipKey, and Airbnb (from PhoCusWright research).Also, only 27% of homeowners say they plan on using professional property managers in the future.VacationFutures provides both parties with a better alternative. We allow homeowners to take all of the weeks they are not using their property, and create a single listing with that package of weeks.Through our marketplace, we then have professional property managers who are looking to grow their properties under management who bid against each other to buy that package of weeks.This saves homeowners time and hassle, and also gives them risk-free income from their property. It also allows the best, and most professional property management companies to grow their business.This also leads to a better experience for renters, who can rent from a professionally run company more quickly and easily, and with higher service levels, than most homeowners can provide.How did the initial idea evolve and were there changes/any pivots along the way in the early stages.The initial idea – a wholesale marketplace for vacation rentals – has pretty much held since the very first day.The things that have changed have been exactly how that marketplace should work, including pricing, making bids v. best offers, and what information is most important to property managers in making their offer.Why should people or companies use the business?For homeowners we save you time and hassle, while also obtaining you guaranteed income from your property.For vacation rental managers, we bring inventory to you. The only way to grow your business is to manage more properties, and we can help you do that by providing you with new properties every single week.What is the strategy for raising awareness and the customer/user acquisition (apart from PR)?For property managers we are members of different industry groups, like the Vacation Rental Managers Association (VRMA) that help us build awareness in that community.For homeowners, there is marketing, as well as a lot of direct sales. On top of this, we are in discussions with a few different potential partners, which would give us access and exposure to even more vacation homeowners.Where do you see the company in three years time and what specific challenges do you anticipate having to overcome?In three years time we want to be THE market for these kinds of transactions.For every homeowner who is tired of the hassle of managing their homes themselves, and for every well-run vacation rental management company who is looking to grow, we want to be the online marketplace that enables them to sell/buy blocks of weeks.The main challenge we face is in making these transactions as seamless and frictionless as possible. These are new kinds of transactions for both parties, so we want to make it as simple and easy for them as possible.What is wrong with the travel, tourism and hospitality industry that requires another startup to help it out?The trend in recent years in the vacation rental space has been the growth of properties being rented by owners.This harms the owners because it puts the entire risk burden on them, while also requiring they spend an inordinate amount of time managing the property. This harms property managers because it shrinks their business.And this harms renters because homeowners doing this part time on nights and weekends simply cannot provide the same kind of responsiveness or level of service as a professional doing this as a full time job.We fix this by shifting the risk and management burdens to the party best suited to handle them: the manager. The homeowner walks away better: guaranteed income with no wasted time or hassle. And renters end up with a better experience.Everyone wins.What other technology company would you consider yourselves most closely aligned to in terms of culture and style... and why?From the outside it is hard to know much about another company’s culture or style. I would say we have a similar mission/purpose as a lot of other companies in the vacation rental space.Whether it is HomeAway, Airbnb, or FlipKey, all of us want to ensure people enjoy the best possible rental experience.In some instances this means renting directly from an owner who is super engaged, and can provide the level of service the renter is looking for. In others, it will mean renting through these same channels, but from a professional property manager.We just want to make sure all options are possible.Tnooz view: This is a very specific pain point for a very specific demographic - which, when done right, can be quite profitable for the company creating the marketplace. Vacation Futures has a solid understanding of this specific pain point, and vacation rental owners will most likely be happy to shave a bit off their incomes in return for the peace-of-mind of guaranteed income. Property managers will also like that they will be able to keep 100% of incomes related to the properties they've picked up from Vacation Futures. Savvy property managers with deep insights into a local market will be able to see discrepancies in the marketplace, and pick up "distressed inventory" (ie. property owners that are willing to make a large tradeoff in income to have the guaranteed income) to add to their portfolio. This has basically created a new marketplace dynamic that can be leveraged by both homeowners and managers - a very exciting thing that might not necessarily be the sexiest travel startup around, but promises to develop into a sizable business. By managing to create inventory where there previously was none, the company will reap the rewards.Share this quote NB: Vacation rental images courtesy Shutterstock.