The vacation rental industry, a once sleepy and highly fragmented niche segment of travel, is rapidly being transformed from the “mom and pop” operations epitomized by T-shirts and flip-flops to slick operations drawing the interest of equity firms wearing suits and penny loafers.
With the influx of billions in capital for vacation rental distributors like Airbnb and HomeAway, it is no surprise that the operational and lodging side of vacation rentals is being rapidly transformed. New technology and industry disruption are creating a vacation rental industry divide between the haves and the have nots.
As the North American economy expands and baby boomers retire to sunbelt destinations, the traditional vacation rental inventory is shrinking.
For all the talk of “trips” and “experiences” being fundamental to growth, it is a company like Amazon, partnering with professional property managers, that is most likely to win this category.
Steve Milo - VTrips
As a result, the margins that property managers are able to charge owners to manage their properties on an exclusive basis have also been shrinking.
New competition is appearing in resort markets in the form of companies and platforms that can expand through superior technology capability - in some cases virtually.
Those property managers that can leverage technology on the operational side are finding significant cost savings as they shift from tedious paper contracts to electronic contracts; from office check-in to self-check-in; from scheduling maintenance and cleaners with Excel sheets to using mobile applications to manage the process.
Standardizing communication with guests and owners through Guest and Owners Portals and using applications including guest payment portals streamlines processes, significantly saving time and resources.
Next-gen technology
However, our prediction at VTrips is that the next generation of operational technology for the vacation rental industry will revolutionize vacation rentals/private accommodations.
As properties are outfitted with Wi-Fi-enabled smart controllers, there is the ability to network smart locks, home automation, HVAC control, noise control and even occupancy (through monitoring the number of cell phones in a property).
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The even bigger breakthrough is for smart controllers in the form of Amazon’s Alexa that can allow guests to order, even before their arrival, groceries, rental supplies, tours and excursions and even on-demand programming for televisions. All whilst giving the property manager an affiliate revenue share.
For all the talk of “trips” and “experiences” being fundamental to growth, it is a company like Amazon, partnering with professional property managers and their massive network of suppliers, that is most likely to win this category.
Marketing disruption
The other area of technology disruption is on the marketing side, as vacation rental distributors like HomeAway change their business model from a listing site to a transactional site, and with the vacation rental industry being so fragmented, there is a lack of standardization for configuring inventory. This lack of standardization makes it increasingly more difficult for smaller vacation rental property management companies to remain competitive.
The old straightforward marketing models of paying for a platinum tier of marketing are being replaced by instant booking and quality scores based on constantly changing algorithms. Those algorithms are heavily weighted by conversion - and the conversion is heavily weighted by dynamics that include optimizing content by channel, cancellation policies, deposit policies and dynamic pricing.
The lack of industry standardization even in configuration creates a free-for-all disruption that favors companies with large centralized technology departments and specialized skills that gain synergies based on a large portfolio of properties.
Airbnb: A Look Back and a Look Ahead
The days of the “Jack of all trade, master of none” marketing person in vacation rental companies is over. In their place are marketing teams with specialists in social media, content management, reputation management, email marketing, paid search placement and revenue management.
New, larger centralized companies who have core competencies in these marketing skills have a decided competitive advantage over the smaller firms.
Instead of converting guests over the phone with a local call center, technology is transforming the vacation rental guest booking to an online marketplace where cookies and user paths create a unique dynamic experience aimed at maximizing conversion.
As the vacation rental industry moves forward, consolidation on the lodging side will accelerate as the "mom and pop" companies chose to retire early as a result of the industry disruption and change.
The vacation rental lodging side is in the early stages of a massive transformation. Fasten your seat belts.