As competition heats up for supply, vacation rental managers are investing heavily in homeowner acquisition. Throughout the industry, our mantra is “This industry is all about relationships.” However, when building strategies to add new homes to their inventory, property managers often target the home instead of the homeowner. For example, companies might set goals to acquire homes with private pools, homes in certain subdivisions, or condos in specific complexes or buildings.
Yet a successful business relationship between the homeowner and management company is determined by much more than property specifications or location. When crafting an inventory acquisition strategy, a better place to start might be evaluating relationships with existing clients.
The logic behind examining current relationships before executing a costly homeowner acquisition plan is simple: the best predictor of future success is relevant past success.
Each company has something it does better than its competitors. It could be its high-touch service, powerful marketing, in-market brand recognition, property care, financial management, transparent communications, revenue optimization, flexible contracts, personable relationships with staff, or some combination of these.
The truth is that property managers may not know why homeowners choose to contract with them. By measuring satisfaction among homeowners already in their rental program, managers can better identify and articulate their unique selling proposition (USP) and target the homeowners who are most likely to be successful in their specific property management program.
Why did homeowners in the rental program decide to rent out their vacation home in the first place? And then, why did they choose one management company over another? The obvious reason for renting is money. However, revenue expectations vary widely among homeowners, so grouping these homeowners by their primary objectives is a good starting point.
Example: Second-Home Owners
Many homeowners purchased their vacation property as a second home or a place to retire later in life. They chose to rent out the home to make money while not using it, but the preservation and enjoyment of the home are their primary motivations. For these homeowners, making sure every vacant night is filled using aggressive revenue management techniques doesn’t align with their objective of having a nice, well-maintained home their family can enjoy because a continuous stream of back-to-back reservations causes damage and increases wear and tear on the home. In addition, selling at low rates to book every vacant night brings in a different type of guest who is less likely to care for the home.
For second-home owners, having repeat guests who treat the home as their own is valuable, and they place a premium on property care, maintenance, and guest management.
Investors purchase vacation homes with the objectives of short-term revenue optimization from rentals and long-term appreciation from the property as a real estate asset. For these owners, annual rental income and market appreciation are the drivers, and they’re attracted to companies that provide professional marketing, revenue management, and financial management.
In contrast to second-home owners, investors would like to see every night on the calendar generating income, and they put a premium on professional marketing and revenue management. For investors, a professional asset-management approach, which includes financial projections, cost-benefit analyses, and detailed reporting, is appealing. In addition, investors are attracted to property managers who provide standardized kitchen packages and linens and have operations and technology that lower the cost of maintaining the investment property.
A homeowner’s priorities often change during their time in a rental program. A death in the family, health issues, loss of job, or any change in their financial position will shift their objectives.
For example, an owner who purchased a vacation home with the primary goal of optimizing revenue may find—with the increase of damage and wear and tear on the property—that they are now interested in a company that more closely manages guest activity. Or the homeowner who puts the property on a rental program to cover a few costs may find themselves in a different financial position and now needs to maximize revenue.
The important thing is to not make assumptions. An annual assessment of each homeowner’s objectives provides insight into why that homeowner is choosing to remain in the rental program and gives the company an opportunity to manage a new set of expectations.
Finding Common Attributes
Beyond defining homeowner objectives, property managers should understand why homeowners chose them in the first place, what homeowners value about the rental program, and what they would like to see improve.
By evaluating homeowner satisfaction, property managers can go beyond homeowners’ objectives and find out what aspects of the rental program are most valuable to its clients. Although revenue matters to homeowners, other factors do as well, including property care, guest management, communications, and service.
During the process of assessing objectives and discussing how satisfied clients are with elements of the rental program, it doesn’t take long before managers begin to identify common attributes among their most satisfied homeowners. They can then articulate what a “good” client looks like.
In addition, they will discover commonalities in what sets their company apart in the eyes of their most valuable clients, giving them the information they need to clearly identify their competitive differentiators and build their USP.
Now, instead of targeting homes, the company can target the homeowners who are most likely to be successful in their rental program with messaging and marketing strategies that appeal directly to their priorities and personas.
In the competition for supply, large, multi-destination vacation rental companies are pouring money into aggressive marketing to homeowners. However, they make broad assumptions about owners’ objectives and values, and we see the same messaging from these companies being sent to homeowners around the country, whether the properties are in the mountains of Colorado or on the beaches of the Carolinas. They target the masses and are not interested in homeowners’ individual values and goals.
However, when measuring homeowner satisfaction, independent, local vacation rental management companies have an advantage over these large multi-destination companies because a local company has a more direct relationship with the homeowner client. A large company must rely on static survey-oriented metrics like Net Promoter Score (NPS) to gauge satisfaction. They simply don’t have the ability to process and communicate subjective information to decision-makers.
Although NPS is important, local management companies are able to dive deeper and gain more meaningful insight through annual satisfaction reviews with each homeowner, giving them a better idea of what drives the homeowners in their market and in their program. They are able to pull this information together and communicate it to the company’s leadership and marketing team.
Besides creating a foundation for inventory acquisition, taking a deep dive into homeowner satisfaction spotlights company and team strengths, reveals areas for improvement, and helps in client retention.
Relationship-based growth builds a stronger—and happier—company for years to come. Before embarking on costly inventory acquisition initiatives, property managers will find it beneficial to remember once again that “in our industry, it’s all about relationships.” By identifying common attributes among its current homeowners—in their objectives and what they value about the company—managers can identify their USP and create a marketing plan that attracts homeowners that are most likely to be successful in their rental program.