Property and guest safety are foundational to delivering five-star guest experiences. The pandemic has made this clearer than ever for operators and their guests.
In a session of Breezeway’s Elevate Operations Conference, hosted virtually March 10-11, Justin Ford, Director of Safety and Certification Programs, Breezeway; Darren Pettyjohn, Co-Founder, Proper Insurance Services; and Mike Bayer, Vacation Rental Formula, discussed the growing emphasis on “quality” and how safety is a major driving factor in the guest experience, insurance and the regulatory landscape.
“We’re seeing claims on things such as handrails, bunkbeds and lighting,” Pettyjohn said. “Vacation rentals are experiencing unprecedented growth – it’s not just Airbnb and beach towns. Commercial liability is now being required in regulations for some jurisdictions.”
Bayer said that “Unlike most hotels that provide consistent spaces, vacation rental homes are unique with their floor plans, ability to meet fire safety codes, etc. Our industry needs to be part of the conversation when it comes to setting safety regulations.
“Hobbyist homeowners who are renting their properties need to take a closer look at their properties. Some did their own construction and maintenance, and work on things like decks and staircases, but was it done to code?
“They need to get ahead of the curve and not be stuck with playing catch-up when it comes to compliance.”
Ford said only some consumers understand where they fit-in on liability.
“Renters are not aware of what they get in terms of coverage once they set foot on your property,” Ford said. “The short-term rental industry has grown so fast that we’re not quite caught up with it yet. Operators need to show and promote to guests how safe their rental homes are. Include it in your marketing. Express to customers: We’re all about this!”
He approximated that 5 percent of jurisdictions are requiring inspections, a number that should increase.
Pettyjohn says he’s seen 114 regulations for the vacation rental industry at the local, state and federal level.
“You need to build coalitions and get to the forefront on the issues,” he said.
“Operators need to meet with public officials to show them what they are and can do to meet safety standards,” Bayer said. “Show them that this is not a ‘cowboy’ industry.”
Ford: Having a working smoke alarm is so important. Consider employing a safety manager for your properties – someone who has dealt with OSHA and who follows product recalls. Recalls are coming out all of the time that people aren’t aware of, such as related to cribs, kayaks, chemicals. Thompson Water Seal was just cited for chemicals that could explode – and a can of it might be sitting in your basement. Too many of my clients have a “it will never happen to me” attitude.
Petty recommended creating checklists for the property and including things like checking that trees, decks and swing-sets are not a hazard.
Stays Group, powered by Fetch My Guest announces the release of the SoutheastStays marketplace. The member driven marketplace is part of the largest cooperative network of independent vacation rental brands working together to drive the book direct initiatives that lead to more direct bookings. The SoutheastStay marketplace will cover Florida, Alabama, Georgia, South Carolina and North Carolina.
“With the rapid changes in the OTA world, now is the time to lay the foundation for becoming less dependent on those platforms. The Stays Group marketplace allows me to drive more direct bookings by leveraging the connections with trusted operators like ourselves.” said Michael James, Owner of Paradise Beach Rentals in Florida.
“What a great way for our members to celebrate the 4th anniversary of #BookDirect Guest Education Day! What started as a vision to connect members of the Northwest Vacation Rental Professionals (NWVRP) to vacation rental travelers based on quality, transparency and trust has grown into a nationwide effort of independent brands realizing strength in numbers. We welcome Michael and Debbie at Paradise Beach to our network and look forward to the continued growth of these well respected independent brands” said Vince Perez, CEO of Fetch My Guest and NWVRP Member.
“Housekeepers really are the frontline workers and the unsung heroes of the vacation rental industry. The company’s brand reputation and the guest’s experience rest on how they perform their jobs. In fact, housekeeper is one of the most critical roles within property management, and ensuring that they are fully equipped to do their jobs safely and well should be a priority.”
– Jeremy Gall, Founder & CEO of Breezeway
With increased focus on contactless check-in, field staff are often the only representatives from a vacation rental company to interact with guests one-on-one.
In a session of Breezeway’s Elevate Operations Conference, hosted virtually March 10-11, Cliff Johnson of Rented and Durk Johnson of Housekeeping Solutions discussed the impact that housekeepers have in delivering on a company’s brand promise and why it’s imperative that they are recognized and ensured they feel valued within an organization during.
For starters, “Make sure your team understands what you are asking of them,” Cliff Johnson said. “Cleaning best practices vary based on whether it’s a hotel, a vacation home, a domestic home or commercial real estate.
“And prepare them for unexpected encounters of customer engagement – such as the time when a team member came into a home and found a guest who had pit bulls still sleeping.”
Durk Johnson said it’s best to train housekeepers in the property “so that they can understand the standards that are set and see the impact that the cleaning makes and the implications of it toward the success of the operations. Teach them about the business so they can understand why cleaning is so important. Teach them about using the right amount of cleaning product and how to use their time efficiently.”
Speaking the Language
Durk Johnson says the communication gap can create challenges with some workers.
“Where appropriate, have your workers carry an ESL card so that if they struggle to communicate with the guests so they can provide a phone number where the guest can get their questions answered,” he said.
Cliff Johnson recognized the respect and stress that these workers command.
“With some housekeepers, they are the core of their families,” he said. “They are proud. They won’t ask for help. They won’t tell you when they are injured or are suffering mental anxieties. They won’t complain.”
Cliff Johnson said it’s important for managers to remind housekeepers that their jobs are not easy, and that they are professionals who are really good at what they do. Show others on the management team how difficult housekeeping can be, he recommends, to create greater appreciation.
Durk Johnson also acknowledged the high stress levels these workers face every day.
“They come to work and have to be worried about MERS, COVID-19, wearing masks and getting the job done right,” he said. “It’s important to emphasize teamwork and give morale support. They know that when anything goes wrong, it’s likely housekeeping that is blamed, so always bring up the good things that are happening. Share a lot more positives than negatives.”
Training: Do a Pie in the Face
Cliff Johnson says that training should be incremental and ongoing.
“Don’t hold any 8-hour training sessions because you’ll lose their attention,” he said. “Have your best housekeepers train the others and teach them tricks on how to do a better job. Relate the training to guest reviews and what needs to be worked on. And put your staff in positions where they are comfortable. If they are good at a certain task, have them do that.”
Durk Johnson said training should be what he called, “edu-tainment.”
“Have fun with it,” he said. “Make sure it’s interactive. It should be quirky and fun so it’s memorable. Each lesson should be 3 to 5 minutes. If you are showing them the difference between goggles and glasses, prove it by taking a pie in the face, for example.
“When retraining, focus on the basics. Look at comment cards from guests to see what types of things need correcting or more effort. If guests are commenting about water marks on silverware, learn how to clean utensils better.
Durk Johnson: Housekeepers are good candidates to move to the front of the house because they have great institutional knowledge about the property based on what they know from cleaning it.”
Cliff Johnson added, “Look to see if any are interested in more work opportunities.”
The pair also debated whether cleaning fees be a profit center. In an informal poll of session attendees, by 57 percent to 43 percent the group said they should.
“It should not be a tack-on fee, because that can cause inefficiencies in the job done, which can lead to burnout,” Cliff Johnson said. “And housekeeping staff should not see that the guest paid $300 for cleaning, but the housekeeper was only paid $100.”
Durk Johnson said operators must balance effectiveness with efficiency. Housekeeping is part of your brand, so they need to be compensated well for what they do.
Few would argue against the statement that a vacation rental operator’s most critical function is handled by the cleaning and maintenance teams. What can be debated is whether it makes more sense to have these duties handled in-house or through contracted services.
Karp’s ratio of maintenance staff and housekeepers varies. A community that has 20 to 100 units will employ a hybrid of the two; while one that has just five or 10 units would get one person who does both.
“We leverage the leasing teams to help with some services,” Karp said. “Our operations and maintenance staff members are aligned with casa’s overall experience and culture. For something like cleaning, that might be a full-day’s work for several people. We contract it out because we wouldn’t want that many staff doing just that over the course of a day.”
Karp says that because he operates in 35 markets, he has to look for service partners that can grow with his company. He’s also looking into trying to redeploy some of his staff to his properties in other markets.
Refosco leans for most everything to be done in-house.
“We’re a long-standing family operated business with 13 managers and 230 employees,” he said. “We’ll contract out for some specialty things such as installing an HVAC system or to build decks, but our staff will service HVACs and repair decks. There’s a community college nearby and our team goes there for training and retraining.”
His employees wear logoed shirts and an ID so that guests know who they are. This avoids any sense that a stranger is working on their vacation rental.
“Our cleaning staff is trained in customer service,” Refosco said. “They probably talk to more of our renters than I do.”
Refosco says it can be challenging to find good workers in his area.
“Most live 20 or 30 or more miles from our property,” Refosco said. “We pay them in piece rates, so we make sure we have plenty of work for them to do to make it worth their trip.”
Taylor-Made Deep Creek is an “away from it all” kind of location, so he’s been doing brisk business throughout the pandemic.
“We are extremely busy and have been for a while,” he said. “We have 450 homes and we’re 98 percent booked. We could have 500 to 800 service orders over a weekend. We’re hiring more staff. We’ve had no layoffs. Our housekeeping staff is getting a bit burned out. We give incentives.”
There are some regulatory fine lines when it comes to how you can manage outsourced firms versus employees.
“With contractors, it’s easier to get rid of them if they are not performing well than it is to fire an employee,” Karp said. “For our contractors, we describe the outcomes we are seeking from our service partners to try to establish standards. Everything is data-driven and based on reviews and scores. We share scores and guest feedback such as subjective comments with our teams and incentivize them based on scores. For training and coaching we use checklists on work to be done.”
“Vacation rental managers have historically taken a reactionary approach to in-stay communication: leave the guest alone and be ready to respond when needed. Today, this is no longer the case, and 68% of managers are differentiating their business by strengthening their guest communication programs. SMS messaging tools are increasingly popular, and empower professionals to resolve in-house issues and deliver deeper client service.”
– Jeremy Gall, Founder & CEO of Breezeway
It’s not often that one solution can combine cost and time savings with ease and convenience for staff and guests. The onset of text communications has been a joy for all concerned during vacation home rental stays.
“Too often our staff either couldn’t take a call or had trouble reaching the guest by phone,” Kubiszyn said. “Texting is much easier and more practical. People are used to it. We don’t have to spend time doing anymore phone logs. Guests love it, they tell, ‘It’s great that you are so available.’ ”
Kubiszyn said text messages are more personal and are customizable, compared to push emails.
“You can use emojis, images and engage in funny conversations,” she said. “I can be texting with four guests separately at once. The volume of communication is way up compared to email and phone, but it’s so much more efficient. I don’t have to take notes; and the text history can be used to prove certain communications such as things related to charge-backs.”
She said her properties don’t always send response-required texts, “but we still get ‘Got it’ and ‘Thanks’ among the responses, so that’s nice.”
Adams said the response rates to his emails might be 25 percent; and text response rates are much higher.
“We can text entrance codes to guests to make it easier for them, and so their first impression of the property goes that much better,” Adams said. “The texting system can be automated, where we might only need to push a few buttons to segment which group will receive it, based on things like check-in, check-out or service order updates. Guests are more likely to respond; they don’t have to wait on hold to speak to a staff member for a simple piece of information.
He also uses a text task tab that helps his team track the progress of service orders.
“This is particularly good when the guest is outside of the home,” he said. “It lets them know when someone is coming, and when the task has been completed. Pre-pandemic, it really wasn’t as big a deal that service orders were done when guests were not home, but now, it provides peace of mind and can avoid a 15-minute call needed to explain and set it all up. And, all the information about the service call is in the workflow (sort of a paper trail) about the visit.”
Adams said there is no ideal number of texts such as X times per day or X times per visit.
“What’s important is that the content includes valuable information for the guest to keep them in the know,” he said.
Driving Feedback
Texting also has led to more feedback being received by the management staff.
“With our automated text outreach, the guests have at least three opportunities to share any concerns or complaints with us,” Adams said. “Before we started using texting, about 10 percent of guests might tell us about a problem they had after they’ve checked out. Now, it’s down to about 1 percent.”
Kubiszyn said texting enables her company to solicit for Google reviews more easily.
“We’ve been in business for 15 years and maybe had seven or eight reviews,” she said. “Getting reviews is difficult. Now we have more than 100. This helps our SEO and is driving more business for us by guests and other owners who want to work with us.”
“Without a doubt, the pandemic has made the job of property managers harder. There’s an increased emphasis, quite rightly, on standards and cleanliness, and many managers have felt the brunt of a heavier workload. Efficient task management and work coordination have become essential, and help operators best manage time, save money, and ensure quality.”
– Jeremy Gall, Founder & CEO of Breezeway
The pandemic led some vacation rental companies to take their cleaning and maintenance game to a higher level – even more so that some would have thought. Simply installing sanitation stations at the entryways was not enough.
Health-conscious guests looked at everything with a closer eye and weren’t bashful about speaking up. Gray estimated that resident service-request demand increased by about three-fold.
“Most requests were related to the kitchen and towels,” Gray said. “The pots and pans in the cabinets were used far less than usual. [Based on their sanitation concerns], if there was a scratch on a ceramic pan, the guest would call to have it replaced. If there were watermarks on the silverware, they were concerned and things would need to be rewashed. If there was a small spill mark on the floor, they would ask us to clean the entire floor.”
He said requests for air fryers like Insta-Pot also were popular.
For service calls, Gray’s team went out of its way to arrive within 30 or 40 minutes for every call, whereas pre-Covid, those trips would usually be handled within a few hours (unless it was an emergency).
Sharp’s team, during vacancies, focused on general repairs and upgrades to things such as furniture. “Everything had to be kept in perfect condition,” Sharp said. “By making sure we achieved this, we didn’t have to return to the vacation home later to fix anything, that way, we limited our time at the properties, and the guests appreciated that [given social distancing considerations].
“If we did have to visit the home, we made sure the guests knew we were coming. Guests asked a lot of questions about when we’d arrive, what we were doing and how long it would take. In a way, this helped us to be more transparent about their entire experience.”
Coming and Going
Sharp said, generally, her properties had longer stays and shorter notices for bookings. Planning for arrival and departure was another keen focus.
“We’d check with guests about when their flights into Salt Lake City were arriving, and that gave us better timing on choosing which homes to turn first, based on arrivals,” she said.
Gray moved his checkout time from 10 a.m. to 9 a.m. to give his staff more time to do laundry and turns. By using a smart access system, it helped his team know when guests checked out. So, if they left early, at 6:30 or so, they could get started on that home right away and not have to wait until 9 a.m.
He said the properties’ bookings generally were shortened from 7-day stays to 3- or 4-day stays. “This created more maintenance and cleaning upkeep work for us, but it made the owners more money,” Gray said. “We had to add an evening crew for laundry so that we’d be able to maintain our turns on time the next morning.”
The heightened emphasis on cleanliness potentially led to employee stress and burnout. Gray said to help boost morale and peace of mind, he emphasized teamwork. “Keeping things to that high of a cleaning standard can be stressful, so we didn’t send just one employee to do the job and feel all that stress on their shoulders, we worked in pairs or more.”
Sharp said she helped maintain positive attitudes among its staff regularly sharing all the positive feedback about service that her company received in guest or online reviews, also posting them in its weekly newsletters.
Wash, Rinse, Repeat
For laundry services, bedding was the primary focus. In the past, owners might have used unique bedding in rooms as a nice touch, but a shift was made to standardized bedding property-wide.
“We washed bedspreads and all sheets daily as an indication that we cared about cleanliness,” Gray said. “As for unifying the bedspreads, we looked into what other operators were doing in our area and it seemed that about 90 percent were doing the same thing.”
Gray said his company intends to keep all of its 2020 cleaning policy changes in 2021, post-Covid, because it benefitted from them in 2020.
As the industry pushes for higher-quality service, guest expectations aren’t the only driving force for operational excellence — state and local regulators are closely examining the impact short-term rentals are having on their communities.
“If you assume someone else is engaged in this discussion, that is a problem,” Krauss said.
Minardi highlighted the opportunity for industrywide engagement and progress coming out of the pandemic.
“Cities, just like our industry, have been put in a very difficult spot,” he said. “Both from a tourism perspective, from a revenue perspective, just from a general health perspective, cities are in a tight spot because of COVID-19. And I think those two factors taken together put us in a unique environment where today we have an opportunity as an industry, as a community, as cities, as states, as a country, to start to leverage this moment to further the conversation around fair and effective policies.
“Those two factors taken together put us in a unique environment where today we have an opportunity as an industry, as a community, as cities, as states, as a country, to start to leverage this moment to further the conversation around fair and effective policies. We’re at a point where we’re starting to see cities open to the idea of discussing fair and effective policies as opposed to banning the industry. You have consumer demand that is driving that discussion forward, and you have an industry now that I think is at the point where we even recognize the importance of putting our best foot forward, being proactive, and engaging in these discussions before they get to a point where they’re vitriolic.
“I think a lot of that is because interests are already aligned to a large extent, or more than they have been historically in cities in the industry. I think a lot of that is centered around the concept of recovery. As I mentioned before, and as we’ve all read a lot by now, cities are looking not just at how they wade through the pandemic, but how they are going to recover after it. I think the vacation rental industry is looking at the same thing. We’ve weathered this storm, we’re on the other side. Vaccines are being deployed in the marketplace. So, I think the interests between cities and the vacation rental industry are more aligned than they ever have been before. I think we need to take advantage of that and leverage that moment.”
“And to [Watts’] point, I think the first step in that process is education. Cities have a lot to learn about the value that the vacation rental industry brings to their communities and has brought to their communities for generations. A lot of that starts with direct one-on-one engagement. So, it’s critically important for cities, city council members, mayors, and their staff to hear directly from individual owners, property managers, and the vendors that you employ – and hear their stories and the value that they’re bringing to the community.
“Conversely, our industry needs to be hearing from elected officials that they’re open to collaboration and engagement. I think when you do that, you start to see more examples of cities like Seattle, cities like San Diego, cities like Louisville, Kentucky, and cities like San Antonio that are starting to get this right.
“Conversely, our industry needs to be hearing from elected officials that they’re open to collaboration and engagement. I think when you do that, you start to see more examples of cities like Seattle, cities like San Diego, cities like Louisville, Kentucky, and cities like San Antonio that are starting to get this right.”
Watts encouraged the industry to build alliances and create messages that demonstrate to city officials that the vacation home rental industry must be taken seriously.
“This goes a long way toward creating fair and effective regulations,” he said. “When a city gets it right, it will see what it has to gain.”
“When you bring up a city’s coffers, is anyone in City Hall really happy?” Watts asked. “They are looking under every couch cushion for revenue. Our industry has good apples and bad apples. The first step for our industry is to educate public officials about the value of vacation rentals and point to the good apples. It’s best to have one-on-one conversations with them, explaining who you are, how the business works and let them know how many you employ.”
Krauss suggested using the data available to drive the message.
“We give cities a revenue boost,” Krauss said. “It used to be that there were 10 to 15 people (non-experts) sitting around and discussing regulations. We belong there because we are the experts.”
Minardi said, “I would imagine most folks [who have joined this webinar today] are the responsible actors in this marketplace. I think, again, it goes back to what are elected officials thinking today. Maybe not too long ago in the past, using your phraseology a lot of elected officials thought the entire industry was just a basket of bad apples. Through our education, through engagement, we’ve helped cities, we’ve elected officials understand that we’re not all bad actors – the majority of folks in our community are the responsible folks that you want operating in your neck of the woods.
“But also getting that direct engagement. Maybe you’re new to a community or you’re a property manager just launching in a new market. I think it’s critical not only to understand the competitive analysis in that community, but to understand the rules and regulations that apply to vacation rentals in that market so you’re not inadvertently obfuscating the law. I think it’s a two-sided paradigm. We need to communicate with elected officials what we’re doing to be responsible, and we also need to understand what the legal requirements in that market are to ensure we’re being good stewards of our industry.”
Breezeway’s Jeremy Gall added, “When you operate to standards, everyone wins: Guests, owners, hosts, property managers, travel platforms. We need to be on the same page and rally around this. We need to be non-controversial and show that we are serious about it.”
“It’s clear that there is still so much room for growth in the vacation rental industry. Demand isn’t the issue, and guests are increasingly looking for what we offer. One challenge for property managers is to acquire more owners, and using repeatable systems to ensure their properties are well maintained goes a long way with acquisition and retention.”
– Jeremy Gall, Founder & CEO of Breezeway
Vacation rentals have been the preferred lodging for those looking to spend time away from home over the past several months. They provide more space, boast fewer crowds and offer access to private amenities.
In this Breezeway Elevate Operations Summit virtual session, ways in which vacation rentals can position themselves against hotels and other property segments – and continue to exceed guest expectations and capture market share – are discussed by Laik LePera of Village Realty, Robin Craigen of Moving Mountains, and Luca Zambello of Jurny as led by moderator Amy Hinote of VRM Intel.
“We all went over the cliff from this pandemic,” Craigen said. “It hit us all at once with not a lot of notice. For us, at Steamboat Springs, we had just checked in 60 groups to go skiing, and then we had to tell them that they couldn’t hit the slopes. You might think of skiing as an individual sport, but really, it brings people together.”
Craigen said that Covid-19 reinforced a lot of things that vacation operators have been providing for a long time. “People want privacy and exclusivity in the places they stay – and don’t want to be surrounded by a bunch of people all the time,” he said.
Zambello said that hotels have been slow to adjust to the pandemic and new conditions. The vacation rental industry is upping its game with more services as it competes with more independent and peer-to-peer platforms such as Airbnb.
“What travelers are looking for is changing,” he said. “They want independent living conditions. They don’t always want to pay for all the service add-ons that hotels might offer. It’s time to prove ourselves and build brand trust. We don’t want to become hotels.”
Hinote said the industry has a lot of momentum going now and it needs to find ways to maintain it in 2021. “This year is going great so far, but for 2022, it could be even harder, because you’ll see the full return of cruise lines and other luxury accommodations,” she said. “Operators have to deliver and win over travelers in 2021.”
Craigen said his company’s operations motto is that it must look at every challenge as an opportunity. “The pandemic has provided one of the greatest opportunities ever,” he said.
Get What You Pay For
Zambello said guests are embracing having more flexibility in what they pay for – and don’t pay for. That’s a business model not aligned with most hotel operations, panelists said, where the room rate includes everything amenity-wise, whether the guest wants it.
“Room service is great, but now there’s Uber restaurant and grocery delivery,” he said. Guests might not want to pay the high prices hotels charge for in-room dining.
“We see that 90 percent of guests don’t want to pay for daily cleaning,” Zambello said. “They’d rather take that money and rent a larger place or stay longer.”
Another part of vacation rental operators’ strategy involves enhanced room cleaning during turns and bringing on more guest services.
“If there’s anything that, in the past, you wondered if you should provide it – even things like extra clean, color-matching pillows – now you should get it,” Craigen said. “It adds to a better guest experience. Our industry has to raise the bar when it comes to accommodations.”
LePere said that “time” is the greatest value-add he can offer guests. “More and more travelers want early check-in times, for example,” he said. “We’ve got to figure out how to get that time back by having homes cleaned so guests can check-in.”
And all panelists expect guests to continue to emphasize cleanliness.
“Our rooms have been cleaner than ever,” Craigen said. “Now, you really have to up your game about what you’ve been doing to deal with the pandemic. Guests didn’t care about this before, but now they are very receptive to it. This is a chance to build trust in owners than ever before.”
LePere said operators should be providing sheets and bedspreads and stylish pictures on the walls, whereby many didn’t in the past.
“It shows that the owner truly cares about the house,” he said. “People complain that bedspreads are always dirty, so we took the step of folding and placing the bedspread at the foot of the bed and people can decide if they want to use it.”
Craigen said, since the pandemic, he’s seen an avalanche in demand for grocery delivery.
“It used to be a sideline business for us, now it’s a business of its own,” he said. “People want to begin their vacations when they arrive. They don’t want the first thing they do to be walking the aisles of a grocery store. They just went through enough to fly to their destination.
Early Season is Busy Season
LePera said the operational standards he has for his properties helped him overcome re-opening challenges last summer because he didn’t have to train or retrain everyone.
“We went from having the two bridges to the Outer Banks shut down to suddenly having them opened just prior to the summer season,” he said. “Instantly, we needed to have about 300 or 400 employees, when at that time, we only had 10. It’s an all-hands-on-deck approach. To my staff, I’d say, “If you can take a call, pick up the phone.” “If you can clean a home, clean a home.”
This year, he said, reservations are showing that Easter (not Memorial Day) will kick off his vacation season. “We’re looking at 16 weeks of solid bookings instead of the usual 12,” he said.
“The ecosystem of ancillary technology enables vacation rental managers to work more efficiently. Short-term rental managers have gravitated away from one-size-fits-all technology and rely on purpose-built point solutions for discrete business functions. This fragmentation enables operators to benefit from deeper functionality, easier internal adoption, and more client value.”
– Jeremy Gall, Founder & CEO of Breezeway
Vacation rental home operators are busy enough. Most wear as many as 10 hats. That might be preferable during the companies’ early stages, but ultimately, the owner’s goal is to get rid of as many hats as possible and hand them off to specialists to take care of those things.
“In vacation rentals, it’s about solving a problem,” Sprenkle said. “Ideally, you want tech to disappear and be something you don’t have to worry about. Guests and operators expect things to be easy. Operators have enough difficult things they have to deal with when managing their homes. For example, we realize that accounting in our industry is hard. There are older solutions out there, but aren’t always the answer.”
Sprenkle offered the example that vacation rental operators are wanting to calculate something similar to REVPAR in the hotel industry, but it’s tough and time-consuming. “There are solutions out there that can make it easier for them to do so,” he said.
Short-term rental managers have quickly gravitated away from one-size-fits-all technology and rely on purpose-built solutions for discrete business functions.
“It’s hard to implement a tech stack,” Landau said. “There’s no ‘one system’ that will accomplish all of what vacation property managers need to do. So, we look to specialists to provide those services we need.”
Goldin said, “A one-size-fits-all system sounds sexy, but once you get one, what you find are the things that the system won’t provide for you. It’s not always having to get the new, shiny tech object out there. You need to determine why you need new tech. Does it help you to reduce your expenses, and perhaps, your head count?”
Sprenkle said, “You can have a core system, but lean on partners to help you get the job done. Let others do what they do best.”
He added another example that while operators use revenue reporting tools and benchmarking and act on those data, they aren’t necessarily focused on how to get those data.
Miller pointed out that technology solutions are available to help management succeed when it comes to key-cutting and temperature control, for example.
“There are not a lot of ‘smart’ home management systems available in this industry, “but if your guests arrive and can’t get in the door, their experience with you starts off as a bad one,” he said. “Smart technology helps with that.”
Asked what software products have the most upside in the next few years, Goldin said to look for artificial intelligence (AI) to help with guest messaging and communications. Sprenkle said improvements in back-end operations has a lot of room to grow and Miller sees a brighter future for revenue management systems.
With increased acquisition activity, at C2G Advisors, we regularly are asked, “What steps can I take to prepare my company to sell?” We’ll unpack this question in a three-part series. Buckle up!
For this first section, let’s focus on revenue growth. Although ancillary revenue streams are extremely important, we will not broach them in this article.
Note: Let me pause and say that it is never too early or late to begin preparing your company for its eventual sale. Although having 36 months of your financials all pointing “up and to the right” is the Holy Grail, that is just not feasible for many companies . . . and that is OK.
Revenue growth is achieved in two ways: inventory growth and revenue growth per inventory. Simple, right? Unfortunately, these are two of the toughest things to achieve if you haven’t yet raised several hundred million dollars.
Inventory Growth
Adding inventory to your portfolio is the best way to achieve revenue growth. This is achieved both organically and inorganically. For most companies, however, organic growth is the only feasible route. This is easier said than done as you and your top five competitors are all vying for the same houses or condos. Fortunately, there are companies whose sole purpose is to assist with organic growth. Vintory is one of those companies.
Pro Tip: Vintory CEO, Brooke Pfautz, said the number-one action a property manager can immediately take to see results is to update their homeowner landing page.
Let’s look at an example:
You add a home that brings in $50,000 per year in gross rents to your company. On average, you will bring 10 percent of that to your bottom line . . . $5,000 per year in profit. The average company sells for a four multiple, so that home not only brings you $5,000 profit every year but also brings you $20,000 when you sell.
Let’s continue: With the assistance of Vintory, you have now grown your company to 100 homes that each do $50,000 per year. That is $5 million in total gross rents. Your profit is 10 percent of that, or $500,000. Now you are ready to retire to the Caribbean, and you sell for $2,000,000. Bravo!
Revenue Growth per Inventory
So you’ve sold your company and retired so that you can sip on Mai Tais and relax on a beach.
What if I told you that you could have sold for more?
While inventory growth is the most important lever, extracting the highest possible revenues from each unit is the next step. This can be achieved by using various yield management strategies to optimize your rates.
If that sounds foreign and confusing, you are not alone. Fortunately, there are fantastic dynamic pricing companies like PriceLabs that work behind the scenes to auto-update your rates, leading to improved revenues. What’s better is that this process is mostly automated, so for all you know, you’d be spending less time adjusting rates and making more money.
Richie Khandewal, cofounder of PriceLabs, said the number-one action a property manager can take to increase RevPAR is to have dynamic minimum-stay requirements. If your minimum-stay restrictions are too high, you could lose out on last-minute demand.
Conversely, if you fill your far-out calendar with short stays, you could lose on longer bookings. Dynamically adjusting your minimum stay length is money.
Let’s take the example from above:
You have grown your company to 100 units, but in this scenario, you are using a company like PriceLabs to help you with your yield management. With its dynamic pricing, your homes now perform 30 percent higher in revenues! So your 100 units are now averaging $65,000/year. Your total gross rents are now at $6,500,000. Ten percent of that, and your profit is $650,000. You sell for a four multiple, and you get $2,600,000. That is an additional $600,000 straight into your pocket. Those Mai Tais are now tasting significantly better!
In the next issue, we will dive into the expense side of the sell-preparation equation.
Oregon-based vacation rental management company, Meredith Lodging, has filed a false advertising and defamation complaint against Vacasa alleging that Vacasa is contacting Meredith’s homeowners with false and misleading information and statements about the company.
The action was filed against Vacasa in US District Court and alleges false advertising under the Lanham Act and “common law defamation per se and trade libel under Oregon state common law.”
According to the complaint, “Frustrated by healthy and fair competition in its home-state from Meredith Lodging’s much smaller, local, and family-owned business, Defendant Vacasa LLC, has embarked on a smear campaign surgically targeted at Meredith Lodging’s homeowner customers, designed to unfairly snuff out that competition.”
The action has a David-vs-Goliath narrative. Meredith Lodging, founded by Jon and Meredith Oksenholt, is a family-owned and locally operated vacation rental management company with 700 units under contract and 200 staff members. By comparison, Vacasa has raised $634 million in funding and is, by far, the largest vacation rental (VR) management company in North America. The company recently announced that it is purchasing another large VR competitor, Turnkey Vacation Rentals ($120 million in funding and 6,000 units). With this acquisition, Vacasa reports that it will manage approximately 30,000 units with over 6,000 employees. With hundreds of millions in funding and over 150 acquisitions under its belt, Vacasa is looking ahead to an IPO, according to multiple sources.
Vacasa’s Alleged Harmful False and Misleading Statements
The lawsuit alleges that the problems started in January of this year. Before that, Meredith Lodging acknowledges that Vacasa has targeted its homeowners with consistent, but not defamatory, marketing campaigns.
However, “Starting in January 2021, Vacasa began a campaign to systematically contact and try to poach business from Homeowners under exclusive contract with Meredith Lodging. In many instances, Vacasa’s representatives have made false or misleading statements about Meredith Lodging to these Homeowners.”
The complaint details specific examples of Vacasa’s employees contacting homeowners in Meredith’s program making false or misleading statements, including:
“Vacasa ‘had heard a lot of complaints about Meredith Lodging and its housekeeping teams.’”
“There were ‘reviews on VRBO for Meredith Lodging stating that there is a lack of cleanliness’ and Meredith Lodging ‘had no manager review for negative reviews,’ all while claiming Vacasa ‘could manage the property better.’”
“Vacasa has had homeowners switch over from Meredith Lodging because of what she called ‘lack of cleanliness.’”
“Vacasa ‘had been talking to a lot of unhappy Meredith Lodging customers.’”
In several cases, Meredith’s homeowners were contacted via unpublished and undisclosed cell phone numbers to which only Meredith employees had access.
“The statements by Vacasa’s representatives that Meredith Lodging suffers from ‘lack of cleanliness’ and has ‘problems with its housekeeping crews’ when considered in conjunction with statements that ‘Vacasa could manage the property better,’ ‘Vacasa had heard a lot of complaints about Meredith Lodging and its housekeeping teams,’ and that ‘a lot of homeowners had switched over to Vacasa because of housekeeping problems’ are all literally false, false by necessary implication, or, at the very least, likely to mislead, confuse, or deceive consumers,” the complaint states.
According to Annie Robertson, Chief Legal Officer for Meredith Lodging, “An orchestrated campaign made using false and misleading statements as part of an advertising effort is unlawful under the federal Lanham Act.”
“We embrace competition and believe it’s important that consumers have choices and options between different companies,” said Robertson. “So it’s not about the competition for us. It’s about cold calling, disturbing people, and intentionally trying to disrupt a business relationship where everyone is satisfied, by falsely planting seeds of doubt. The proof is in the pudding with our homeowners staying loyal to us throughout this ordeal and all of the organic growth that’s recently occurred with homeowners deciding to join us from other companies.”
Deceptive Commercial Speech
The lawsuit points out that the language used during phone solicitations is “commercial speech,” and “based on the similarity of the statements made by Vacasa’s representatives in such a short period of time to the same target audience (homeowners currently under contract with Meredith Lodging), Vacasa’s management directed its sales representatives to contact homeowners who are managed by Meredith Lodging and disseminate false and misleading statements about Meredith Lodging as part of an organized campaign to penetrate the relevant market.”
The complaint added, “Because many, if not all, of Vacasa’s false statements were literally false or false by necessary implication, consumer deception is presumed.”
Relief and Damages
Meredith is asking the court to put a stop to Vacasa representatives soliciting homeowners by using false statements about the company’s performance. “Unless enjoined by this Court, Vacasa will continue to make misrepresentations and false misleading statements of fact that disparage Meredith Lodging in connection with Vacasa’s marketing and promotion of its own services, that will, in turn, likely confuse, mislead, or deceive homeowners and improperly draw homeowners to Vacasa, causing irreparable injury to the business, goodwill, and reputation of Meredith Lodging. This threat of future injury to Meredith Lodging’s business, goodwill, and reputation requires preliminary and permanent injunctive relief.”
Further, “Vacasa’s statements to homeowners . . . are defamatory because they are false, harm Meredith Lodging’s reputation, lower its estimation in the community, deter homeowners from associating or dealing with the company, and ascribe conduct and characteristics incompatible with the proper conduct of a lawful or quality business in the hospitality industry.”
The action further states, “Vacasa published these false allegations with actual malice because its primary purpose was to injure Meredith Lodging’s business.”
Meredith is seeking the following:
Vacasa and its employees, contractors, agents, servants, offices, and/or members, and all other persons in active concert with Vacasa be enjoined and restrained from falsely advertising about Meredith Lodging.
Vacasa be required to pay Meredith Lodging all damages Meredith Lodging has suffered as a result of Vacasa’s misrepresentations and false and defamatory statements, including, but not limited to, lost revenue, damages to goodwill, any and all other actual damages, and presumptive damages for defamation per se, in an amount to be proven at trial.
Vacasa be required to pay Meredith Lodging’s reasonable attorneys’ fees, costs, and expenses.
Meredith Lodging be granted such other relief as the Court deems just and equitable.
According to Robertson, “Despite these efforts, which we believe to be both unlawful and unethical, our homeowners continue to express loyalty to our program and refer us new homeowners. In fact, our homeowners went so far as to give us the courtesy of bringing this to our attention. Numerous homeowners in our program reached out after reading the news stories to offer words of solidarity and support. We are incredibly grateful for their loyalty and will continue to focus on putting our homeowners first.”
Interestingly, Vacasa has approached Meredith Lodging multiple times to purchase the company, demonstrating that Vacasa doesn’t view Meredith as a bad company that performs as poorly as its representatives are claiming to Meredith’s homeowner customers.
“Vacasa has asked on several prior occasions whether Meredith Lodging would be interested in selling the business to Vacasa,” Robertson said.
However, Meredith Lodging believes in its mission. “All of these vacation rental property management companies have access to similar technologies, but Meredith Lodging prefers to differentiate itself from its competitors by providing high quality services to its guests and homeowners, physical presence in the areas it operates, maximizing homeowner return on their property, and professionalism,” Robertson said.
“I’ve seen plenty of lawsuits, and this seems to be well put together,” said one vacation rental industry M&A expert. “I wonder what would [happen] if 50 managers filled the same lawsuit?”
There’s a push-pull situation emerging in vacation home rentals where operators must determine the right balance between how much touch-free service they can or should provide guests versus providing personal attentiveness and frequent, detailed communication.
As supply and demand of hotel and vacation rental inventory continue to co-mingle, service expectations at short-term rental properties have accelerated. Operators are tasked with more work to maintain higher-quality property and provide personalized concierge.
A Breezeway Elevate Operations Summit virtual event panel in March discussed the identity shift from property manager to hospitality provider, and its implications on the future of the industry. It featured Jessica Gillingham of Abode PR, J.D. Wagner of Luxury Properties Jackson Hole, Amber Carpenter of ACME House Company based in Palm Springs, Calif., and Anthony Lee of UK-based ALTIDO.
“It’s about taking better care of guests from the time they research your properties to when they checkout of them,” Carpenter said. “Call handles are longer. More white-glove service required. Before they book, they want to understand what you are doing for cleaning time. Over-communication is wanted.”
Carpenter said she has seen that 65 percent of owners want to be able to differentiate themselves from the competition through their customer service. One step she’s taking is to communicate with them more and more through texting.
“If we text guests, there’s a 90 percent chance they will respond,” Carpenter said. “If we call them, you never know if they’ll pick-up the phone or return the call. Guests will text us on a whim. Enabling contact through texting used to be considered a VIP perk, but now it’s more commonplace, and they will pay more to have that ability. They are not price-sensitive to receiving this level of service.”
Going further, Carpenter said she tries to provide guests with everything but the groceries.
“Guests’ time is important to them,” she said. “Guests want to know that everything they need will be taken care of for them. Providing PPEs (personal protective equipment) and other needed items such as sunscreen and extra towels as a convenience is now viewed as a value-add. If they want mid-week cleaning, we give it to them.”
Lee said his guests are wanting innovative services such as touch-free check-in.
“But you still need to have in-person check in for those who want to speak to a person,” he said. “Customers’ expectations are as high as ever. We will do grocery shopping for them. We offer to help carry their luggage from the top floor at checkout.”
Lee’s properties began offering virtual tours of the home and common areas in December, a marketing trend that is accelerating in nearly all forms of commercial real estate and housing.
Wagner said his guests used to visit Jackson Hole mostly to enjoy the western lifestyle. Now, they are coming and staying in rentals so they can check on the progress in the construction of their new homes there.
“We call this new breed of traveler a flexcationer,” Wagner said. “People are booking longer stays on shorter notice. It once was common for bookings to happen 60 days out, now it’s 30 days out. There’s a sense of ‘rootedness,’ where they want to feel like they are part of the community. They want to relax there and work there. We need to cater to giving them the best of both worlds.”
Wagner said his guests are communicating with the properties leading up to their stay even more.
“We look to find ways to insulate our staff from guest contact (for privacy and social distancing reasons),” he said. “Text-messaging helps us to do that. We are using You’re Welcome tablets. (The tablet is set up in the home for the guest and offers a communication channel to management as well as opportunities to up-sell the guest on available property features). We partnered with concierge services so our guests can get precise service on their questions and not have to rely on us. It’s all about not overpromising and under-delivering.”
Carpenter said guests who are treated well “don’t want to leave” and will re-book while they are in the rental home. When they do, she said, “the last experience they have with you will be the most important and will make the biggest impression. A smooth checkout process means a lot. Having them arrive to a welcome basket is fine, but what about a road-trip basket? That will leave an impression.”
Carpenter tracks her staff’s performance with “simple” KPIs, she said. “We measure ourselves through net promoter scores and by keeping track of how many times we have to repeat things before the guest understands it.”
Carpenter believes that the future of vacation rental management (three years down the road) will be hyper-competitive. “I hope at that time we have standards in place so that we can gain more trust from the public,” she said.
Lee said the future will have more innovation in products and services.
“There will be more options on where to vacation that are outside of cities,” he said. “And, we’ll be more prepared for another emergency event like a pandemic.”
Outside investment has been pouring into the short-term rental industry for the last seven years with increasing intensity, but on the heels of Airbnb’s IPO success story, the funding frenzy is now in full swing.
“This year, the investor funding level for startups is tracking at a pace of about 40 percent above the most recent investing peak in 2018, according to data tracker PitchBook,” Skift reported. “The vacation rental sector has drawn attention in light of the success of Airbnb’s initial public offering.”
According to C2G Advisors CEO Jim Olin, “The Airbnb IPO and the pandemic have made our industry ‘sexy,’ so now the investment community looking at us for the first time wants to brand us something that makes it even sexier.”
However, hundreds of millions of dollars of investment into short-term rental (STR) companies were wiped away in 2020 via business closures, including $179 million at Lyric, $62 million at Stay Alfred, and $116 million at Domio. Even before the pandemic, Tripping closed after raising $60 million, and LeisureLink shut its doors after bringing in $42 million.
With so many companies folding under the weight of inflated investment and so few funded companies reaching sustainable profitability, we’re left to wonder―what is it that the investment community doesn’t understand about the STR industry?
The “Investment Community”
First, who are these investors?
“The ‘investment community’ is a broad term that encompasses venture capital (VC), private equity (PE), family offices, and other various funds and firms,” explained Jacobie Olin, president at C2G Advisors. “They all have different objectives when focusing on the short-term vacation rental industry. Some want to disrupt the startup ecosystem by attempting to solve pain points through technology. Others are trying to ‘roll up’ different verticals, while others are trying to do a real estate play. Airbnb’s recent IPO brought a new wave of exposure on our industry.”
“From our various conversations [with investors], the high-level points that the investment community does not fully grasp are 1) the niches within the STR industry―urban vs leisure, single-family vs multi-family, various business models, and asset ownership―and 2) complexities within the industry―how localized each market is, customer segments (homeowners and guests) that are at many times diametrically opposed to each other, and how operational intensive the business actually is.”
Rented CEO Andrew McConnell added that it’s not just investors who lack understanding. “There are many things people outside of the day-to-day, and hand-to-hand, of this industry do not understand,” McConnell said.
Fragmented Doesn’t Equal Stupid
The vacation rental industry is often described as fragmented and mom-and-pop. These descriptors seem to lead investors to believe that the sector is unsophisticated and antiquated.
“Many investors that I have spoken with in the last year still view the short-term rental industry as a fragmented cottage industry of mainly individual homeowners with rogue businesses and Airbnb listings,” said Amber Carpenter, CMO at Acme House and founder at DemandIQ.
“One of the big things people miss is that the reason there is not ‘yet’ the same kind of consolidation in this industry as we see in hotels is not simply because ‘smart’ people haven’t tried it yet,” Andrew McConnell said. “Many times, over many decades, smart people have come in thinking everyone in the industry had it wrong, and they will fix it (with technology, etc.). Then they face the harsh realities of the incredibly manual, and fickle ground game that this industry requires. Code integrates well and efficiently; super manual on-the-ground operations, less so.”
McConnell continued, “Investors see the large top-line revenue and the quick bursts of growth you can get from M&A and think the margins will come later with scale. The reality ends up often being that scale decreases those margins as the increased complexity grows geometrically, not linearly, as you add nodes (markets, owners, etc.). More money will be spent―and lost―chasing this mirage, that’s for sure.”
Jeff Paglialonga, founder and CEO at Teeming Vacation Rentals agreed, “Wall Street and big money look at this sector as ‘beneath their so-called smartness.’ Little does big money know we (independent operators) are killing it.”
Metrics, Management, and Money
According to Simon Lehmann, founder and CEO, AJL Atelier, “[Investors] don’t understand the fact that we deal with privately owned assets, the challenges that this brings to our industry, and the impact it has on the unit economics.”
Unit Count Doesn’t Correlate with Success
“First of all, when it comes to inventory you are not signing a ten- to twenty-year lease on a building with 200 rooms as with a hotel. You are talking to each individual homeowner every single year, and they change,” said McConnell.
“Unit count alone is not a measure of success,” said Robin Craigen, cofounder and CEO at Colorado-based Moving Mountains. “Guest review scores, owner satisfaction and retention, a stable, experienced and passionate employee pool backed by a strong company culture for delivering exceptional hospitality, and―wait for it―profitability, are the metrics that investors should be considering.”
“It’s not easy to scale and achieve all of these, and without all of them, the business is not sustainable,” Craigen added. “All that glitters is not gold.”
Experienced Management is Critical
“The VR industry is extremely complex, and an industry-experienced leadership team, especially a competent CEO or Managing Member, is essential to financial success,” said Steve Milo, founder and CEO at VTrips. “Conversely, incompetent leadership in this sector, especially at the CEO level, can drive a good company into the ground. Pretty pitch decks and cute cookie cutter business models may raise money from VCs, but they have never proven to work in the property management sector. If that was the case Domio, Lyric, Stay Alfred and other urban players would still be around instead of going out of business the first time they faced adversity.”
“There are no shortcuts to building a profitable business.” Milo said. “Profitability is a mindset and a culture that starts at the top of the business with leadership. It is very difficult to make a business that had a culture of zero financial discipline profitable. It is not about who raises the most money. At the end of day, it is about increasing shareholdervalue not PE-preferred shareholder value that is the #1 score board.”
“Investors and analysts should consider how a company fared during adversity like a natural disaster or COVID-19. If a company had to lay off 90 percent of their staff and get emergency funding of $100 million at a massive down round to allow them not to go out of business, that company is not a market leader unless it is opposite day,” Milo added.
The Language of Profitability
“The best perspective on the vacation rental community right now as an asset class is to think about a vacation home not as a commodity but as an operating company doing what all operating companies do―seeking to maximize revenue and minimize costs,” said Clark Twiddy of North Carolina’s Twiddy & Co. “As the investment community assesses vacation rentals, I think the primary barrier―if any―is one only of language. For example, if we reframe annual booking revenue into something more akin to a more conventional equity measure―earnings-per-share, for example, I think we’re bridging language. As an additional example, if we describe a sales price to a vacation home as in many ways a reflection of a price-to-earnings ratio, we’re bridging language.”
“The more we’re able as a vacation rental community to bridge those language barriers, the more genuine interest I believe we will find from the investment community,” Twiddy added.
Localized Operations Hinder Scalability
“Vacation rentals are deeply connected to the specific place they are located,” said Margot Schmorak, cofounder and CEO at Hostfully. “Management of each requires a local-centric approach. This goes for revenue optimization, handling policies and regulations, and maximizing auxiliary revenue from in-destination tourism spend. The one-size-fits-all ‘let’s standardize and save money’ approach will not work at scale like it can for hotels. It requires a more flexible approach so unique local factors of a rental can be part of the value proposition. Otherwise, lost revenue will continue to be left on the table.”
In Texas, Sand ‘N Sea owner and manager, Claire Reiswerg, pointed out that funded multinational VR companies can actually cause harm to destinations. “Vacation rentals located in traditional destinations are local businesses,” said Reiswerg. “We live and work here. We support local causes and are connected to the community. We are also well-versed in local ordinances and neighborhood rules, and we respect them all. National companies and investor-modeled VR companies come in to our markets and ignore―or don’t bother to learn―the specifics about a community. It wreaks havoc and creates tension with our community. The result? Complaints abound as do threats of rental bans.”
“In January, we were banned from a longtime bayside neighborhood thanks to the less-than-desirable operations of an investor-model company, and now the neighbors and HOA are mired in lawsuits,” Reiswerg added. “We are also now battling two other proposed bans on the island.”
Christina Thoreson, cofounder and CFO at Chattanooga Vacation Rentals has also experienced the impact of funded companies lacking local knowledge, “Like real estate brokerage, vacation rental management is hyperlocal. You have to know laws and regulations, who to go to for plumbing and electrical, and what events and circumstances might disrupt a guest’s experience, to name a few. For example, we had a direct experience with Mint House ($33 million in funding) wanting us to manage one of their properties in Chattanooga. They said they had master leased several apartments in a newly renovated downtown building. We asked about their permit, They said it’s all fine, and real estate handles that. Six months later, they had two furnished units that were still not approved, and lots of supplies in our office, which they loaded up and moved back out. It seemed to me that investors put in a lot of money, and there was limited concern about how it was spent.”
Paglialonga provided another example of how a lack of market understanding severely limits scalability. “Vacasa has done a decent job of becoming local but are still way behind in local pricing and market knowledge,” said Paglialonga. “For example, Florida is mainly a condo market, and probably the largest rental market in the world. Once you get into having to do applications for guests and deal with all the condo restrictions, scalability goes away quickly. That is why the Vacasa’s and the TurnKey’s have not succeeded in the ‘restricted’ Florida condo market. Panama City Beach is the primary ‘nonrestricted’ condo market in Florida, and about everyone is there which has led to a race to the bottom for commission structure. Hence, it is not a place venture capitalists would find success. Nothing is proprietary there.”
Alex Nigg, founder and CEO at Properly, added, “I seriously wonder whether anybody has shown national or international economies of scale beyond the unbundled managers the listing platforms. What we’ve been seeing so far has basically been stringing a series of local markets together, and then pretending that this amounts to economies of scale beyond the local market.”
Vacation Rental Management isn’t a Tech Play
Nigg added, “If the business had national or international scale you’d expect it to spend more on the scalable bits (technology, brand) over time, and less on the non-scalable ones (operations, sales, asset acquisition, etc.).”
Yet, investors are applying technology multiples to a non-tech sector.
For example Milo says he’s learned that hosted systems provide tremendous opportunities and economies and can be “far more efficient to building a profitable and scalable business than trying to manage internal software IP.”
“They think we are a ‘tech play,’ which we are not, and that we should be valued off revenues and not worry about profit, which is so wrong. Wall Street vs real businesses sometimes are complete opposites,” said Jim Olin. “We are managers, plain and simple, and the best of us throw off large amounts of cash when run correctly.”
According to Audrey Leeds Miller, cofounder and managing director at Cottage Connection of Maine, “It is the wild-wild-west in the VR industry right now. Ethical, eco-centric, consumer safety policies, and sensible regulation are going to become more prevalent. Demand is currently high because of COVID. This will slow down when travel restrictions are lifted and Americans can go to other parts of the world.”
“The feeling on the street is that these national companies are building up their inventories so that they can sell their ‘book’ to a bigger conglomerate,” Miller said. “Just as in the .com era the .com companies didn’t have to prove to investors they were profitable. There will be winners and losers this time too. To build up their ‘book’ they are challenging the small local businesses that have to show a profit to stay in business.”
Miller advised, “Investors should review what happened during the .com bubble, remember that the vacation rental industry is based on relationships, and plan accordingly,”
“The issue of raising quality in short-term rentals is a fundamental one for our industry. It is so closely tied with raising standards, trust, guest experiences and professionalism. It’s an issue that each individual manager or host can’t ignore – nor us collectively as an industry. Many managers are already excelling in this area, but for some, there is still a long way to go.”
– Jeremy Gall, Founder & CEO of Breezeway
Wait. Some of the most desirable vacation rental home destinations’ lure is their unique qualities. From accommodations to appointments to service, what one brand or property does often is what sets it apart from the competition.
However, with increasing traveler demand, vacation rental operators – from boutique styled properties to larger global chains – are exploring the value that could come with setting standardization for pricing, marketing, operations and cleanliness.
“Our rental industry has been around for several decades, much longer than the past 10 years, when Airbnb first came on the scene,” Karr said. “Professionally managed vacation rentals have existed since the 1950s, but it was after the global financial crisis that the sharing economy and peer-to-peer homes managed by individuals really began to grow.”
Karr said the beauty of the industry is that it provides authentic stays. Keeping choice for consumers is very important. “I am really encouraged by companies such as Marriott entering the market and promoting standards in our industry, because it is something that I am passionate about. It’s part of what we have sought to deliver at UnderTheDoormat since we began our business in 2014,” she said.
“Back then, having standards wasn’t something the industry had really identified or understood, but I knew eventually everyone in the industry would embrace this as the industry grows and consumers demand the highest quality.”
Homes & Villas by Marriott International began in spring 2019 as a high-quality alternative to rental homes in markets that might not be ideal for hotel placements.
“Some markets just don’t support hotels,” Riner said. “They are too seasonal, or the homes there are too established, so it doesn’t make sense to put a hotel there. When guests are using their [Marriott rewards program] Bonvoy points, they expect a Marriott-level experience. This is an opportunity for us to provide that kind of service in a vacation rental.”
Riner said the unique brands within Marriott are not intended to squash any of the authenticity that comes with the homes or the neighborhoods in great destination vacation venue areas. For instance, its Autograph Collection does not include any items that are Marriott-branded.
Karr says the industry would thrive with standards rather than standardization.
Finding More Time for Service
For Karr, her company’s software Hospiria is a solution for smaller independent property managers and operators of five to 50 properties.
“Many property managers want to (and should) focus on the guest experience, but they find themselves wrapped up in the administration of maintaining properties on the platforms, managing inquiries or pricing,” she said. “It takes all the marketing, distribution and technology hassle away from property managers so they can focus on the hospitality experience.”
Some of that could be lost if larger companies buy up smaller ones and standardize operational practices.
“There are occasions when larger companies buy up the smaller companies as they just aren’t able to compete,” Karr said. “I want to avoid that, because I believe that authenticity is something the travelers want and the local companies who have local knowledge are best able to deliver. We have to avoid becoming standardized and guests getting basically the same experience in London as in Paris as in San Francisco.”
Cleaning House
Given the impression the pandemic has made and continues to make on cleanliness, housekeeping has become a hot-button for any type of hospitality. Here, standards could be more embraced.
“For us, our cleaning standards are more about the outcome of what we want our rooms to be – get it cleaned,” Riner said. “And not about you must use these steps at this regularity, etc. Cleanliness and safety have moved to the forefront and customers expect the same level they would get when staying at hotels. The goal is to create the illusion to the guest that they are the only one to sleep and shower there.”
In hotels, rooms typically are sized between 700 and 900 square feet of space, they generally include consistent fixtures and have been maintained by the same housekeeper for years, Riner said. Establishing and maintaining standards, therefore, would be simpler than applying them to the varied floorplans and appointments of vacation rentals.
“Vacation homes have so many more touchpoints for the guest, Riner said. “It’s a more challenging job to maintain them, and often the place is cleaned by a contracting company where different people service it each time, unlike hotels that might have the same housekeeper cleaning the same floor of the same hotel for years.”
Sustaining Industry Growth
Ideally, growth comes from a mixture of institutional companies and heart-and-soul owners, Karr said.
“Short-term rentals are now commanding similar prices to what 4- or 5-star hotel rooms get,” she said. “Many customers see short-term rentals as a safer option than hotels, and provide a great experience for families and longer stays so there’s opportunity for our industry to grow as the sector recovers.”
She said a study by STR showed that there is an 11 percent increase in consumer preference by travelers for short-term or vacation homes since the pandemic.
Karr said that when one thinks about how corporations are now using vacation and short-term rentals as an option for their business travelers, having standards is even more important. And this week, UK-based TrustedStays became the first such company to win a government RFP.
Key Data has acquired DemandIQ, a technology product designed to capture real-time, forward-looking traveler demand data. Demand IQ was founded in 2020 by Amber Carpenter and Joe Scurto.
For Key Data, combining demand data and booking data sets creates the potential for some fascinating and actionable data that was previously unavailable for hospitality providers.
Historically, the market has had to rely on forward-looking booking data to reflect traveler demand. Booking data sets tell the picture of the captured demand but fail to tell the entire story, ignoring the demand that wasn’t captured and the market level demand that never made it to an individual lodging provider. Combining these two companies’ data sets changes that, providing powerful new insights.
According to Jason Sprenkle, CEO of Key Data, “Over the coming weeks, we’ll be fine-tuning the platform and enhancing the integration between these two data sets. Amber and her team built something really special in DemandIQ, and we couldn’t be more excited about what the product can do for our industry as it is. But where we get blown away is when we begin to see the potential for what these products can do together.”
Carpenter has been building the DemandIQ platform for these last eighteen months. “Selling to Key Data is an exciting and natural next step in the journey to bring demand data and booking data together to create the industry’s first full view of unconstrained demand, market share, and conversion data,” Carpenter said. “Being part of Key Data will expedite execution on the roadmap and help scale the operation faster than we could have done on our own.”
Carpenter will work alongside the Key Data team as a product consultant to help execute on the “integration, launch, and future of the combined platform.”
For property managers and other lodging partners, here’s a glimpse at some of the ways this data could have an impact:
Pricing Insights: Access to real-time demand data for properties and markets should provide new insights into pricing opportunities by highlighting where the demand exceeds the current booking pace and where demand just isn’t being captured.
Revenue Management: Length of stay optimization is an area where providers are still leaving a lot of money on the table. Many, if not most, companies still have fixed restrictions on the length of stay with no visibility into what the true demand is for shorter lengths of stay. If there’s an opportunity to rent a 5-night stay for the same price as the fixed 7-night stay, this data should expose that in an obvious way.
Business Development: Providers often tell new prospective homeowners that they have a ton of demand that they could direct toward their home. Showing an owner excess demand for their exact type of property could significantly change these conversations.
Marketing: How many guests really want a pet-friendly house in your market? Which types of website layouts get better conversion? Do certain types of listing fare much better than others? Hopefully, this dataset will help us answer many of these questions. And when a unit isn’t booking well, is it a pricing issue, or is the demand for this type, style, look, or location just down?
News of acquisitions and investment in the vacation rental industry has been pouring in since Airbnb’s IPO: Vacasa buys TurnKey, Telluride’s Latitude 38, and Ocean City’s Vantage. Lightbay Capital acquires Tregaron’s vacation rental businesses, including Village, Great Ocean, Sun Palace, and Retreatia. HomeAway founders, Brian Sharples and Carl Shepherd start a new SPAC. Key Data buys Demand IQ. Goldman Sachs invests in Inhabit IQ.
What does it all mean? Where is all of this money coming from? How are independent PMCs affected? And what is a SPAC, anyway?
On Monday, March 15, VRM Intel popped up a live webinar with US vacation rental management experts to discuss recent industry news headlines, what they mean for property managers, and where the industry is heading.
Live Discussion_ How Recent Headlines Affect US Vacation Rental Managers from VRM Intel Live on Vimeo.
As editor of VRM Intel, quite honestly, I had a lot of questions. I figured I wasn’t alone so we decided to gather a group of experts for a live discussion, including: Mike Harrington, founder and CEO, Carolina Retreats; Steve Milo, founder and CEO, VTrips, Jodi Refosco, owner, Taylor-Made Deep Creek Vacations; Ben Edwards, president, Weatherby Consulting, Cinnamon Shore Rentals, and Sanctuary Vacation Rentals; Lino Maldonado, equity PM investor, CEO, BeHome247, and former vice president, Wyndham Vacation Rentals; and Jason Sprenkle, CEO, Key Data and former owner, 360 Blue (which recently sold to Natural Retreats).
Vacasa, the largest vacation rental management platform in North America, announced today it has signed an agreement to acquire TurnKey Vacation Rentals, a leading vacation rental management company for premium homes in more than 80 destinations across the U.S. The transaction brings together two prominent vacation rental management companies with complementary portfolios and capabilities. The deal is expected to close in a month subject to customary closing conditions.
“This is an incredibly exciting day as we plan to welcome TurnKey employees, homeowners and guests into the Vacasa family upon closing of the transaction. Our companies have a similar focus on delivering exceptional service to our homeowners and guests, and we are excited to do that together at a key juncture for the highly competitive vacation rental industry,” said Vacasa CEO Matt Roberts. “The vacation rental sector continues to see significant gains in market share for accommodations and, with our expert teams and innovative technology, we’ll have the opportunity to lead the industry forward.”
TurnKey manages approximately 6,000 vacation rentals throughout the U.S. The acquisition will result in Vacasa adding premier destination markets to its portfolio, including Los Angeles and Napa, California; Asheville, Black Mountain, and Holden Beach, North Carolina; and Santa Fe, New Mexico. Like Vacasa, TurnKey invests in solutions to simplify the vacation rental ownership process for owners and provides exceptional experiences for guests.
“Innovation has been at the core of our business from the start. Our goal is to make vacation rental homeownership more efficient and more profitable for owners through the use of technology,” said TurnKey CEO John Banczak. “Moving forward together, we expect to deliver on our shared vision of developing innovative solutions to meet the evolving needs of our homeowners, and offer a consistent, reliable hospitality experience to our guests.”
Vacasa and TurnKey offer full-service vacation rental management to homeowners through local teams that care for guests in-home, providing immediate support during guest stays, as well as property cleaning and maintenance. Vacasa’s 4,000+ local team members are backed by central support offices in Portland, Oregon, and Boise, Idaho, and, following the acquisition, Vacasa expects to maintain TurnKey’s headquarters office in Austin, Texas.
PJT Partners acted as financial advisor and Latham & Watkins LLP acted as legal advisor to Vacasa in connection with the transaction. GCA Advisors acted as financial advisors to TurnKey. Weil, Gotshal & Manges LLP and Kastner Gravelle LLP acted as legal advisors to TurnKey.
David Krauss, Rent Responsibly’s CEO and co-founder, said each of these founding partners was selected because of their long track record of championing the industry through education, promotion of responsible renting standards, professionalization, and advocacy efforts.
“When Alexa Nota and I co-founded Rent Responsibly, we knew that education, collaboration, and advocacy would be at the core of what we do – and what the industry needs,” Krauss said. “To now have committed, long-term partnerships, we’ll be able to support more markets faster. Imagine a world where every destination has a strong, unified vacation rental community and cohesive voice 12 months of the year.”
Rent Responsibly supports the creation and back-of-office functions of local vacation rental alliances. Their services and tools are designed to help alliances become self-sustainable long after the initial organizing efforts, and the founding partners’ support ensures they can be available for free.
Beyond supporting alliances, the collaboration will focus on education, nuisance prevention programs, events and DIY tools. Rent Responsibly also helps recruit local operators to lead these alliances, providing a playbook and leadership support to help them grow their organizations, recruit partners, and build trust with their cities.
“Our industry moves forward when we move together,” said Philip Minardi, head of public affairs for Expedia Group. “The last year has underscored what we can achieve when we collaborate not only with each other, but with our neighbors and with government officials. From promoting traveler trust through cleanliness guidelines to helping cities pass reasonable regulations, property managers, owners, and suppliers have worked together to advance the industry during unprecedented times. We are proud to have been a longtime supporter of Rent Responsibly, to be among this group of founding partners, and to work alongside the team to usher in the next era of vacation rental advocacy.”
“Breezeway is incredibly excited to team up with Rent Responsibly,” said Jeremy Gall, CEO of Breezeway. “As we’ve seen around the country, those operating short-term rentals with quality, safety and service at the forefront can be exposed to reputational damage by those who are less professional. With this partnership, we will help strengthen the standards of what it means to be a quality, responsible hospitality operator in this category, and help local alliances promote vacation rentals in the community.”
Andrew Schulz, CEO of NoiseAware, agreed. “The only path forward for our entire industry is through good neighbors practices and collaboration with each other, our neighbors, and our cities,” he said.
The partnerships will focus primarily on online resources and virtual events while the pandemic persists, such as downloadable materials, a national happy hour series, and the building out of Rent Responsibly’s new alliance management software platform.
Rent Responsibly was founded in 2019 and since then has served alliances in more than 10 markets around the U.S., including Virginia Beach, Santa Fe and Oahu. One of the most powerful frontiers for this partnership is the new data-rich educational resources the company can provide to alliances to share directly with their towns and cities, Krauss said.
Among those resources is predictive market forecasts from Key Data that can show stakeholders the potential upside of effective, easy-to-understand policies.
“Our property management clients know how valuable it is to have an accurate and detailed look at their market landscape, from occupancy to ADR,” said Jason Sprenkle, CEO of Key Data. “Imagine how powerful this can be in an ordinance development process, not just for clients but for city staff, too. This partnership allows us to provide a lot more data to local advocates to bring to City Hall for more effective, forward-thinking legislation.”
With Proper Insurance, Rent Responsibly is developing FAQ resources and education customized to the needs of local alliances.
“We get inquiries from homeowners all the time asking us to confirm if they are compliant with the rules and regulations,” said Darren Pettyjohn, Proper Insurance’s co-founder. “We have wanted to create more FAQ-style educational material but did not have an efficient way to actually get it out to people. We are excited that Rent Responsibly is taking a simple and scalable approach in which we can create a lot of value for the vacation rental community.”
Property managers and owners can join Rent Responsibly free at RentResponsibly.org
About Rent Responsibly
Founded in 2019, Rent Responsibly is a community-building platform for vacation rental alliances. The mission-driven organization specializes in empowering local advocacy, dedicated to building a sustainable future for flexible properties in every community. Leveraging its team’s industry experience, including leading their own cities’ short-term rental alliances, Rent Responsibly has built an online platform that supports a rapidly expanding network of local alliances across the U.S. Rent Responsibly believes that collaboration with all industry organizations and partners is the key to ensuring that every hour and dollar spent on advocacy goes 10 times as far.
The Onsite Property Management Association (OPMA) is the collective voice of and a meaningful advocate for the vacation rental industry. The idea to form OPMA began in 2013 to fill a need in the hospitality industry. A countless number of associations exist for hotels but completely ignore the multibillion-dollar sector of vacation rental management—especially the onsite property managers offering spacious home-like accommodations with hotel-like service and amenities.
After officially launching in 2014, OPMA quickly acquired many onsite vacation rental property management companies and targeted service and product suppliers as members, representing more than 50,000 vacation rental units. The association provides education, advocacy, and the promotion of the value of the rental experience through onsite property management.
OPMA was born from this small idea and grew exponentially through the hard work and perseverance of property management professionals all over the US and beyond.
The goal of OPMA was simple: industry leaders coming together, setting egos aside, in pursuit of idea sharing and improving the industry. Membership in OPMA means standing shoulder to shoulder with your colleagues as a leader in the industry. OPMA members work together every day to innovate and shape the future of onsite property management.
As the vision unfolded for this association in its infancy, it became imperative to hold in-person meetings involving the leading decision-makers in the vacation rental industry. The association began holding two annual think-tank events called Executive Summits, held at various member properties around the country. The OPMA Executive Summits represent an industry first, providing a three-day immersive environment geared toward all things vacation rental management. Attendees meet and exchange ideas with leaders and decision-makers from OPMA member companies and their vendors.
The summits bring together the speakers of the well-known brands in their particular field, the best minds in the condo-hotel lodging sector, and their preferred suppliers, and they enable attendees to return to their respective marketplaces focused onshaping the future together with common objectives and goals. Technology, homeowner relations, the guest experience, and industry legal battles proved to be vital topics with special invited speakers and various panel discussions, and these summits encourage new ideas, better alternatives, and even spearheading global change in the industry.
The OPMA Executive Summit approach is a departure from conferences where traditional speakers field two or three questions at the end of their presentations with no plan of action ever surfacing. Instead, guest speaker presentations are followed by open dialogue and interaction between the presenters and the attendees. The intimate program format encourages stimulating discussions, the exchange of ideas, and arriving at potential solutions to our industry’s most pressing and challenging issues. This inclusive meeting environment results in the establishment of common objectives and an agreed-upon action plan that contributes to the continued growth and profitability of each OPMA manager and supplier member company.
Even with high momentum and real change happening through the efforts of OPMA members, our industry is not without its challenges. Financial recessions, natural disasters, and the political climate can instantly alter the hospitality sector. The most impactful damage most of us endured was when the COVID-19 pandemic ran rampant throughout the world in 2020. Depending on where you were, our industry experienced, at a minimum, a temporary shutdown for two months and, at its worst, a mandatory stay-at-home order that closed entire countries. Regardless of the severity, the impact was felt worldwide.
For many of us, OPMA served as a resource for overcoming obstacles from others’ experiences and allowed for more open discussions on how to handle crisis management situations. With the approval and launch of COVID vaccines underway, those of us in the industry are optimistic about what lies ahead in 2021 and beyond. Throughout this wild ride and moving forward, OPMA members know they have an invaluable resource and network of peers to lean on and learn from no matter the circumstances.
If you are in the vacation rental industry, whether as a manager or supplier, and are interested in joining or learning more about OPMA, visit TheOPMA.org for more information.
If it’s possible to find a silver lining in the cloud that was 2020, the resilience of the vacation rental industry might be it. Last year, vacation rentals stepped into the spotlight, offering travelers the safest and most responsible way to escape during the uncertainties of the pandemic. Traveler awareness of vacation rentals is at an all-time high. With that in mind, how do you ensure your business can capitalize on the increased attention?
The answer is this: with a strong digital ecosystem. In the competition to attract the modern traveler—who wants to research and book their vacation rental quickly and easily online—a robust direct-booking website is only the first element of a successful strategy. Companies rising to the forefront of our industry utilize a diverse, multifaceted ecosystem to drive travelers to their brand.
“I tell vacation rental managers that a customer-centric direct-booking website is like a high-performance sports car. Sure, you want it to be beautiful and have all the latest bells and whistles, but what you really want is a car that goes from 0 to 60 in seconds flat. And you can’t get off the start line without fuel,” says Bluetent’s senior sales executive, Alisa Justice. “Strategic digital marketing efforts and targeted email campaigns are the fuel for your website and direct-booking strategy.”
Focusing on direct bookings alone, however, would leave your digital ecosystem unbalanced. Connecting to online travel agencies (OTAs) via an efficient channel management tool diversifies your booking strategy. “Online marketplaces are here to stay, so putting your listings on OTAs—and on Google’s new Vacation Rentals platform—is basically future-proofing your business,” Justice states.
But why call it an ecosystem? Brynn Flaherty, Bluetent’s director of marketing services, explains, “We’ve found these components—SEO, digital advertising, distribution, email campaigns, and more—amplify each other. With everything working together, one plus one really can equal three when it comes to driving bookings and revenue.”
There are endless examples to illustrate the revenue-generating power of a healthy digital ecosystem. Two of the most recognizable are the billboard effect and the assisted conversion.
The Billboard Effect
For years, studies have shown that although most vacation rental guests start their accommodations search by looking at properties on an OTA, a relatively small percentage go on to book through that channel. That means a large number of travelers are viewing OTA listings as advertisements—or billboards—eventually leading them to a direct booking.
How do you make sure that a traveler searching OTAs later finds your brand for a direct booking—especially on channels that don’t list your company’s name? It’s tricky, but your digital ecosystem makes it possible, according to Bluetent’s vice president of product Tom Kenyon.
“There are two important factors here,” Kenyon explains. “First, you need a channel manager that communicates effectively with both your PMS and the OTA. That way, the traveler sees the same property details, photos, and availability when they view your OTA listing and again when they see it on your website. Second, you need a website with robust search functionality. If a traveler found your four-bedroom, pet-friendly lakefront home with a hot tub on the OTA, you want them to be able to quickly conduct a detailed search using those same parameters from your home page.” In summation, Kenyon says, “The easier you make it for travelers to find exactly what they’re looking for, the greater the chance they’ll click the ‘book now’ button.”
The Assisted Conversion
A study by Verto Analytics found that a traveler goes through an average of 45 touchpoints on their way to purchasing accommodations. Every one of those touchpoints assists in converting a looker to a booker. “We now have data that tracks each step in a traveler’s decision-making process,” says Flaherty.
“As an example, if your brand has invested in SEO and content creation, a traveler might find your website through an organic search for vacation rentals. While on your website, maybe the traveler views a few properties and signs up for your e-newsletter through a pop-up window.” Flaherty continues, “That single interaction with your website allows the rest of your digital ecosystem to kick into gear. Your digital advertising cam¬paign can now follow the traveler around the internet with ads showing properties they’ve viewed. You can also deploy a targeted email campaign that sends promotions or news their way. All these touchpoints give the traveler the information and confidence they need to book one of your properties.”
Does your online presence grab the attention of the modern traveler? With both a healthy digital ecosystem and diverse marketing strategy at play, your vacation rental business can turn the lessons of 2020 into the successes of 2021—regardless of what the future brings. Interested in learning more? Our experts are here to help. Contact Bluetent at (970) 340-4400.
Growing up, we assumed the automobile has always been considered as American as apple pie. Then we looked a bit closer at the history books and saw mirrored back at us a stunning image of our own industry.
A Tale of Two Cities: New York and Detroit
In 1896, the first gas-powered vehicle sped through the dirt streets of Detroit at a blazing 20 mph. At the time, early drivers weren’t practiced with the physics of driving, so accidents and “turning turtle” were common.
At the same time in New York City, automobile use was slowly increasing, but early problems with their introduction to city streets reminded real estate professional William Phelps Eno of a thorny childhood memory: horse-drawn carriage traffic jams.
Foreseeing the chaos of adding automobiles to already congested roads, he set out to put order to it.
Just three years later, he crafted the city’s first traffic code, with driver rules on lane use, passing, turning, and other basics. He would later expand this in Street Traffic Regulation in 1909, laying the foundation for general regulations, city planning, signage, licensing, and more.
At the time, cars were expensive and often used through hired chauffeurs. However, Henry Ford changed everything when he set out to make the automobile affordable to those who made them. The resulting Model T assembly line suddenly democratized access to cars—not unlike the advent of online travel agencies (OTAs) in the 1990s and 2000s.
As soon as Model Ts rolled onto streets across the country, they were met with vociferous public opposition. Early cars were “terrifyingly loud,” accidents and recklessness increased, and haphazard parking clogged streets.
Hyperbole, fear, and uncertainty triggered debate about cars’ “evilness.”
Henry Ford and his Model T, 1921
Meanwhile, in Detroit, cars were still not considered essential transportation. As Bill Loomis wrote in the Detroit News, “It was their speeding that confused pedestrians, frightened horses, and tore up the roadways.”
So policymakers first tried turning back the clock with a 5 mph speed limit to match horse-drawn buggies and “make the streets as slow and safe as they were before cars,” a measure akin to today’s attempts to “slow down” vacation rental (VR) activity by throttling reservations and permit caps.
Detroit’s 5 mph limit proved equally ineffective because it was so slow that cars would stall, causing even bigger problems.
The Headlights Turn On
By 1916, Ford’s assembly line and scale had reduced automobile costs enough to increase sales 67-fold—a shift in consumer demand unlike any seen before. To call the jump from 200,000 cars in 1909 to 2.25 million in 1916 “disruptive” would be an understatement.
As Detroit earned its Motor City nickname as an auto production capital, automobiles’ essentialism was no longer a debate, and city officials could not ignore their massive economic benefit.
Consequently, the city abandoned its impractical speed limit and looked to more effective solutions. Initially, Detroit placed traffic officers on street corners holding “Stop/Go” signs to help people cross busy roads while keeping traffic moving.
Within a year, 25 percent of Detroit’s police force was managing traffic, yet collisions remained unmitigated, with pedestrians accounting for most accident victims by 1917. Citing the menace to the non-motoring public, activists widely called for cars to be banned, even as their popularity rose. (Sound familiar?)
Still, Detroit was becoming increasingly dependent on automobile production, so it realized it needed to solve the negative publicity and fear, too. The time had come to try a new approach to bringing harmony to the streets.
Traffic jam at Lafayette and Third Street in Detroit
Turning the Corner
Enter former Ford Motor Co. executive James Couzens. He left Ford in 1913 and entered public service, ultimately becoming mayor in 1919. His industry expertise and collaboration with public safety officials and the Detroit Motor Club put Detroit on the map for traffic control innovation.
According to an announcement in Motor Age in 1909, the Detroit Motor Club was a group created to “fulfill the purpose of a gathering place for all motorists, primarily for the owners of cars, but including as well the retail and manufacturing departments of the trade . . . It is the intention of the organizers of the new club to make it one that does things.”
Perhaps one of the most critical “things” the club produced was a drivers’ Code of Manners. It reminded drivers that regulations protect them, too, and laid out basic rules of common courtesy and self-policing for drivers, ending with a poignant suggestion: “Don’t, therefore, be an obstacle in the path of the progress of automobile good driving.”
This good faith statement shifted focus to preventing problematic drivers and not eliminating the automobile itself.
As drivers began adopting these “good manners,” Detroit began to implement new measures in what would become known as the Detroit Plan. This included stop signs, cement guideposts to prevent corner-cutting, tennis court line markings to designate crosswalks and no parking zones, the towing of illegally parked cars, strict enforcement of pedestrian crossing laws, and a massive educationcampaign. Their installation of electric traffic lights alone saved the city 90 percent of traffic control costs by relieving officers.
During this time, Eno formalized this innovation in a different way in New York City. In 1921, he founded the Eno Transportation Foundation (now the Eno Center for Transportation) with the mission to “promote safe mobility by ensuring that traffic control became an accepted role of government and traffic engineering a recognized professional discipline.”
Eno was thinking two steps ahead, mindfully considering what would come after traffic management and safety basics were to become commonplace.
By the 1930s, they were.
The combination of enforceable and uniform rules, public education, and technology paved a superhighway for the safe, accepted, and widespread use of automobiles.
The first electric traffic light at Michigan and Woodward in Detroit, “Mr. ‘Trafficlight,’”
History Looking Back at Us
Nearly 100 years later, we are witnessing a strikingly similar dramatic disruption in consumer preferences for lodging and resulting regulatory challenges. Short-term rental (STR) usage in the United States has gone through the roof, driven by the democratizing effects of the internet and booking platforms. From 2010 to 2015, the percentage of Americans who had booked STRs quadrupled from 8 percent to 32 percent, according to Phocuswright. We’ve since seen further growth as travelers seek the inherent advantages of private homes as lodging options during COVID-19.
However, as with automobiles, the more popular vacation rentals become, the greater the backlash—especially at the local level. Over the past few years, you can’t have read the news without seeing headlines about STRs that make your hair stand up.
Thankfully, a better future is perhaps more firmly in the grasp of the readers of this very magazine than any other stakeholder. Property managers are among the best equipped to write the rules of the road, design our Code of Manners, and put in place our own Detroit Plan. Thankfully, that road map to make your standards the standard comes neatly packaged to us from history, complete with the lane markings and guideposts we’re calling the five Ps: People, Policy, Plan, Passion, and Power.
The Five Ps: AUTOMOTIVE INDUSTRY’S HISTORY SHOWS PATH FORWARD IN REGULATIONS
1. People
First and foremost, as stakeholders in our communities and experts in vacation rentals, we must take the wheel, not the back seat, to solve public policy issues.
The Detroit Plan worked only because industry experts, enthusiasts, and innovators brought solutions to the table. Rather than denying the issues, the stakeholders recognized that they had a duty to devise policies, implement education, and employ technology to avoid the avoidable.
We have our Enos, those who think years ahead for the betterment of all. We have our bullish Couzens, too, those who demand a seat at political tables. We must recruit those like Samuel Walter Taylor, an editor who published Eno’s first editorial and enthusiastically aided his efforts from then on.
More than ever before, we need our own Detroit Motor Clubs: groups of enthusiastic citizens who simply want to create a better future for all.
Tip: See if a group exists in your area by searching the local alliance directory on RentResponsibly.org.
2. Policy
Today, we don’t question the need for a driver’s license. We don’t think twice about putting on our seatbelts, staying in our lanes, and stopping at stop signs. We expect our cars to come with turn signals, brake lights, and rearview mirrors.
Professional property managers have solved many common public complaints. Our insights can relieve our public officials who, more often than not, are simply looking to quiet the complaint hotlines. Why not help them craft fair, effective, and enforceable laws that actually work for everyone?
We must also adopt our own Code of Manners, regardless of the laws that govern us. Check out our take on such a code at RentResponsibly.org/Oath, or use it to inspire your own. What matters most is that we voluntarily agree to a set of responsible expectations to prevent us from becoming an obstacle in the path of progress of good VR/STR management.
3. Plan
Like Eno, we must look years and decades ahead. The laws we write today must not serve solely our own self-interest, or else we’re stalled from the start. We must focus on the next generations—not only those who will one day take over our companies but also those who will be our future neighbors, local businesses, and policymakers. How do we ensure vacation rentals serve them best, too?
No ordinance is final. The 5 mph speed limits became 20 mph speed limits, which eventually became 55 mph speed limits. So, too, must we be prepared to iterate STR ordinances through thoughtful planning, consideration of all stakeholders, and a long-term commitment.
4. Passion
You don’t have to be a policy wonk or government relations pro to help create successful laws. What matters more is passion. Fun fact: Eno himself never once drove a car. In his words, he tookup the issue of traffic regulation because “Its usefulness in saving life, time and money became so apparent that it has interested me absorbingly.”
This simple, passionate interest is the same reason so many of us fall into the vacation rental industry by chance but choose to stay for a lifetime. As long as we bring our passion to city hall, we can change history.
5. Power
Of course, progress often requires some power to make change. It’s long past time for VR professionals to take a seat at the table—and we can no longer wait for a formal invitation.
Many can negotiate with their cities without a formal position. However, like Couzens, we can claim a seat at city hall and use our industry expertise as a public service. For some, sitting on their cities’ STR boards is a great place to start. At Rent Responsibly, three of our staff members have served on city task forces and committees. Others may run for office, like Breckenridge Resort Managers CEO and VRMA president Toby Babich, who serves as Blue River, Colorado’s, mayor.
“Many government officials are surprised to discover that the vacation rental industry is a collection of local, professional, and community-minded small businesses that have many of the same goals as our local governments,” Babich said. “While promoting the vacation rental industry should never be the sole reason to serve, certainly service to our communities through elected positions, committees, boards, or community groups offers us the ability to tell our story, present informed information, and influence discussions that directly impact our businesses.”
Time to Hit the Gas
For automobiles, a successful regulatory foundation enabled the decades of advancement that led to the ubiquity of the automobile as we know it today, including standard safety features and state-mandated drivers’ education and licensing. Thus, like the 1920s for automobiles, the 2020s is our decade to take the wheel and steer our industry, along with our local government partners, to a limitless future with a regulatory framework that works, once and for all.
As Abe Lincoln said, “The best way to predict the future is to create it.”
Take everything you know about the vacation rental industry and throw it out the window. What’s up is down, and what’s down is up. The industry is in a state of flux. Change comes in many forms, including constant regulatory review, changes to terms and conditions, diligent financial management, and uncertainty. Vacation rental managers have undergone the most difficult year on record, and for some of us, the hits to the business keep coming. For others, now is not the time to relax; instead, it’s time to finish what you’ve started and implement meaningful change to weather any storm.
Why?
This may not be as clear as it should or could be, given that many of us have been so involved working in the business as compared to working on the business. Having grown up in a rural community, I think of the business like a garden. There is no doubt that you’ve been working tirelessly, but we cannot get caught up in working hard. We must look beyond the issue du jour. As a business owner, you have to play the long game. Consider your crop, plant the seed, manage the garden, and protect the long-term viability of your product.
I’m afraid that with all the distractions in the business today, we are not planning for tomorrow. I’ve often said, plan your work and work your plan, but how do we apply that in today’s ever-changing environment?
Long-term Thinking
First, start with the end in mind. What is your long-term strategy? Fortunately, developing a long-term sustainable business provides a meaningful profit and ensures that you have a viable business that can be sold, allowing you to capitalize on your investment. So how do we get there?
Adapting to Changing Regulations and Restrictions
In today’s environment, we need to be flexible and ready to pivot based upon regulatory pronouncements and key performance indicators (KPIs) in the business. By monitoring restrictions that may be coming down the pipe, we can have plans in place, staying ahead of upcoming operating restrictions. Being caught flat-footed by restrictions increases the time it takes to change direction.
Within your plans to stay ahead of restrictive pronouncements, we’ve found it beneficial to have varied policies. We have separate terms and conditions designed to more fairly respond to issues out of our control and are ready to implement them at a moment’s notice.
In the event restrictions are implemented, we have found this procedure beneficial and more efficient in navigating the situation at hand.
Managing Expenses
As if changes to rules and regulations are not enough, certain businesses have seen a boom, while others are trying to avoid a bust. In the event your business has seen unprecedented demand and results, producing windfall profits, you’re not out of the woods yet. Conversely, if you’ve taken a hit to profits, there is still work to do, but the road to recovery may not be as tumultuous as you may think because it is easier to ramp up than cut back.
As profits begin to swell, we often lose control of the business, allowing it to become bloated. It is imperative to reign in expenses that are out of control to ensure that when the tide does change, your business does not run aground.
Start by reviewing your expenses in your business to highlight those areas that have increased beyond responsible margins. As revenue and occupancy starts to decrease, expenses should also decrease proportionally. Having visibility into those accounts today will ensure your business retains more profits, ensuring more stability in the business.
The constant environment of change shows no signs of slowing. It is incumbent on us as business leaders to recognize the ever-changing environment and progressively navigate our businesses around any obstacle.
As we enter 2021, it has become clear that vacation rentals are the preferred lodging for those looking to spend time away from home. Remote work has incubated staycations, extended the average length of stay (ALOS) at rental properties, and shortened booking windows. Rental homes in drive-to destinations suddenly look much more attractive than those in urban areas—accommodating more space, boasting fewer crowds, and offering access to private amenities. In fact, RevPAR for short-term rentals decreased just 4.5 percent over the past year, compared to 64.8 percent for hotels. Finally, Airbnb’s IPO, at the end of 2020, demonstrated the resiliency and maturation of the vacation rental segment.
Despite these advances, it is clear that the vacation rental industry is at a crossroads. The events of this past year and the anticipation of more uncertainty to come have brought further light to the topic of quality assurance, which I prefer to call quality service. Issues around safety and professionalism and how providers can automate workflows through technology to meet higher guest expectations and ensure efficient and profitable operations are at the forefront of industry conversations.
I know that operational technology is no longer just nice to have; it is critical to ensuring a quality service experience for both guests and homeowners. Purpose-built operational tools will be the essential armory for professional vacation rental property managers in 2021 and beyond. It’s a strong statement, but one I stand by. Here’s why.
Stricter guest expectations for property preparation and service
As an industry, we face great challenges, many of which stem from consumer expectations for property preparation, timely communication, and in-stay experiences. The components of quality service were important considerations well before 2020, but today’s travelers expect nothing less than perfection.
As noted in last summer’s 2020 Operations Report by Breezeway, two out of every three vacation rental managers expect that cleanliness and safety will be the most important booking factors moving forward. Just imagine showing up at a vacation rental after months without travel (with heightened awareness about hygiene and safety) only to find the property’s condition and presentation are well short of what was advertised.
But safeguarding against this scenario by maintaining exemplary housekeeping standards requires extra time and effort. For example, our clients are spending an additional 25 minutes cleaning each unit, completing and verifying additional COVID-19 protocols, including disinfecting and sanitizing high-touch surfaces and cleaning linens at commercial-grade facilities.
The uncertainty of 2020 did not dissipate when we flipped the calendar to 2021. Vacation rental managers and operators are deploying comprehensive programs and using smarter processes and technologies to mitigate operational stress.
Technology adoption and fragmentation
I remember my time at FlipKey when back-of-house operations began to weigh down vacation rental professionals. Managers couldn’t turn to purpose-built tools like they do today and were stuck with spreadsheets and handwritten documents to schedule tasks and track issues and paper checklists to perform work and monitor brand compliance. These manual workarounds led to inefficiencies and inconsistencies, hindering client service and creating demand for new operational technologies.
The complexity of operations was magnified as consumers pushed for more quality and service. More intelligent solutions came to market, and a technological revolution gained momentum as vacation rentals grew. Then came COVID-19, underscoring the critical nature of meeting enhanced client demands and, in turn, accelerating the adoption of integrated technologies.
This digital transformation has lowered the barriers of entry in the rental market, and everyone, including business leaders, staff, homeowners, and guests, has become much more comfortable using technology to improve their lives. Software has become simpler to implement and often doesn’t involve costly hardware or onboarding. Professional managers can now rely on new technologies to easily manage teams and perform quality property services.
Providers have also gravitated away from one-size-fits-all technologies toward technologies with more singular focuses and deeper functionalities. This fragmentation—using different software for different business functions—allows for products with better connectivity and usability. This trend should continue as managers strive to automate services, deliver more value to clients, and differentiate their brands among a sea of competitors, all vying to impress the modern traveler.
Effective communication embodies brand values
Building a strong brand isn’t easy, and being able to consistently deliver and communicate service is part of the recipe for success. Vacation rental managers have historically taken a reactionary approach to communication and left guests alone until prompted otherwise.
Today, this is no longer the case. The trend for proactive engagement throughout the stay accelerated in 2020, becoming a basic expectation for many guests. In fact, three out of every four vacation rental managers plan on communicating with guests throughout their stays in 2021 and prefer SMS tools customized for the hospitality industry.
Guest texting is very much a part of vacation rental operations, and leading hospitality providers are tying messaging into their operational workflows. Doing so drives automation and makes for more proactive outreach, with easier two-way communication. For example, imagine a world where you can send bulk messages to guestsstaying in a specific type of property (with a pool, for example), or to guests in a specific area where there is a storm warning. In-stay communication can also be more dynamic, ensuring in-property standards are reached and offering additional revenue-generating features, such as early check-in, late checkout, extended stays, food delivery, and concierge services.
Operational technology offers a competitive edge
If property managers want to future-proof their businesses, they need to stay on top of changing guest expectations and get on board with operational technology. Investing in the automation of back-of-house processes will pay dividends and shore up business, allowing managers to face future uncertainties with confidence.
Increased competition, both in market and from a convergence of property segments, makes zeroing in on profit and cost structures all the more important. Using operational software can reduce head count, weed out inefficiencies, and increase uptake of revenue-generating additional services.
Automating processes affords more time and focus on other areas of your business and can greatly impact your bottom line.
Four seasoned VR pros share how they have survived and thrived in the industry.
In this series of VRM Careerists, VRM Intel is diving into the lives of the careerists among us, those managers who have made it over the river and through the woods of vacation rental life, and yet have still chosen to persevere in a business that is as rigorous as it is unglamorous, as challenging as it is heartwarming.
The last story we have to share with you in this series of VRM Careerists is that of Cort Roussel.
Stepping Away with Full-Cort Advantage
Perhaps the most relatable part of Cort Roussel’s story is how he stepped back from the vacation rental industry, as opposed to how he stepped into it.
“The quality of life was gone,” he said quietly, as he reflected. “The dream was gone. At the end of the winter, my guests were skiing more than I was.”
Now Cort Roussel has time to hit the slopes in New England.
Overwhelm in the vacation rental management world is a common condition. But these days, Roussel, who is still owner of Franconia Notch Vacations (he sold his interest in the short-term rental part of his business to Vacasa), has dialed back his workload to include only long-term rentals of 90 nights or more.
“It’s still an ongoing business cycle, but less stressed,” he said. “When things go wrong, you have more time to get it right. And I’m not having to manage both short-term and long-term rentals at the same time.”
Roussel had always planned a life in hospitality. A self-described “well-educated resort rat,” he earned a bachelor’s degree in business, focusing on hotel and restaurant management. But his first position working in the timeshare arena left him frustrated. He was not always able to please his customers, whether they were owners or guests, because they didn’t always understand what they had purchased.
“Most folks don’t get a lot of vacation time; maybe they go away four times per year,” he noted. “They dedicate a lot of time figuring out how they want to spend that time. The time someone gives you for vacation is inordinately valuable.”
Roussel had been moonlighting for Loon Reservation Service, where he met then-company owners Jim and Barbara Collier, whom he credits as his greatest mentors in the industry.
Within a year after being hired in 2000, he obtained his real estate license in New Hampshire and attended his first VRMA (Vacation Rental Management Association) conference as a result of their support. Roussell would later serve as a member of the board of directors at both VRMA and the Franconia Notch Chamber of Commerce.
“I never had an employer invest that much,” he said. “And I had health care! They took care of their staff and treated us like family.”
Roussel marvels at how the Colliers, then in their late 60s, were early adopters of everything the internet had to offer. He said they were already accepting reservations online in 2000 and had a T1 data line running through their office.
“They snatched up all the dot-coms in the surrounding areas,” he said of the Colliers’ foresight in purchasing domain names. “No one even knew what a dot-com was.”
By 2002, the Colliers had moved him into the management of Franconia Notch Vacations, and by 2005, they offered to sell that business to him, and he accepted. But the building itself was leased, not owned. Although the option to buy it was on the table from the landlord, Roussel could not afford to buy both the business and the building.
“But are you interested?” Collier asked Roussel at the time.
“He bought the building,” Roussel recalled, emotion rising in his voice. “I now own the building. They’re like parents.”
He purchased the building from the Colliers over time and developed the business into a success that drew the interest of Vacasa. Along the way, he realized he was overworked by doing everything himself, and it was time to make a shift.
He is happy to have more time on the slopes these days.
“I’m semi-retired now,” he said.
After more than 25 years dedicated to others, this careerist finally made time for his own vacations.
