Measuring Performance for Vacation Rental Management Companies
Part One: A Look Back at How the Marketing and Competitive Landscape Has Changed for Vacation Rental Managers
For vacation rental managers who have been around long enough to remember an offline life, the marketing of vacation rentals “ain’t what it used to be.”
An office on the strip, branded signs on the homes, and a rental brochure were enough to light up the phones on January 1st, with vacationers trying to secure their favorite house for one of the few weeks of the season.
But change is inevitable, and the sales and marketing of vacation rentals is no different. The first part of this series of articles takes a brief look back at some of these changes and how they impact the determination of key performance indicators for today’s vacation rental management article.
General History of Vacation Rentals
After World War II, in Europe, a vacation system became popular which involved “vacation home sharing,” also known as “holiday home sharing.” European families would buy a vacation cottage/villa jointly and have exclusive use of the property for one of the four seasons. They rotated seasons so each family enjoyed the prime seasons equally. This concept was mostly utilized by families related to each other because of the trust factor involved in joint ownership and no property manager.
However, few families vacationed for an entire season at a time so owners found ways to monetize vacant periods, leading to the birth of the vacation rental and timeshare markets we know today.
The idea of vacationing in homes became widely accepted in the United States in the 1960’s. By the 1970’s and early 1980’s many property management companies emerged, largely as a by-product of real estate companies identifying additional revenue streams and securing client loyalty.
Interestingly, the first timeshare in the United States was started in 1974 by Caribbean International Corp., offering a 25-year “vacation license” rather than ownership.
Traditional Professional Property Management
Professional Property Managers initially offered comprehensive, full-scale services to vacation home owners, including but not limited to:
- Maintenance and Services
- Furnishing Services
- Local Check-in/Check-out
- Local Assistance
- Guest Services
- Real Estate Services and Accounting
As technology progressed in the early to mid 1980’s, vacation-rental-specific property management systems were created to help VRMs manage these services, including Resort Data Processing (RDP) and AV Main (FRS). AV Main creator First Resort Software was instrumental in bringing VRMs together with the first user conference called “The Forum,” which later became known as RezFest after Instant Software’s acquisition of the company.
In 1985, the Vacation Rental Managers Association (VRMA) was founded, and ten vacation rental managers gathered in Lake Tahoe for the first Annual Conference, which featured sessions on marketing and advertising and a presentation from the California Department of Real Estate. The industry expanded rapidly.
By the mid 1990’s, the internet as a vacation planning tool began to transform VRMs, vacation rental websites with online booking components began to appear around the country, and web-based software developed.
However, many vacation destinations were located in areas with unreliable internet connections, so technology growth was sluggish. In addition, adoption of new software was painful and creating a successful online presence was costly. Consequently, the road was paved for 3rd party channels to sell and market vacation rental properties online.
Changing Marketing/Competitive Landscape
In recent years, the traditional Vacation Rental Management Company (VRM) has seen considerable changes in the competitive landscape:
- The impact of 3rd party websites
From 1995 until 2008, multiple 3rd party vacation rental websites were born. However, during this period, the only 3rd party website causing disruptive competition for the traditional VRM was HomeAway’s VRBO.
Learning to navigate a distribution strategy related to VRBO.com was faced by VRMs with varying levels of success and angst. Many chose to place their own professionally managed properties alongside for-rent-by-owner properties on VRBO.com causing a consequential expansion of the source of competition. Other VRMs chose to pour their marketing dollars into heavy SEO/SEM initiatives to compete head-to-head with VRBO.com.
Simultaneously, TripAdvisor began compiling reviews which worried many VRMs who at the time lacked the ability to adequately respond to negative comments.
With the real estate market collapse, the number of rentals available to consumers increased; with easy access online marketing outlets, the number of rent-by-owner properties grew exponentially; and with double digit industry growth, the investment community got on board.
In 2008, TripAdvisor’s took a majority stake in Flipkey, HomeAway raised $250 million in capital, the 3rd party website competition began to increase, and new 3rd party websites were born. Some of these include Airbnb (with a current $2.5 billion valuation), HouseTrip (just received $40m in capital), and the metasearch platform by StubHub execs Tripping.com.
By 2013, the vast majority of VRMs have adopted:
1. A marketing strategy which incorporates 3rd party channels.
2. An operational strategy which handles inquiries and bookings from distribution channels.
3. A guest relationship strategy which converts one-time guests into long-term customers.
- Search engine results
As vacationers turned to the search engines to plan their vacations, it became extremely important for VRMs to dominate the Search Engine Results Pages (SERPs). SEO/SEM experts such as Blizzard Internet Marketing, Blue Tent Marketing, and Visual Data Systems began dominating the programming lineup of industry conferences with the latest and greatest tips to achieving a listing on page 1 of Google for “[Your destination here] Vacation Rentals”.
VRMs were able to compete with each other for coveted keywords and fight the Google battle with strategies and marketing budgets. As the search engine algorithms changed and the distribution channels started increasing in traffic and page rank, VRMs struggled to keep up online. The large VRMs have been able to retain beneficial presence in SERPs, but small to midsize companies in competitive markets have been forced to get more creative in their online marketing strategies, while new companies find themselves more reliant on third party distribution than on SEM.
- The increased competition from VRBO’s
Before technology and communications allowed remote management, vacation home owners were heavily reliant on VRMs to manage their properties. The full service approach was beneficial for property managers, home owners and guests which made the relationship a win-win-win for all.
The real estate collapse brought major changes to the vacation rental market place, bringing in thousands of homeowners who had not previously considered renting their homes. Airbnb was one conduit who capitalized on the phenomenon in major cities.
Christine Karpinski made Amazon’s Best Seller List with her book How to Rent Vacation Properties by Owner, which supplied would be owners with rental policy and confirmation templates, marketing strategies and tips on maintenance and housekeeping accountability.
Looking back on some the services which traditional VRMs offered, many tools became available to homeowners:
- Accounting and Reporting: QuickBooks Pro worked well for many VR owners, and there are services available which show owners how to use effectively.
- Marketing: Distribution channels (VRBO.com, Airbnb.com, HomeAway.com. HouseTrip.com, Flipkey.com, etc.) and low cost website building tools allowed homeowners to effectively market their properties.
- Local Check-in/Check-out: Keyless entry options became more advanced and affordable.
- Local Assistance: Companies with hybrid business models sprouted which allow fee based services such as 24/7 on call service, housekeeping, maintenance and reservations.
- Housekeeping: Housekeeping tracking services are available for owners.
In addition the distribution channels provide support, communities, forums, conferences, training, credit card processing and travel insurance options for VRBOs.
- Awareness of other destinations as vacation options
Among vacationers who utilize vacation homes, for many years the trend was to visit the same place year after year and establish family traditions. Vacations were often longer than a week, and it was typical to stay in the exact same home each year.
Developments in technology, transportation, communications, and the family composition allowed travelers to think outside the box about vacation choices. With more options to explore with the click of a mouse or the touch of a screen, destinations all over the world became accessible for vacationers.
However, for the same reasons, more travelers are finding and using vacation homes as a lodging option, and there is still substantial room for growth.
- Trends in 2013 and 2014
The competitive and marketing landscape is still shifting for VRMs, and the following trends are currently reshaping how traditional VRMs market to their owners and guests:
1. Mergers and acquisitions in the vacation rentals space (in management companies, technology and distribution channels)
2. Increasing online marketing costs for VRMs
3. Previously traditional timeshare inventory becoming available to the retail vacation rental market at lower rental rates
4. Emerging technology/tools becoming available to individual homeowners
5. An increased attention to data mining and usage
6. A surge in tools to manage the guest experience and remarket to the guest after their stay
Coming soon…Part 2: Metrics should be used to measure performance for a Vacation Rental Management Company
By Amy Hinote