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Industry News for Vacation Rental Managers

Riding the Next Wave of Vacation Rental Consolidation

Riding the Next Wave of Vacation Rental Consolidation
mm
Jeremiah Gall
July 24, 2019

As the industry hits its third wave of maturity, there’s a renewed focus on consolidation. Vacasa continues acquiring vacation rental managers at a rapid clip, and Airbnb has heavily invested in brands and a variety of new property managers. The recent news of the technology “rollup” has property managers questioning the future of rental property management software and its implications for the industry’s ability to continue innovation and growth.

Believe it or not, consolidation isn’t a novel theme for the vacation rental industry. If we turn the clock back 20 years, we’ll find similar stories. ResortQuest acquired dozens of vacation rental managers as it pushed to build a publicly traded multi-destination vacation rental brand before it eventually sold to Gaylord, then Leucadia, and then to Wyndham Vacation Rentals. Instant Software folded together multiple technology platforms to create the industry’s largest software provider before selling to HomeAway. Speaking of HomeAway, it also went on a buying spree, acquiring the top listing sites to create the largest vacation rental marketplace.

Many operators, both on the vendor and the property management sides, have been in this business long enough to see multiple waves of changes to the vacation rental sector. Shifting dynamics will continue, and the two core disciplines of the business will further evolve. Here’s a hot take on consolidation and how to roll with the changes and ride the next wave of vacation rental growth.

 

Dominant Acquisition Channels Move Marketing Opportunities Downstream

As vacation rentals gain awareness and market share in the travel industry, the effects of consolidation are forcing a renewed approach to marketing. For operators in most destinations, spending on major online travel agent platforms has grown to dominate marketing budgets. With just 59 seconds to grab a guest’s attention at booking, platforms have adopted more targeted strategies to focus on rich information (e.g., location, amenities, and proximity to local attractions) to optimize the shopping experience and surface the best choices that match the prospective guest’s needs. As the online travel agents (OTAs) layer in more advanced pricing algorithms, they will continue to dominate search results and the top-funnel marketing landscape (i.e., potential renters looking to book a vacation rental).

To some extent, OTAs level the playing field for a large portion of top-funnel marketing. If the platforms control access to the majority of new travelers, then there isn’t much room to build in an advantage (putting search engine optimization aside). The real competitive advantage is moving down funnel and leveraging product marketing to deliver positive brand awareness and property services to ultimately drive guest loyalty. Generating repeat guests requires fewer marketing resources than that of attracting new ones, and improving your customer retention by just 5 percent can increase profit by a whopping 75 percent.

Vacation rentals have always had a healthy multigenerational audience—travelers head back to the same spot (sometimes the same property) year after year. As generational families live farther apart, the resulting macro effect should see fewer repeat guests. Combine this with higher marketing costs to attract new guests, and the value of every repeat guest increases.

Managers can earn repeat guests through better product marketing that addresses how the guest interacts with the property and with the service. Vacation rental managers are not property managers; they are hospitality providers. This requires a rededication to serving the hospitality needs of guests to deliver exceptional service. That’s the hard, local work that can’t be consolidated away at the top.

Managers must take active steps and create ways for branded touchpoints throughout the stay. Yes, this includes all of those details, like how welcome packages await the guests, how the towels are folded, and whether the curtains are open or closed in the living room. These details may seem small, but they combine to form the brand standards that define the experiences guests have when they walk through the door.

But the marketing investment shouldn’t pause in between guest arrival and checkout. Cultivate the brand, engage with the guests during their stay, and offer value-added services to make their vacations more noteworthy. Heavily investing in reengagement campaigns (e.g., retargeting ads, surveys, thank you gifts, etc.) elevates your brand exposure beyond your competition and contributes to a more meaningful relationship with the guest. 

 

Consolidated Inventory Drives Quality Standards and Deeper Service Engagement

The second core discipline is management. Management in this context is property services—all the industrious work that goes into preparing a property for guests and providing asset management for the owner. Operations has always been the backbone of property management, from cleaning and property prep to inspections and maintenance—both preventative and unexpected repairs. For short-term rentals, these functions require a generous dose of human coordination to keep rental properties serviceable and clean before a guest arrives.

Note: Lately, I’ve been beating the drum on operations (you may have even heard me speak about them at a conference the last few years). Maintaining the highest-quality property conditions, branding the guest’s experience, and delivering more concierge services will define each manager’s success in the future of the vacation rental industry. This plays a role in the consolidation conversation.

As much as consolidation may bring new standardization to the market, so much of the work requires local knowledge. Managers can control this piece of the business effectively by fostering deep relationships. In fact, the local nature of the business and the existing fragmentation (i.e., there are significantly more vacation rental operators than hotel operators) shield managers from many of the competitive effects of inventory consolidation. That said, growth of national vacation rental brands, such as Vacasa and Turnkey, has downstream implications for all managers.

Today’s workload has never been heavier and has forced managers to adopt a smarter approach to property care. Guests and owners are demanding more service, particularly with millennials and Generation Zs traveling more frequently than other generations do, and they don’t put up with even the most minor mistakes. Larger brands have invested in these processes to match the quality and standardization that guests want. Predictable, high-quality experiences must become the norm. With vacation rentals and hotels moving closer together, quality and safety are emerging as top trends. Larger managers are investing in these processes accordingly, and the industry should expect more regulations on this front.

 

Software Consolidation Leads to Better Tools and Technology

Twenty years ago, vacation rental managers had limited choices as to which software to adopt. Systems were complex, and property managers gravitated to all-in-one solutions to operate their businesses.

Now hundreds of property management software platforms and an ecosystem of ancillary technology enable vacation rental managers to work better. Unless you believe that the role of the vacation rental manager is going to magically get easier, this dynamic will continue: more technology to drive additional value and efficiency to the business.

Property management and hospitality is a complicated business that requires diverse skill sets, software, and technology to be successful. Using different tools for different business functions is optimal. These technologies have a more singular focus and can afford to devote resources toward building incredibly deep functionality. Their products are purpose-built for the vacation rental industry, making for easier internal adoption, implementation, and a more user-friendly experience.

When effective, software adds tremendous value to business operations. As the segment matures, more intelligent solutions are coming to the market. Deeper functionality requires considerable investment, and with so much value left to be delivered to managers, innovation will undoubtedly continue. The software consolidation will have a trickle-down effect of additional investment and will lead to even better technology solutions for managers.

 

Conclusion

Consolidation is a sign of the vacation rental industry’s maturity. Although we’ve seen this behavior in the past, the rollups feel poised for more success this time. Perhaps the intervening years have provided enough awareness that this wave of entities can capture synergies and value from their largess. Growth and innovation shouldn’t slow. Rather the identity of the rental manager will continue to evolve as a hospitality provider and expand the focus on delivering the best customer experience. The customer experience is the real business we’re in—helping travelers find, enjoy, and relish the memories of their vacations.

 

Related Itemsbooking platformsFeaturedgaylordhomeawayinstant softwarejeremiah gallleucadiaonline travel agenciesOTAsPMSproperty management softwareproperty managersresortquestturnkeyvacasavacation rental property managerswyndham vacation rentals
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1 Comment

  1. Matt says:
    July 25, 2019 at 1:30 pm

    Well written and thoughtful Jeremiah. Thanks for the read.

    Reply

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Industry News for Vacation Rental Managers
July 24, 2019
mm
Jeremiah Gall

Jeremiah Gall is a serial entrepreneur and vacation rental market veteran with a history of delivering great products to rental managers over the past twelve years. In 2006, Jeremy co-founded FlipKey.com and developed marketing tools and the first verified guest review platform for professional rental managers. He continued to manage FlipKey’s global professional services group, working with more than three thousand property manager clients. Before leaving in 2013 and after the acquisition by TripAdvisor, Jeremy grew FlipKey into one of the largest vacation rental businesses in the world. Jeremy is the founder and CEO of Breezeway. Breezeway’s mobile app and solutions give rental managers the tools they need for optimized turn days, efficient operations, and excellent property care programs. Jeremy has shared in-depth analyses of the vacation rental market at national travel shows and in industry publications and is a regular presenter at VRMA conferences, MIT, and Boston College. He is an avid vacation rental fan and enjoys splitting time between Boston and South Carolina.

Related Itemsbooking platformsFeaturedgaylordhomeawayinstant softwarejeremiah gallleucadiaonline travel agenciesOTAsPMSproperty management softwareproperty managersresortquestturnkeyvacasavacation rental property managerswyndham vacation rentals

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