Over the last two weeks, VRM Intel has received several reports that Streamline Vacation Rental Software is notifying some of its vacation rental management customers about an imminent—and significant—price increase for use of its enterprise-level property management system (PMS).
According to Inhabit IQ, Streamline’s parent company, the pricing increase applies to customers who originally began using Streamline when prices were lower and is “an effort to standardize pricing in fairness to all Streamline clients.”
The pricing changes reflect the company’s current tier-based fee structure. For some property managers, the increase more than doubles what they were previously paying to use Streamline’s PMS (more below).
Inhabit IQ’s Chief Strategy Officer, Eric Broughton, provided VRM Intel with the following statement:
Over the years Streamline has invested heavily to build a solution that, in our view, is the best in the industry. A testament to that success and investment can be found in the number of clients that continue to sign on and go live with Streamline each month. Numerous clients have used the system for many years to grow their property management business to new heights.
The significant investment has rapidly expanded both the breadth and depth of the product, and clients have continued to join the platform at an increasing pace throughout that growth. That rapid growth also resulted in disparate pricing structures over time, in that new customers signed on at a higher rate, while legacy customers were still paying 8- and 10-year old rates.
This measure is an effort to standardize pricing in fairness to all Streamline clients. It also helps Streamline and their clients to make better sense of the various tools and services they are using. The new structure includes tiers that standardize clients’ access to tools such as the new CRM, StreamPhone, RevMax revenue management tools, OTA Connection enhancements, StreamSign, and more.
While Streamline realized they hadn’t increased pricing for some customers over the entire history of the company, they also deeply respect the loyalty of those clients, and the new pricing is still far below Streamline’s current market rate, as well as lower than many enterprise solutions. Many of the clients they’ve contacted so far acknowledge the value they’ve received over the years and recognize that the new pricing structure still provides the best value in the industry.
To your point about the larger local PMs, Streamline’s ongoing and increased investment directly supports large, independent managers with better technology that helps them be more aggressive and compete with the multi-destination property management companies.
Streamline’s customers can choose between flat-rate monthly pricing (per unit per month) plus 1% of gross revenue received from OTA/third-party channel bookings or bundled flat-rate monthly pricing for its all-in-one solution.
Last year, Inhabit IQ also implemented a new pricing structure for LiveRez, another PMS under its umbrella, which increased software costs for its users. In addition to Streamline and LiveRez, Inhabit IQ’s proptech portfolio also includes the PMS platforms, Virtual Resort Manager (VRM) and UK-based SuperControl.
What should a vacation rental management company be spending on technology?
The recent announcement of pricing increases leads to a broader question: How much should a vacation rental management company (VRMC) be spending on its PMS? And to go even further, how much should a VRMC be paying for technology?
Currently PMS fees vary widely across VRM companies, ranging from $8 – $35 per property per month or .5% – 2.5% of gross booking revenue (or some combination of monthly fees and performance-based pricing).
“There are no exact metrics on an appropriate software cost in a VR company,” said Jim Olin, founder at C2G Advisors, “However, anytime you get a substantial increase, its analogous to increasing your fees to your homeowners. People start looking for alternatives.”
As one VRMC owner said after being notified of Streamline’s price increase, “I am back to the drawing board on software it seems.”
All-in-One vs Best-of-Breed
In developing a tech strategy, businesses in any industry must weigh out using an all-in-one system (aka single-vendor solution) or a best-in-breed approach. When VRMCs take a best-of-breed approach, instead of purchasing an all-in-one PMS from a single vendor that tries to cover multiple bases, it means adopting specialized solutions from many vendors, and integrating them.
For example, in addition to the PMS, VRMCs commonly pay for additional third-party technology platforms and apps:
- Smart home systems
- Property care (housekeeping, maintenance) management
- Accounting and tax remittance software
- Channel management
- Customer relationship management (CRM)
- Call center management/tracking and lead management
- Benchmark and comparative data tools
- Revenue management and dynamic pricing systems
- SMS messaging and survey tools
- Customer verification systems
- Contract signature tools
- Marketing automation and email technology
- Guestbook/area guide apps
- Noise monitoring systems
- Homeowner management and communication systems
There are best-of-breed solutions for each of these categories. A VRMC can optimize tech dollars by maximizing the built-in functionality in the PMS where possible before strategically and deliberately integrating best-in-breed solutions.
Beware of Shiny New Things
With the rising popularity of short-term rentals, dozens upon dozens of new entrants have recently built technology platforms and apps designed for home-rental operators. Each new tech provider sells to the VRMC saying, “If it helps you generate $X in bookings, then it pays for itself.” Or, “If it saves you X# in manhours, it pays for itself.”
However, each new tech addition requires integration, implementation, training, support, and evaluation.
In a recent article in VRM Intel Magazine, Simon Lehmann, founder and CEO, AJL Atelier, addressed the rapidly expanding tech environment. “[Technology] use has increased substantially, but at the same time, it has been identified as one of the biggest pain points for the operators,” Lehmann said. “Vacation rental has been the only travel vertical in the start-up scene that has received more investment, and technology start-ups popped up on a monthly basis even during 2020.”
“On average, a property manager is working with eight different software products to run his business. This is not sustainable,” Lehmann added. “While the OTAs are taking 50 percent of the gross margin, technology has not become cheaper, and the net margin for property managers has become smaller. Most of the tech companies are venture-funded and are not profitable either, which does not help the situation. Today, we can source software for any process that the PMS does not offer. It is obvious now that each technology provider is trying to expand its value proposition and increase its take rate. . . . So, watch out when making decisions to source new technology. Get external advice to help you with the specifications that you need and with the selection process.”
Related: Read Simon Lehmann’s Full Comments in “Tech Leaders Predict the Future in Vacation Rental Technology”
Unfortunately these software platforms fail to recognize that their long term customers have helped them build their business with referrals. In addition they are earning money from the client base the PM had developed without them. The market has grown and the profits should have grown with it without a drastic rate increase. When LiveRez increased our rate by 100 percent we saw a decline in service and no improvement in the software .
I think This is about getting more $$ for the outside investors – not reinvestment in the pm managers who are the clients
We are thankful it motivated us to find a better system for our company. We are saving money and have more independence
It’s a great time to go shop for new ir
What OTA’s are taking 50% of the gross margin?
As a software company, it is very important to support your infrastructure. We have spent 15+ years building a very powerful software system. I know from experience that if you are properly maximizing the features in Streamline, it would be hard to find another software solution that can automate your company to generate as much money.
Unfortunately, as our company has grown (Over 100 employees), to meet the needs of our clients, there have been costs associated with that growth. As a property manager, I normally increase my rates yearly. We have not had any major price increase in over 15 years. This is not something that newer software companies are able to say, as they come into this space. The experience and innovation over 15+ years, warrants these changes to stay competitive in the market and continue to deliver a high quality product and service.
We always wanted our property managers to grow while reducing costs. Meanwhile, we always invested to grow based on the feedback we received. We have taken everyone’s years of loyalty into account when working out pricing. This was planned for months to make sure we were fair to everyone and we feel everyone needed to have the option to have a personal conversation with us. If you know me, I will always stand-up for property managers.