By George Volsky
In my view, the combination of web-based technology and the billions of dollars in vacation rentals is attracting big-dollar investors on three fronts, all tied to evolving trends:
1. Distribution solutions that put vacation rental homes (managed or rent-by-owner) together with renters.
2. Booking and resource solutions that help homeowners bypass vacation rental managers, and
3. Acquisitions of vacation rental managers.
Distribution solutions that put vacation rental homes (managed or rent-by-owner) together with renters
The first category, which includes HomeAway, is harnessing the appeal of online shopping. It provides value to renters, who love one-stop shopping with convenient research and booking options–this category can prosper even if it brings no value to rental managers or homeowners. Behind the dominant players in this category, there are niche players with specialties, such as TripAdvisor who is known for reviews, or LeisureLink, whose interfaces have allowed condo rentals to conform to the standardized requirements of on-line travel agents. Of course, the specialists have to worry about HomeAway expansion into their space.
Booking and resource solutions that help homeowners bypass vacation rental managers
The second category is riding a trend where homeowners, who tried rent-by-owner to survive the crash of housing and financing, are weary of self-management and are experimenting with half-way options that appear less expensive than mainstream rental managers. To achieve sustainable business, this category will always battle a formidable constraint: the heart of vacation rentals is–and will always be–something that technology cannot do, “clean the home, fix it, and take care of the screaming guests.” If rent-by-owners start paying the true (and fair) price of having others do these services reliably, it may not be possible for homeowners to pay the fees being sought by large or public half-way solutions without exceeding the cost of mainstream management. The legacy of this category may not be to displace rental managers but to force rental managers to offer an unbundled array of service options (as real estate brokers were forced to do in response to FSBO (for sale by owners).
Acquisitions of vacation rental managers
The final category reflects the attraction by large companies to a lodging segment that is owned by investors (homeowners) who don’t expect ROI from lodging revenues, let alone positive cash flow. This category’s ultimate role in the vacation rental industry depends on the answer to a simple question: does the vacation rental industry have economies of scale to offset the very substantial cost, growth, and profit requirements that large or public companies are obligated to maintain?
George Volsky will be sharing more insight at a seminar in Kitty Hawk on March 25.
George Volsky is a thought leader and respected consultant in the Vacation Rental industry. He has spent years as a vacation rental manager on the Outer Banks of North Carolina, worked with multiple property management technology organizations and served 12 years as an independent consultant to vacation rental managers. He is a leading anaylyst of the vacation rental industry with an extensive background in revenue management, finance and travel economics as a transportation industry analyst and aviation attorney.