The vacation rental industry is growing and expanding at an alarming rate, and now, more than ever, vacationers are changing the way they travel.
With the rise of sharing economy sites like Airbnb whereby anyone can become a host (provided they have the patience, space and time to do so), has come a huge increase of owners, platforms and business solutions for everything VR-related.
We asked the experts – some of the biggest names in the industry – what trends they think are on the horizon for vacation rentals, and this is what they had to say.
Trend #1: Consolidation of Platforms and OTAs
Louise Brace, RentalTonic
“The global platforms can consolidate, but is that going to make them more effective as a booking solution? I don’t think so. Ultimately, I consider it will be the local platforms; those who really focus on delivering the destination that travelers are looking for, who will shine in terms of delivering better qualified and quality leads and bookings. I also believe that owners and managers are ready to start their own revolution, creating their own channels and opportunities. There are enough resources out there now to help make it happen for them.”
Marc Figueras, KeyNest
“I see a clear trend towards consolidation among platforms and OTAs, where Airbnb has a dominant position.”
Vanessa De Souza Lage, Rentals United
“The trends we saw in 2016 will continue in 2017: more professionalism from owners and managers, and more innovative start-ups disrupting the way we run our businesses. While the word is out that large property managers will acquire technology companies to help them grow faster, I don’t think the vacation rental service market will consolidate that way just yet.”
Andrew McConnell, Rented.com
“In the Long Term, and even Medium Term, we can expect the exact opposite: “fewer & bigger.” Just as the 1950s on saw a shake out of the hotel industry where today four large companies account for >70% of hotel bookings globally, we will see a similar consolidation and shake out within VR.
Just the past few months have provided excellent examples of this as Wimdu and 9flats combined forces and Accor acquired onefinestay on the consolidation front, and a number of startups went under (LeisureLink, Vacasol, Gloveler) on the shake out front. This consolidation, convergence, and destruction will continue, and continue ever more rapidly as the industry continues to grow.”
Stuart Lansdale, Roomfilla
“Now, there are still competitors to AirBnB. Expedia, TripAdvisor and some sites in China are doing some great things on a global scale, but you have seen the trend go and it will increase; HomeAway got bought by Expedia, HouseTrip got bought by TripAdvisor, 9Flats and Wimdu just merged operations. Consolidation is happening and aggregation is happening.
The vacation rental industry is becoming more commercialized and that is OK. AirBnB has over 2.5 million listings globally but they make the majority of their listings from their Superhosts. Superhosts account for a small % of the total listings, but most superhosts will be operating more than one unit.
Sites are also pushing consumers to go to instant book a lot of the time. There will be a major backlash against this in the next two years when stories start to emerge of bad things happening. AirBnB and HomeAway see the discrimination studies that come out as a way to push this instant book agenda, but at the end of the day most hosts wouldn’t host to a frat on spring break no matter where they come from.
The future is more commercialization, bigger players owning swathes of certain markets and a power struggle between these guys and the sites that make them the money.”
Richard Vaughton, Rentivo
“1. OTAs will chase the instant book to assist bundling and dynamic packaging. HomeAway has 11% on instant book, but this is 95% managers, so expect OTAs to love up managers and this means channels, payments and technology.
2. More consolidation of smaller managers and increasing size of supermanagers, who will content with OTAs themselves.
3. Disruption by aggregation of managers and inventory at a local level
4. Niche market focus that OTAs cannot adapt to.
5. New direct and secure payment technologies and systems to reduce fees
6. Open channel systems that allow generic developers to hook to OTAs
7. AI but this is long term and will be intermediated with “clever” tools and hardware integrations
8. Consolidation of some OTAs and collapse of some other legacy-based systems.
9. Consolidation of channel managers
10. Price increases to guests.“
Trend #2: Increase in VR Management Sector
Marc Figueras, KeyNest
“The VR management sector is increasingly fragmented as there are no barriers to entry. In fact, many of our clients at KeyNest are profitable from day one. In London alone there are over 100 Airbnb management companies, often concentrated in a particular area of the city, much like real estate agencies.”
Paola Gheis, FullyBookedHome
“We will also witness a growth in the development of services in VRs in different forms. Services management platforms, such Vreasy, will spread and develop more. Most recently we read about the Bermondsey Square Hotel in London that agreed to offer its services to the Airbnb vacation rentals around within one mile radius: if you can’t beat them, join them. A great example of energy spent in the right direction.
Instead of fighting against the “evil” VRs as most hotel lobbyists do, this British hotel takes the lead and innovates by creating something new that the market needs. Creating a profitable alliance between two “enemies” is the right way to go. In vacation rentals, the services are seen as ancillary revenues but they will become the biggest chunk of the revenue where the rental is just the fraction of the overall spending of a guest traveller.”
Gene Brothers, Destination Analytics
“With the VRM being fragmented, the next development for the sector needs to be adoption of an integrated tracking dashboard so that VRM can see their performance over time. This technology also tracks how they compare to their destination. With transaction data from software management systems this capability is currently available. Managers will see the competitive advantage of using tracking technologies to enhance revenue management and promotion efforts.”
Trend #3: Greater Host Independence
Romain Giacalone, BookingSync
“It will be an education process for hosts, non-pro ones will have to learn how to publicize their house, sell it and provide a great guest experience. Not all of them are doing it right now. Individual owners are more and more tired of housekeeping management.”
Danny Vaughton, Smarthosts
“I see a future with a true decentralised structure – what Sir Tim Berners Lee refers to as “Web 3.0”. His idea is to:
To bring back power to people. We are thinking we are going to make a social revolution by just tweaking: we’re going to use web technology, but we’re going to use it in such a way that we separate the apps that you use from the data that you use
What does this mean? Well, instead of booking your next vacation rental through an intermediary, such as Airbnb, you’ll booking it direct with the owner. This will be achieved through a truly decentralised listing website which uses blockchain technology. But would it work?
Many people would argue it simply wouldn’t work because once again a large corporation controls the decentralised network and always has the ability to build in hidden fees and make more profit. However:
Github is the posterchild for this: a $2 billion company built entirely as a value-added service on top of the decentralised technology of Git – despite users being able to trivially take their data and leave at any point – Matthew Hodgson
Owners and managers would control their data and their destiny. The companies who manage the network will operate in a similar fashion to Github – by making money with value added services (instead of taking a percentage of owners’/guests’money) which they charge a nominal monthly fee. Users will actually WANT to pay them monthly for these extra services because they don’t feel cheated.”
Trend #4: New Technologies
Danny Vaughton, Smarthosts
“There’s been lots of talk about chatbots, personal assistants & artificial intelligence. For me, apps like Lola are really interesting.
However, A.I clearly isn’t good enough yet because they still use real people – but for how long? Additionally, the thought having to text people, wait for their response, go back and forth, not see detailed information and trust they’ve not made any mistakes is still pretty tedious. It’s hardly ‘frictionless’.”
Trend #5: More Vacation Rental Competition
Tuomas Aarni, CubiCasa
“I think that vacation rental hosts aren’t always competing with hotels, instead the competition is between VR hosts. It could be that now or in the future, VR hosts are actually real-life estate agents.”
Andrew McConnell, Rented.com
“In the Short Term, we are likely to see “more & smaller” drive the industry. Airbnb, and its astronomic valuation, is attracting all sorts of new entrants into the space thanks to a gold rush mentality. If we had 25,000 or so professional rental managers globally a few years ago, I think we can expect that number to cross 40,000 in the next few years. I have been approached by literal teenagers in high school saying they are looking to become property managers, and asking me for help growing their “business” (NOTE: we at Rented.com turn them down as customers since we believe in more professional management). More and more people are pouring in, and since so many are new, the players on average are getting smaller and smaller.”
Paola Gheis, FullyBookedHome
“As the VR market is growing and is becoming more mature, I am seeing an increase in training and education consumption by hosts shifting from amateurs to professionals. Villas competition is increasing year after year, and now property owners and property managers will have to make more educated and intelligent efforts to stand out and get their slice of customers.”
Trend #6: Location, Location, Location
Kathleen Lasater, GoCozumel
“I think it depends on the location of the vacation rental. I believe the future for vacation rentals is excellent for a location like Cozumel, Mexico or I still would not be in the vacation rental business.
Cozumel is a safe place to vacation and a wonderful place to spend a week… or two weeks. Some of our guests even spend a month or more. The cost of accommodations and food is reasonable, the weather is beautiful, the people are kind and gracious, scuba diving and snorkeling are wonderful, the water is beautiful and there are a wide variety of beaches. At the same time, Cozumel is not undeveloped. There are several very large grocery stores (even a Sam’s Club) some great restaurants with very reasonable prices, good doctors at several hospitals, quite good internet service, phone service, cell phone service and cable TV.
Having lived in Cozumel for 16 years it’s like living in a Caribbean paradise with beaches and turquoise blue water, but at the same time enjoying creature comforts such as air conditioning, phones, WiFi, great restaurants, cell phones and cable TV.”
Sasha Rosewood, SenStay
“I’m going to narrow it down to ‘What high-level things should mom and pop vacation rental owners consider in the next few years?’
In super generic terms, this boils down to where your properties are.
Vacation destinations: These places have had STRs for years. There aren’t legislation headaches and Airbnb has minimal penetration vs other more urban markets. For the most part it will be business as usual. Market will continue to get more efficient. Consolidation will increase as that increasingly becomes the only viable growth strategy. Yes, ‘the industry is moving towards instant book’, but that is mainly just noise. Will not affect your day-to-day much and best saved for a different discussion. An aggressive strategy for you would be to go an acquisition spree and try to cobble together a cluster of units that someone like Vacasa would buy. I don’t recommend that for most. Master-leasing your unit(s) to a professional company and pivoting to some other field might be your best bet. Very situational here.
Urban markets: These are your Manhattans, Santa Monicas, etc. Travel in a time machine to three years ago and you’d have a massive arbitrage opportunity on your hands. Now, it’s dicey. You have legislation up in the air and revenues have mostly been trending downward. There is still money to be made, but pick your units very carefully and get out of the ones that aren’t making a killling. Diversify to multiple cities and have backup plans (i.e. A secondary Airbnb account with listing shells built, ready to turn on if the hammer comes down and your account gets quarantined). Legislation will come, but it won’t be fun along the way and there will be collateral damage (see Globe in LA).
Hybrid markets: This is the money zone. If you’re already in them, fantastic. If you’re not, good luck.”
Trend #7: Focus on Guest Experience
Martin Picard, Vreasy
“As property managers and hosts see that their places are being more and more commoditized by the large booking portals, there is a search for the best way to stay relevant. Certainly, a great website such as the ones Lodgify, Rentivo and others can supply is one important step, but without a great guest experience strategy it would be very expensive to drive traffic to one’s website.
So, I believe the best way to develop independence, guest loyalty and to build a brand is via a strong commitment and focus on guest experience. This takes strategy and careful creation of one’s guest experience system. Trends in travel technology mean that concierge apps and any one method of communicating with users are doomed to be less important than how you categorize your guests into personas to which you cater in a unique way. And data and especially metadata will be key going forward.
Property managers need to do some introspection and identify where they are really unique and how far they are willing to go for their guests and their brands. Finding the right guest experience methodology can ensure long term success.”
Do you have any more insights to add? Let us know what YOU think about the future of the vacation rental industry in the comments.
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