The introduction of the shared economy business model has given a much deeper meaning to the term “global village.” Pioneers like Uber, for example, took the value of the work / life balance to a whole new level, making it easy for independent contractors to earn a decent living while having the flexibility to focus on other important life matters. These companies were able to get the general public to embrace their model by providing a service that was infinitely better than what was already out there. The shared economy has been wildly successful in numerous industries – now most prominently, in the vacation rental sector.
Marketplace companies like Airbnb, HomeAway, and VRBO have significantly changed the way people vacation. Rather than staying in an expensive hotel with little space and no kitchen, travelers can rent a full home with more amenities for less money. On the flipside, those renting out their homes now have a highly profitable means of making supplemental income. This is one of the reasons thatFinTech, or Financial Technology, has become such a hot industry. Individuals (not large companies) are taking credit card transactions online and need to be protected if they fall victim to fraud. That’s where companies like ours step in and work with vacation home listing sites toprocess payments, assuming some of the risk for individual property owners so they can continue to focus on growing their business.
With over 10 years of powering payments for the vacation industry as well as global marketplaces, HomeAway and VRBO, we believe the following trends will have a big impact on the vacation industry in 2016:
The Demand for First-Rate Technology
Millennials didn’t grow up using travel agents or calling hotels to find the best deal. Like every other aspect of their lives, they use technology to get what they need and don’t have the patience for long sales processes. The speed and ease of making payment transactions on sites like Airbnb, HomeAway, and VRBO is one of the many reasons millennials are turning away from traditional hotels.
When someone chooses the shared economy option, however, it means they are using an untrusted vacation experience provider. Therefore, users need to feel safe when it comes to making and taking monetary transactions. Payment platforms such as YapStone’s provide a “trust layer” or “trust middleware” between the vacation guest and the vacation rental owner, so that both feel protected against fraud. With the high growth of the vacation rental market has come the exponential need for reputable payment gateways.
“Experience” Seekers Are Dominating the Market
Not all vacation planners are choosing chic, five-star locations. In fact, many travelers are opting for a unique “experience” that allows them to learn about a new city and how its inhabitants live. This is not something you can usually get by staying in a hotel or resort, so folks are using shared economy platforms to book a stay in somebody’s home. This way, they can feel like one of the “locals.” It’s also more cost-effective.
Most of the time, booking a hotel room is far more expensive for an extended stay than going through a shared economy vacation rental platform. Plus, there’s much more room in a full home, so multiple people can stay and split the rental costs. On top of that, homes typically have a full kitchen – which means the renter can cook, rather than spend most of their vacation money eating out all of the time.
Vacation Rental Sites are Racing to Become Mobile First
Most online vacation listing sites were originally designed for desktop experiences, using numerous pictures, a great deal of verbiage describing the property, and intricate amenity charts – which is not conducive to the mobile experience.
A recent study by eMarketer reported that 48.5 million adults booked their travel through mobile devices last year. Because of this staggering number, rental platforms are urgently migrating their websites to be efficient for mobile transactions.
As travel has become easier and more accessible, even the hotel industry is taking a closer look at the shared economy and its impact. Perhaps by 2020, hotel revenue will drop significantly in favor of the more cost effective shared economy option? Stay tuned.
Tom Villante is the Chairman and CEO of YapStone, a global provider of full-stack payment solutions for global marketplaces and large vertical markets. YapStone powers online and mobile payments for HomeAway®, VRBO®, and thousands of apartment and vacation rental companies, homeowners’ associations, self-storage companies, hospitality establishments and non-profits. YapStone processes over $17B in payment volume annually and has been recognized for its growth, ranking on the Inc. 5000 list of Fastest-Growing Private Companies for eight consecutive years and named to the Forbes’ List of America’s Most Promising Companies in 2015.