VRMA

    Trends in the Vacation Rental Industry: Q3 2016

    This article is part of an ongoing VRMA quarterly series that reviews the top trends in the vacation rental industry. For those new to the series, you can find earlier posts under the VRMA Blog Contributor Page. This series synthesizes major trends and developments within the vacation rental industry over the period. The goal is to stimulate discussion and debate, so please use the comments section at the bottom of this post. Please reach out to Andrew McConnell, a@rented.com, with any trends you think have been left out and what vacation rental managers (VRMs) can do to benefit from positive trends while limiting the detriment caused by negative trends.
     
    Perhaps the biggest news to come out of quarter three is that the Founder and CEO of HomeAway, Brian Sharples, stepped down. Not necessarily a trend in itself, his replacement, experienced Expedia executive, John Kim, signaled that this is part of the larger trend that shaping this quarter: The Big Boys taking all the fun out of guessing what comes next.
     
    You see, just a few days before the announcement, on stage at RezFest in Orlando, Sharples told the crowd: “You have a huge advantage, as a professional manager, against your competitors [self-managers] with the new best match algorithm.”
     
    The transition of HomeAway/VRBO from a listing site for “Rent by Owner” homes to a booking engine for professional VRMs was made explicit. The next day, at the same conference, this was even further confirmed when John Suzuki told the crowd of professional VRMs: “You have the advantage.” The official passing of the torch from the architect of the HomeAway roll-up to the former chief product officer of Expedia just served to further reinforce this point.
     
    And this move to favoring professional management is not only being driven by HomeAway. Quarter three saw the other behemoth in the space essentially admit what many have been saying for a while: Guests prefer more professional management.
     
    The first admission was slightly less explicit, requiring some reading between the lines when Michael Endelman, Airbnb’s head of North American vacation rentals told Skift that instant booking was “going mainstream.” Who abhors instant booking? Self-managing owners/hosts. Who is best positioned to accept them? Professional managers.
     
    But it didn’t take Sherlock Holmes to read the writing on the wall when Airbnb then launched its “Search for a Superhost” page, or rather the “Please Work With a Professional” page.
     
    Airbnb has been making its money as a cut of the total booking amount for a while, something that is relatively new to HomeAway. Who is going to get more bookings at higher rates, and thus make Airbnb more money? A homeowner renting out his or her place part-time? Or a professional rental manager, “Superhost,” who is operating this as a business?
     
    The guest wins. The owner wins. The manager wins. And of course, Airbnb wins.
     
    So the trend we have been calling for a while is fully upon us. The tide has turned to favor professional vacation rental managers over self-managing hosts and homeowners.
     
    All of that should be good news to readers and VRMA members, and it is, but it comes with a caveat. With all of this, the game has also changed.
     
    In the past few months, I have spoken to a number of banks, private equity firms and venture capital firms doing due diligence on management companies in which they were looking to invest. With this shift to favoring professional management in the space, professional investors are sensing a huge opportunity. The trend of big dollar raises started by Vacasa continued publicly this quarter when Flatbook rebranded as Sonder and announced its most recent round of fundraising ($10 million).
     
    The point being that, yes, everything is there to fight for. But the operative word is fight.
     
    There is a lot of money to be made, and as a result, people with very deep pockets are starting to pay attention. When the competition heats up this much, there are no doubt big winners, but there are those less fortunate. Think of the recent shutting down of LeisureLink, Vacasol’s bankruptcy filing and Gloveler entering preliminary insolvency.
     
    So all of this raises the question: What will you do to ensure you end up on the winning team?
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