For a long time, technological change in the vacation rental industry meant, almost entirely, systems improvements. This consisted of better accounting, marketing, reservation tracking and other process efficiency upgrades. But new technologies already in place aim to disrupt the entire business, to re-think not just the processes, but how they work together. Uber and Lyft disrupted the old taxi business by taking advantage of app technology for smartphones. Amazon used the Internet to disrupt brick-and-mortar retailing. In the VR universe, technology-driven improvements such as dynamic pricing, automated booking, yield management and “smart homes” promise to disrupt many if not most of the traditional assumptions of VR management.
Recently, Steve Milo, founder and owner of Vacation Rental Pros Property Management LLC, and Cliff Johnson, co-founder of Vacasa, talked to VRMA Arrival about technological change, and how VR managers can best take advantage of the benefits these new changes offer. Technology has always divided business executives into adapters and resistors, but both Milo and Johnson believe the new changes now revolutionizing vacation rental management firms (VRMs) will determine who survives and who doesn’t.
As Cliff observes: “The days of VRMs managing their businesses in handwritten books is going away. Increasingly, VRMs who are resistant to technology are retiring, passing the baton to the next generation and ushering in an era of innovation unlike the industry has ever seen. I think that the more established managers who weren’t already on the path to change and have a negative view of technology have mostly gone through the grieving process and either gotten on board or gone away.”
According to Steve, if your organization views technology as a core strength of your company, then the changes will be viewed as mostly positive. “Either way, the pace of change and the disruption created by technology will actually accelerate over the next few years. The vacation rental space itself is growing rapidly through increased demand from consumers, and there is simply too much money that is flowing into the vacation rental sector.”
Steve believes the purchase of HomeAway by Expedia was probably the single biggest impact on the core vacation rental industry in the last five years. In his opinion, the technology that impacts property managers is the online travel agencies’ application programming interface, or API, which requires configuration to optimize results within their search rankings. For instance, HomeAway has moved to ‘lodging rates,’ which requires changing the way you configure your rates in your vacation rental software. The lodging rates are actually very logical, but the amount of work to make this change can be daunting, and HomeAway is just one of several OTAs.
The disruptive part of this example, according to Steve, is that if you do not follow the OTAs’ ‘best practices’ then you will drop within their rankings — unlike in the past when you could buy your way to the top.
OTAs and their utilization of disruptive technology is truly revolutionizing the entire VR industry, Steve believes.
“Five years ago, most property managers received emails and phone calls regarding property listings – and this required systems in place to manage the reservation team and the email inquiries. Today, almost all interaction within an OTA is from a direct booking or a closed communication channel. This has a major impact on your staff, your guests and even your property owners who provide owner referrals by listing on these sites,” he says.
“The other area where OTAs are disrupting the market is on the paid-for-click side, where they are bidding up advertising costs by a large amount year over year. For property managers in markets with a large percentage of repeat guests, the impact of this disruption is less severe. For property managers in markets who have less repeat guests, the impact is significant.”
Improving the Experience
From the guest’s point of view, disruptive technologies can be real time-savers and efficiency-makers, says Cliff. These type of ground-up changes, he notes, “make it simpler than ever for guests to find and easily book the homes they want. On the other hand, dynamic pricing technology can result in steeper charges for homes historically offered at a flat rate. In the end, more guests than ever are booking homes. I think they appreciate the technology more than they resent it.”
And for homeowners, Cliff adds, “technology has created more transparency. It gives owners the ability to easily do things like block their calendars, see who’s staying in their homes, and access insights about how their homes are performing against others in the market.”
Besides innovations such as dynamic pricing, which bases rental charges on a supply-and-demand formula, both Steve and Cliff think disruptive technologies will change the nature of the rental homes themselves. Advancements in smart home technology have provided a solution to one of the industry’s oldest problems: How can we get more insight about how guests are using our homes without invading their privacy?
Steve agrees, but thinks technology is ready to go much further. “We are going to see significant changes in home automation systems and the way they interact with smart locks, HVAC, pool heat, cleaners, service personnel and even systems like noise monitoring,” he says. “The Wi-Fi or cellular-enabled controller within the property is the brain that makes all of these advancements possible, and we will see radical advancements in the next few years that will transform the guest experience.”
Just imagine, for example, if the controller was something like Alexa from Amazon. If you had a controller device like Alexa tying into your vacation rental software system, you could leverage tremendous opportunities. Digging further into this example, with Alexa and Amazon Prime, your guests could order in advance groceries or rental supplies or even travel experiences like tours or events; and your housekeeper or service technician could order parts.
In a VRM’s central office, Cliff believes inventory control management software will increasingly allow managers to micro-manage (in a good way) properties and how they’re rented via yield management, or what he calls, “the ability to automatically adjust rates based on market conditions.” Cliff considers yield management to be “one of the biggest changes in the industry, and those who don’t embrace it will be leaving money on the table. Fraud detection technology makes instant booking possible without unwarranted chargebacks. We’ve been using it since day one at Vacasa, but advanced technology has allowed us to do it in a more sophisticated and effective manner.”
The key to making any technology improve a business is to manage the technology rather than have it manage the managers. “Too many property managers abdicate technology to someone else in their business. My advice is for business owners to be hands-on,” Steve says. “If you have never used Airbnb, then start using it. And experiment with listing one property and managing it yourself. If you do not understand how rates within your vacation rental software work or how they are configured – take a course and try to learn. These software companies have online knowledge sites and yearly conferences. The priority of technology starts with the principle of the business embracing, owning and learning the technology so that they can lead their staff.”
“Technology is expensive, so you want to prioritize the outcomes you’re looking to achieve,” advises Cliff. “First, determine a differentiator for your homeowners and your guests: What’s the biggest improvement technology could realistically help you make for each side of your business? Next, make a technology execution plan. A lot of VRMs focus on improving the guest experience first. I’d argue there’s better return on improving the owner experience first. Of course, it’s your choice! Take a look at how much of your overall budget you can afford to spend on annual tech improvements.
“Don’t try to do everything at once,” Cliff cautions. “Instead, try to launch one big improvement project each year.”