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    How to Stay Ahead of Changing Trends

    Booking a vacation rental used to be hard. I remember calling “central reservations” or looking through classified ads in the newspaper in the early 1990s, trying to find that weekend getaway in the Colorado ski towns. You had to rely on agents describing, over the phone, different properties ─ basically, you had to trust them completely. 

    In the late 1990s and early 2000s, new technology combined with the internet brought us VRBO and HomeAway. A few years later, Airbnb—in addition to dozens of other national, regional and niche short-term rental platforms  popped up, providing a welcome alternative to the established vacation travel industry.

    But shopping on VRBO (and other sites) 10 years ago was frustrating and time-consuming. You had to call or send an email to each owner, hoping they would respond. There were limited ways to search and the booking process was almost entirely offline, unpredictable and inefficient. Strong traveler demand for short-term rentals kept bringing people back, propelling their willingness to deal with whatever kind of shopping and booking process ─ no matter how challenging. The process was still significantly better than the pre-internet days, with VRBO and others successfully aggregating huge volumes of available rentals online.     

    The rise of these online vacation rental platforms ─ combined with advances in technology and a customer base eager to book and stay at these properties ─ resulted in vacation rentals becoming a huge part of the travel industry. To keep pace, property owners and managers must educate themselves on growing and emerging short-term rental trends, strategies and challenges.

    Great(er) Expectations

    Today’s travelers have high expectations. They want to book a vacation rental quickly and easily online, just like they would book a hotel. This crowd is increasingly comfortable with technology and online processes. They’re looking for memorable moments, Instagram-worthy backdrops and extra perks to make their social media friends swoon. To ensure those expectations are met, today’s travelers are doing more research than ever before. They are poring over online photos, reading reviews and confirming prospective rentals include necessary amenities, such as smart TVs, gaming systems for the kids and Wi-Fi.

    Customers in today’s competitive travel market expect high-quality listings on sites such as Airbnb or VRBO. Photos that are grainy, poorly lit and display cluttered or messy rooms are a big turnoff. Travelers want to see high quality, high-resolution photos that are meticulously curated to make them feel like this is exactly the rental they’ve been looking for. They also want to book a property, instantly, online. It’s also important to be responsive to a traveler’s questions or concerns in a timely manner to avoid losing them to a competitor.

    Bye-bye Subscription Pricing; Hello Transaction Pricing

    Years ago, leading short-term rental sites were free for the traveler; you simply paid the nightly fee to the owner or host when booking. Today, the cost of listing on a vacation rental website has shifted and is shared between both travelers and homeowners. The days of property owners and managers paying subscription fees to list properties (which was the VRBO pricing model) is basically gone. The industry has converted over to transaction pricing models, with both owners and travelers paying commission fees on bookings.    

    The short-term rental marketplace has never been more competitive ─ nor has it ever been in such high demand. Although major short-term rental platforms now take a cut from booking profits, a lot of that money is used to drive more traffic, attracting more and more travelers to these websites.

    Expert hack: List your property on multiple platforms that don’t charge until a booking is confirmed. This will increase your property’s exposure without paying dollars out of your pocket before you have a booking. 

    Guest Reviews

    Online reviews and social media are changing the game for businesses across the spectrum, and rental properties are no exception. Negative feedback can have negative consequences for any business, but for short-term rental owners, negative reviews are proving to be especially harmful.

    Property owners and managers must keep their online reputations strong by striving for customer satisfaction. Be forthright and honest when advertising your property. Highlight the strengths of the property, but be clear about the location, amenities and views.  If the property is older or not in a great location, price the nightly rate accordingly. 

    If you are self-managing (Rent by Owner) or a property manager (managers usually know this), you are in the guest services business. Your guest is coming for a week or weekend getaway. Put nice TV’s in the property with high-speed internet, cable and popular video streaming services. Make sure the property has all the basics like utensils, wine glasses, soap, detergent and more. Think about what guests want, what will make their stay better and what extras you can provide to meet or, better yet, exceed their expectations. 

    New Players and Changing Dynamics

    Just a few years ago, Airbnb and VRBO were the new kids on the block, challenging the status quo and providing a viable alternative to hotel stays for vacationers. But, as the industry grows and the appetite among travelers has increased for rentals, the definition of what encompasses a vacation rental is evolving. New players, such as ApartmentJet, Lyric, Sonder, Stay Alfred and many others, are entering (and changing) the market.

    Many of these operators are raising the bar for short-term rental properties, offering professional management services and providing a consistent, higher level guest experience. The short-term rental market now includes apartment operators (multi-family) specifically designed and offered to meet the needs of specific traveler demographics like business and higher-end travelers. These properties are often homogeneously presented as upscale and luxurious, as opposed to the more home-y feeling of privately-run rentals. Today’s multi-family unit properties are often branded and share a similar look across various locations.

    Marriott recently announced they are entering the short-term rental space in a big way.  These types of operators will be focused on providing a consistent and high quality guest experience.

    Cottage Service Industries Rising

    The rise of the short-term rental market isn’t just benefiting property owners. It’s also creating a surge of opportunities for the service providers and technology-based tools required to help run and operate rentals, including:

    • Payment solutions: Credit card processors now provide multiple cost effective options, customized for the vacation rental industry. 10 years ago, most payments for vacation rentals were made offline, generally via check or cash.
    • Insurance products: Insurance providers have brought to market several products that have changed the industry. Damage deposits have been replaced by low cost insurance policies, paid by the guest, that cover any damages. New property and casualty policies, customized for short-term rentals, are replacing traditional homeowner policies that often don’t cover the risk involved with short-term rentals.
    • Tools: There is a ton of new technology (such as apps you can download onto your phone) to help manage guest interaction, cleaning service interaction, home system management (i.e. Alexa, Nest, security and more) plus networks of professional photographers and home video/virtual tour solutions.
    • Accounting & tax: Property managers and homeowners need accounting and tax services for their rental business, which includes bookkeeping, 1099s, income taxes and lodging taxes.
    • Property managers: Property managers have always been a huge part of the short-term rental industry. We are seeing new entrants and new business models in this space. The increasing change, complexity and competition in the market is making property managers more valuable. These pros have a handle on where the industry is heading and what it takes to secure renters, improve guest experiences and operate efficiently.

    Local Tax and Regulatory Changes

    Short-term rentals are now mainstream, but this success and has led to pushback in many communities. There are debates raging across the country over how to regulate and tax short-term rental properties.

     Current changes we’re seeing in tax and regulation around the vacation rental space include:

    • An increased focus and enforcement on short-term rentals, which includes licensing and ensuring owner and operator are paying required sales and lodging taxes. Historically, many property owners were unaware they needed to collect and remit taxes on their rental, what tax rates to charge and how to comply.
    • New regulations and policies covering how short-term rentals can operate, sometimes limiting the number of units in any particular area, the number of days per year allowable to rent and requiring only owner occupied rentals, not second homes.
    • Leading platforms such as Airbnb and VRBO are voluntarily collecting and remitting certain taxes across the U.S.  
    • New legislation requiring platforms to collect and remit taxes, as well as more tax requirements for homeowner and hosts.

    The growth in the short-term rental market has been astounding, it shows no signs of slowing. In fact, we are still in the relatively early stages of the industry and there are more changes to come. In this growing and changing environment, property managers and owners will need to stay informed as the industry evolves and matures to ensure the success of their businesses.


    From Issue 6 of Arrival, 2019


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    Rob Stephens co-founded Avalara MyLodgeTax (formerly HotSpot Tax) in 2002 out of a necessity to understand and manage compliance with his own rental property. Avalara MyLodgeTax is the leading provider of tax compliance solutions for the vacation rental industry, simplifying compliance and managing licenses and tax filings for thousands of vacation rental owners and managers across the US. Rob regularly applies his passion for and knowledge of complicated lodging tax compliance in the vacation rental industry to speaking engagements at industry events. He has owned and managed his own vacation rental in Vail, CO since 1999.

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