The Ever-Evolving Vacation Rental Ecosystem

James Burrows
2/13/2020

A business ecosystem is defined as a network of organizations ─ including suppliers, distributors, customers, competitors, government agencies and more ─ which is involved in the delivery of a specific product or service through both competition and cooperation. Each business affects and is effected by the other players, creating a constantly evolving relationship. Just like any other ecosystem, the businesses are linked together through cycles and flows of data between each other.

The vacation rental ecosystem consists of hundreds of companies offering different products and services. We’ve listed 33 categories of tech and supplier companies in the Who’s Who of Vacation Rentals 2020. This doesn’t take into account the huge number of channels, short-term rental suppliers and now the hotel sector, which is converging across both segments.

Convergence in the industry is currently stemming from hotel companies like Marriot and Accor entering the vacation rental sector as both suppliers and bookers, and also companies such as Sonder and Stay Alfred working with the master lease model. Continuing the theme of convergence, many of these master lease-based property managers are functioning more like hotels rather than traditional vacation rental operators.

Although the vacation rental market is worth more than $100 billion now, it’s still dwarfed by the $600 billion valuation of the hotel sector. I’m sure that many vacation rental specialists will start seeing the huge potential in tapping into the opportunities that exist as the lines become increasingly blurred.

Google’s entry into the ecosystem has been eyed with enthusiasm and keen anticipation of the riches it might bring. The development has been slow, but it’s only a matter of time before Google starts to make a real impact. How this impact will play out remains to be seen as Google has the potential to, not only disrupt our ecosystem, but also to create its own.

Undoubtedly, the next big question is: When will Amazon enter the fray? A $12 billion annual revenue from selling ad space to third parties means it’s not a question of if they enter ─ it’s rather a question of when. What’s also important to note is that unlike many other platforms, Amazon doesn’t rely on traffic from Google to generate business. This will be a major advantage, given the online travel agencies (OTAs) are starting to look for alternative methods of driving traffic to their platforms.

After the recent announcement at the Skift Short-Term Rental Summit, even Kayak is finally getting in on the act by partnering with Lyric. The deal demonstrates further integration in the industry as Lyric plans to bring its full inventory to the platform in time.

Our ecosystem is highly complex, and the property management systems (PMS) see themselves as the heart of this network. The big question is, are they really the best platforms to handle both the connections and the data?

What we’ve witnessed so far is a number of companies offering more of a marketplace, rather than a symbiotic system of companies that rely on each other to create more value than their individual offering for the customer. As customers start to streamline their businesses and demand a more integrated approach between all of these connected companies, the landscape will likely shift again.

One thing for sure is that new service providers will enter our market looking to either improve the guest experience or help the suppliers optimize their business and reduce operating costs.

Within the ecosystem, there’s been consolidation on multiple facets:

• On the Supply Side: Consolidation has never been so active. Four property managers realized the potential of combining resources and created ALTIDO. Furthermore, Vacasa bought Wyndham Vacation Rentals, making it the largest portfolio of vacation rental properties for one company in North America. But whilst there are now some supercharged property managers growing at an incredible pace, the top 20 in the market still only contribute under 1.5% of the global supply. 60% of the market is the individual host or long-tail market.

• On the Tech Front: The Greater Sum Ventures and Insight Partners roll-up has started the consolidation run on tech companies. There will certainly be more in this area going forward.

• On the Demand Side: Whilst channel consolidation has been going on for years, there are now more niche channels; this can really make a difference to many local vacation rental companies relying on local channels to drive bookings and additional value. Whilst the large players will continue to drive volume, the local, curated and themed niche sites will play a more important role over the next few years, widening the diversity pool. Watch out for sites such as The Plum Guide, CoolStays, Florida Rentals and BringFido, to name just a few.

In 2020, I would expect our ecosystem to flourish and change to reflect the fast-moving pace of the industry. Convergence between sectors will break down our traditional boundaries, big players will start to move into the space and consolidation will continue alongside the development of niche specialists.

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