The Issue of Value Proposition and the Professional Vacation Rental Industry
5/9/2019
Distinguishing your business from the crowd is one of the fundamental challenges for business strategy for any property manager. There are a ton of books and advice available out there to help businesses of all kinds both create and maintain an advantage in order to attract and keep customers.
Common business sense prevails that there are several ways to ensure you are creating value for your customers that your competitors may not. The first is around price. However, no one really wants to gain an advantage by being the cheapest, which may also mean engaging in a race to the bottom. But differentiating your business on price by cutting costs or reducing margins is one way to create an advantage and attract guests or owners.
Another area to create a competitive advantage is through service. As property managers, you can ensure that you offer the best possible service to your owners in several ways. This can be through communication, ease of working practice, delivery and going the extra mile.
As a provider of a travel product, you can create an advantage and an exemplary guest experience by having the most attractive offering from the start of the booking process right through to post stay. Again, this can be created through communication, booking process, brand, personalization and the actual physical product.
However, this whole topic of competitive advantage got me thinking about the bigger picture for the vacation rental industry. How does the industry stack up against other accommodation choices? What gives vacation rentals a competitive edge and, perhaps more importantly, is the industry able to communicate these advantages effectively?
Last year at the VRMA European Conference in Paris, Simon Lehmann from AJL Consulting talked about the fact that the biggest issue in the professional vacation rental industry is around supply of inventory.
As Simon reminded us, supply is not just about the sheer number of properties on the market. It’s also about the quality of those properties and their availability. A million units could come on the market tomorrow, but if the quality is substandard or the inventory is only available for a few limited weeks off-season, then as an industry, we have a vacation rental supply issue.
Simon went on to talk about fact that in his view, the bigger picture problem for the professional vacation rental industry is that property managers need to get a lot better at communicating their value proposition. On one level, this means that managers need to improve how they explain the tangible benefits for owners when they outsource the management of their properties to them rather than opt for a DIY version, or not bother at all.
If this failure to communicate the benefits of professional management doesn’t improve, then vacation rental management businesses not only risk losing out on converting owners who may well be considering managing and/or marketing their properties themselves, the industry will also fail to gain access to the millions of properties around the world that are currently not yet on the rental market.
The vacation rental industry as an entity also needs to up its game and do a better job at communicating why a traveller should book a rental over a hotel. As Phocuswright research shows, travelers aren’t necessarily looking for specifics of what they book. They are simply looking for accommodation, and the lodging that meets their needs in the moment of decision making is the one that will get their dollars/euros/yuan.
However, there is still much reluctance for booking a rental from travelers concerned with the quality of the product when they arrive and turn the key. Although perceptions are improving, vacation rentals still suffer from a somewhat shady reputation for being inconsistent in terms of quality, amenities and service. Even though perhaps much of the blame for this reputation is as a result of less experienced managers and owners doing it for themselves, professional property managers still need to address this issue and overcome the reluctance.
How can the professional vacation rental industry get better at communicating its value proposition and gain a competitive advantage over other options? First, the increasing attendance of managers at the VRMA conferences is encouraging. Joining professional organizations, participating in industry dialogue and acting as a collective is vital for moving forward.
Increased exposure in the media, and consistent and clear messages about the value of professional property management for owners and for guests is also necessary. Communicating the transformation of management processes occurring through increased use of technology, but without losing sight of the unique and special qualities of private accommodation is important. It’s also crucial to actively engaging in conversations about regulation and social impact.
As with many elements of the vacation rental industry, due its very nature of fragmentation, diversity and low barriers to entry, the issue of value proposition is not going to be easily solved. However, clear steps are being made to head in the right direction.