This is part of an ongoing VRMA series of quarterly reviews of the top trends in the vacation rental (VR) industry. For those new to the series, you can find earlier posts under my VRMA Blog Contributor Page.
As a reminder, the intent of this series is not to be completely exhaustive of all events that have taken place over the quarter, but rather to synthesize the major trends and developments within the industry over the period. The hope is also to stimulate discussion and debate, so please use the comments section below. What trends have I missed? What can vacation rental managers (VRMs) do to benefit from the positive ones, and to limit the detriment caused by the negative ones?
With summer now officially over, we are about to enter the last quarter of 2014. What have we seen over the last several months within the industry? The one overarching trend for the industry has been an increase in visibility. There are numerous instances of this, but no doubt, you each have your own examples.
More interesting are the sub-trends that are driving this increase in visibility, and those resulting from it. Namely:
- Vacation rentals impact beyond the industry
- Coalition building to fight the industrys growth
- Greater recognition of the benefits of the industry
- Increased attraction of the industry to criminals
Below I will briefly touch on each trend and its implications for VRMs, as well as the industry as a whole.
The continued strong growth of the VR industry has taken vacation rentals as whole to a size where its economic impact is being felt beyond the confines of the industry. This outsized economic impact is being felt most noticeably in two areas: home sales and hotel bookings.
Driven in no small part by the increasing popularity of vacation rentals, vacation home sales are up nearly 30%.
And though this has driven prices up 12.5%, the rate of growth is actually expected to accelerate this year. It is too early to tell how long this growth spurt will continue, but when more than half of vacation homeowners report being booked for at least the first half of the year, it does not look likely to end any time soon.
The impact on hotels is perhaps less welcome, at least for hotel owners. Economists and hotel owners alike point to the growth in popularity of vacation rentals, as well as sites such as Airbnb, for declining occupancy rates and average room prices in budget hotels from Texas to the Netherlands. And though hotels as a whole have been experiencing record profits, executives at more than one global hotel company have begun expressing their concern about losing market share to the big vacation rental sites.
Driven by these concerns, no doubt, vested interests from hotel owners, to local politicians, to neighborhood NIMBYs are beginning to band together to fight the growth of the VR industry. Though to date these efforts have mostly focused on the big targets such as HomeAway and Airbnb, they also are increasingly coming after individual owners.
When someone with a previously protected position is challenged by a new entrant, especially when it becomes apparent that customers actually prefer the new entrants offering, there is no telling to what ends they will go to in order to prevent progress in the name of consumer protection. For an example look no further than Germanys recent banning of Uber across the entire country in order to protect the taxi lobby.
Given the increased visibility of vacation rentals, this trend may be an unavoidable one, but it is worrying nonetheless.
*Update: A German court lifted the emergency injunction, but the taxi associations plan to appeal the decision.
Recognition of economic benefits
This is not to say that everyone is in the pocket of vested interests. More and more economic impact studies are showing those in power just how beneficial vacation rentals can be to local economies. Greater recognition of these overall benefits helps explain why, though some governments continue to fight against vacation rentals, others from as far afield as Mississippi and London, are seeking regulation to explicitly allow them.
There is no guarantee as to how any individual local government or regulator will treat the issue. This is why it is important to be proactive when it comes to regulation. Utilize resources such as VRRegs and the Short Term Rental Advocacy Center to stay on top of what is happening in your area and beyond, and to make sure you are ahead of the issue before it ever becomes a problem.
Criminal and scams
The regulatory attention the increased visibility brings is bad enough, but even worse is the criminal element it attracts. As more money pours into the VR industry, more scammers and opportunists follow suit. There will always be one-off local stories of things that have gone wrong with vacation rentals, but increased national coverage of vacation rental scams are cause for concern. When outlets from the USA Today, to CNBC, to Forbes are all publishing articles about the dangers of vacation rentals and the scams involved, it is time to worry.
It is not necessarily that booking a vacation rental is all that much more perilous than other lodging options. The real issue is one of perception. Vacation rentals are still relatively nascent as compared to hotels. As we seek to attract a greater portion of travelers into booking vacation rentals for their holidays, anything but glowing PR can be detrimental.
But the bad press can also be seen as an opportunity for professional vacation rental managers. As more homeowners have bad experiences, and more vacationers seek the superior offering of vacation rentals but are concerned about the lack of professionalism in the RBO side of the market, professionals can use this to their advantage, touting the virtues and security of renting from the known entity of a professional and licensed rental management company. This is truly an area where you might be able to turn some lemons into lemonade if you play your cards right.
In summary, 2014 to date has been a good one for the VR industry. Though challenges continue to arise, the opportunities have thus far outweighed them. And even many of these challenges, when studied from the right angle, can prove to be opportunities in their own right.
I am sure I have missed some trends, and may have misinterpreted others. I look forward to your comments and any discussion that follows, as well as to seeing what Q4 has to offer.