Trends in the Vacation Rental Industry: Q2 2016

    Trends in the Vacation Rental Industry: Q2 2016

    This is part of an ongoing VRMA series of quarterly reviews of the top trends in the vacation rental industry. For those new to the series, you can find earlier posts under my VRMA Blog Contributor Page.

    This series' intent is to synthesize major trends and developments within the vacation rental industry over the period, not to just summarize them all. My hope is to stimulate discussion and debate, and as such, I strongly encourage use of the comments section at the bottom. I would like to hear what trends you think I have missed and what vacation rental managers (VRMs) can do to benefit from positive trends while limiting the detriment caused by negative trends.
    Q2 Overview
    As 2016 began, we saw many dominating 2015 trends become even more pronounced. Regulations continued changing at a rapid rate. Consolidation within the industry, and convergence across it, continued. And all of this led to even greater distrust of some of the largest players in the space.
    But in Q2, we may have started to see the pendulum swing back in the other direction. Regulations continued to get more onerous, but did the regulators overstep? The big players got even bigger, but how did their growth impact their customers and, ultimately, them?
     Regulation: The Regulated Fight Back
    It seems like not a day goes by that we do not hear of another city, state, or even the federal government, wanting to step in and add more rules and regulations to short-term vacation rental. This is typically in the name of “consumer protection,” but all too often the moves are funded by industry lobbies. Yet, the tide may be turning.
    For example, a recent move in Anaheim, California will ban vacation rentals by early 2018. This seems like an exceedingly odd move for the home of Disneyland. Surely Anaheim will want to continue to attract the families with young children who are more likely to prefer vacation rentals to a hotel. So what gives? Some have pointed out that Disney recently announced plans to build a new hotel in the area, but the two are probably not related. Right? Whether they are or not, this is one of the more obvious examples of self-harm from a municipality in the space. It will be interesting to watch the longer-term impact of the move on tourism and tax revenues.
    But maybe we won’t get to.
    You see, in this example of regulatory overreach, Anaheim may have picked the wrong fight. It is not just individual homeowners and local management companies who feel the pain of these regulations and are trying to fight them, they have also picked a fight with multi-billion dollar corporations, two of which — HomeAway and Airbnb — have filed lawsuits against the city stating violations of the constitutional rights to free speech and equal protection. These are not the only instances of people and companies fighting against over-eager regulators. Airbnb is also suing its hometown of San Francisco, and a similar lawsuit is currently underway in HomeAway’s hometown of Austin, Texas from an organization representing local property owners and entrepreneurs.
    So as regulation continues to be a trend, perhaps it is one in which the direction of change is finally shifting.
    The Big Get Bigger: What’s It Mean For the Little Guys?
    Probably the most discussed move in the space last year was Expedia’s acquisition of HomeAway. The question on everyone’s mind was: What does it mean for the industry and for HomeAway’s customers? With more than half a year having passed since the acquisition, we are starting to get a clearer picture. As many expected, online booking and subsequent fees came to the fore. And with them came near riots from homeowners, along with threats of a class action lawsuit.
    Why the furor? Owners were concerned the additional fees would eat into their bookings and take the control out of their hands. As a result, many online forums cropped up around the subject, with owners wondering if others were feeling the same contraction in bookings; Facebook groups were started to fight against the fees; and at least one industry survey had nearly two-thirds of respondents say the new fees were “killing the VR business.”
    With this much noise, the move must have been a disaster — but it wasn’t. In fact, it was the exact opposite. In Expedia’s latest earnings call, the CEO said HomeAway’s results were even better than expected and that Q2 revenue was up 36 percent.
    To reconcile the two, it may be a similar story to the trend above on regulation. Most regulation fights are started by small, noisy groups. They may not accurately represent the overall population, but their voices are louder and thus they are the ones who get heard by regulators. The same may be true with HomeAway and Expedia.
    HomeAway has told us for years that travelers simply prefer online booking. The way Airbnb took off like a rocket seemed to bear this out. HomeAway had to listen to its customers, and the results have been good financially, and probably good from an end user’s perspective. For the traditional VR business owner, however, the grievances are real, and bookings are down. The need to be bookable online requires more time and effort than owners want to put in. The loss of control on screening guests can be  frustrating and scary.
    All of this is true: It is the right business move despite negatively impacting some of HomeAway’s customers, which is what makes this a fascinating trend for a manager. Strike while the iron is hot. These owners had everything set up for years, but the world around them has changed. Now they might realize they actually need a manager. How can you make sure you are there when they make that decision?
    Vacation Rentals Go Pro
    For years vacation rentals have been the embodiment of leisure travel — it was in the name. “Vacation” evoked everything we wanted to convey about the home and the experience we provided. Then things started to change. Airbnb opened up new markets. Was your trip to NYC a vacation rental? Did it matter if you were on a work trip for a conference, or if you were there for the weekend with your spouse and kids? The lines between a vacation rental, and other short-term rentals began to blur for the better. Broaden your perspective, broaden the guests you attract, and the context in which they consider your property, and increase your revenue.
    In Q2, this was truer than ever. Several moves in the corporate and meetings spaces signaled that to limit ourselves to the “vacation” part, and not think in terms of the broader “rental” part, would be a mistake. Recognizing the appeal for many business travelers, Airbnb launched a Business Travel product. But they didn’t stop there. They also signed a partnership with American Express Corporate Travel, which made this product even more accessible to business travelers. And to top it all off, Airbnb made it explicit that targeting the meetings and events market was a strategic priority. Hotels beware.
    This is another trend with high relevance for VRMA Members. Don’t limit yourself. If you think of yourself as only in the business of vacation rentals, you are likely leaving money on the table.
    The world of vacation rentals and, more broadly, short-term rentals, is changing quickly. It is not enough to sit back and be a spectator. In a space evolving at such a rapid pace, it is imperative on all of us to stay on top of the trends and make sure we stay ahead of them.

    Recent shifts have made rentals more popular than ever with more travelers of different types and in different contexts. At the same time, recent consolidation is making it more difficult than ever for owners to adequately compete with the best-managed professionals.

    Use this to your advantage. Now is the time to grow. Seize the moment.

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