2019 will be an interesting year for vacation rentals. We seem to be coming of age. I can see a lot of change, some good for the professional. Some of what I have predicted the past two years continue to come true, some of it faster than I expected and for other things it is taking longer. Here are my expectations for 2019:
There continues to be a lot of money flowing into the vacation rental market.
Will this be the year that AirBnB goes public? If I were a betting man, I would bet on it in the next two years. As a result, even more money will flow into the market. As I mentioned the last two year, it falls into two categories:
Venture capital -Most of this money is focused on national companies. In the past two years, we have seen crazy money given to players who are trying to act nationally like Vacasa, Turn Key and Red Awning, and some say AirBnB. We are also seeing property management systems being bought up-like Streamline and Kigo. Most of this money is with cash driven based venture capital looking for a relatively short-term return on investment. It will be interesting to see how these players fair, but it is safe to say that they will have a lot less control over their daily business. I do think that strategic venture capital is also starting to come into the industry and it will be interesting to watch how companies with large financially sound lodging, hospitality and real estate backgrounds start to participate.
Buy outs-This has been focused on regional players. It seems to continue to be strong with Vacasa and Turn Key in addition to local players buying their competitors. Wyndham seems to have taken the year off and sold their international vacation rental division in 2018. It will be interesting to see where Wyndham goes, but that I think is defined at the top level-so unless there is a change you will probably see the same for this year. If you are thinking about retiring or considering getting out of the business, there are ample opportunities. Let us know and we may be able to connect you with a buyer.
Take some time each year to consider what is the value of your business. Selling a business means a deep audit, so clean up everything. I cannot emphasize enough that buyers will pay more for your business if there is less risk and good opportunity. Less risk comes from providing them with details.
I also recommend that you really define your niche and focus on the opportunity of that niche. Your business has a complex value that it is based on market share, opportunity, profit and proximity. In most cases in that order of importance.
Portals continue to compete head to head.
They want your inventory. It is a major part of their valuation. The question is, “does this benefit you?” My recommendation is to shop the portal, see how much inventory is in your market, and see if that inventory fits your niche. Look for your competitors and your competing markets. Ideally, you are looking to be first and stand out. In your conversation with the portal make sure you understand what you need to get on the first page and do what is necessary-which includes continue to shop their pages. A few of our smarter clients have been able to drive new home owners to their program by owning the whole first page and moving RBO’s deep into the obscure pages.
Focus on your niche and your personality as a company. Remember your houses are not hotel rooms and your clients who are going on vacation are putting their trust in you. I mention this because the big portals are going to start to put you against those hotel rooms if you can offer daily pricing. By the way that does not mean nightly lengths of stay, it just means showing your value in hotel terms.
There are also a lot of micro-portals appearing that are niche based. You should consider those as they tend to be more socially connected.
Continue to think of your own web site as a portal. You are in fact the local expert and if you know and own your niche you can compete against the big players through social strategies.
Finally, keep an eye on Zillow. I have been saying this for a few years. If you do long term rentals, consider working with them and explain that when they go short term-you want to be one of the first.
Being vacation planners, not just vacation rental booking providers.
Portals are moving into providing complete vacation experiences, something I have suggested the local expert must do to stay relevant for the past few years. Expedia buying HomeAway and AirBnB buying their own homes, creating experiences search pages and moving into boutique hotel stays are perfect examples. They realize the value of niche. What portals do well, like including air and car (although Barefoot continues to look at opportunities in these fields for you) as part of their offering is powerful. But portals will struggle with what you can do being the local expert-the activities and local concierge. They will have success with national activities, like Grayline tours, but will struggle on the local lifestyle/activity businesses. They will also make strategic buys for those activity integrations, which gives you or whoever has control of a huge opportunity. Regardless Barefoot is all in on activities and offers far more ability than any other property management system in the industry as well as a staff with deep experience with activity management skills.
Reviews will always be very important.
With so many web pages of rental inventory, guests need to trust before they will hand over their hard-earned dollars. Trust is the priority in marketing and why reviews are so important. The perception of real reviews is more important than perfect reviews. Reviews from “people like me” continue to become the norm. Ideally, reviews from someone they know, even indirectly, will be the most powerful. There will also be an increase in micro reviews as well. Companies are now asking you to review specific services that you use-often automatically generating the review process. A few examples are a review about the check in process, use of community services (triggered by opening a lock), reviews of the products and purchase process levied on a guest folio. Balancing over review communication with the guest will be interesting and we can most likely follow other hospitality industries in setting a format.
Professionalism is on the rise.
As we are being compared more and more to traditional lodging, we need to step up our professionalism and push our companies toward a demeanor represented by bigger chain hotels. The question becomes “does it hurt your niche and uniqueness?”. Tracking repeat guests and thanking them for returning, using their names and their kids names and interests and generally making them feel part of the family, you can’t go wrong and may be able to do a better job than the national player. If you can get you hands on a staff manual from Marriott and make it your own will probably make a big difference in reviews, repeats and your bottom line.
The Return of RBO’s to the family.
I think you will see owners start to return to the smarter vacation rental players. Laws and taxing issues have become more complicated. Liability insurance will increase in price and complexity as insurance companies get a better understanding of this new market. Customers expect automated transactions. Smart rental companies have adjusted their value propositions. One of the big ones is to include RBO tools like our Advanced Owner Access which allows individual owners to market their own properties. By doing this, you will function more like an asset manager and not just a property manager.
As second homes sales continue to grow, smart agencies are looking at ways to benefit from being the local expert. According to NAR only 50% of vacation rental homes purchased used an agent. Seems like an opportunity from my perspective. Those in real estate all have stories of houses they rented for years being sold out from under them, either by a different agency or by the owner. You must become more engaged with the owner and ask them why they bought, what are there plans yearly and steer them in a direction that shows you are doing more than booking the home and fixing the home. You are interested in increasing the home’s value.
In some markets, we are seeing agencies open or align with insurance companies. In some markets with large numbers of home in flood plains, I have seen them align with house-raising companies. Some companies, as part of their yearly pricing and contract process, are starting to focus on improving the inventory by doing Comparative Market Analysis (CMA) to get the homeowners to improve their properties, give the agency flexibility on pricing, and remind them of their sales divisions.
Guests will start to understand the risk of RBO booking.
Every client I have talked with has at least one story of a guest who has been scammed by someone posing as an owner or an RBO owner who has been scammed by a guest in their market. Most of these scams are perpetuated through the big portals. We in the professionally managed vacation rental industry historically have down played these tragedies believing it will hurt our market and the industry. I suggest that our industry is rock solid and that if anything we should be promoting the difference between RBO and Professionals. In this age of hyper sensitized media, it is only a matter of time before these stories start to mainstream.
Parts of Yield Management are coming of age.
Most in this industry consider Yield Management as dynamic pricing, which is the ability to modify price based off items like occupancy levels, events, number of guests and more. A move to daily pricing makes this process more manageable and for those guests transiting from hotel lodging more trusting of our market. To be ahead of the industry we should be looking at other segments of the hospitality industry who are more mature. You will see that Yield Management includes couponing, concierge, upsell and rewards programs. Most smart companies focus on using these tools to build a value proposition that is more than just based off price.
Staffing will continue to be most company’s biggest problem.
This has always been the case in this industry. Providing a remarkable vacation is a mixture of matching guests with the right niche player and personalizing their experience. While much of this can be done by great CRM, lead management and true Yield Management ultimately having the right staff is the difference. Putting them in a place where they can truly make the guest feel special drives repeat business, social media, ownership and the sheer joy one gets when we are able to share that special local experience.
Finding the right staff is important and keeping them is paramount. With younger generations, empowering them and rewarding for above and beyond service is key. But there is nothing like older personalities to really help the niche experience. Finally, never under estimate the connection points that non-front desk staff must affect the guest. With low unemployment numbers, I wish I had a secret sauce, but staff with the same interests as you will find you if you have a strong enough value proposition.
Finally, working with 3rd parties for non-touch employees is a good option. They bring expertise, so training can be minimized, you don’t have to pay benefits and departure is simple. This industry and the world are changing so quickly that having outside resources can really assist you in staying current. But you really must understand the difference between a contractor and an employee. The government has really cracked down here but there are resources out there to assist you in not stepping on that land mine.
Barefoot continues to build functionality to assist clients in being at the front of these trends. We are happy to go into more details on any of these trends and our solutions. In addition, if you have any ideas, we welcome comments as that is how we all improve. Looking forward to continuing to build momentum in 2019.