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Hi everyone, I'm Ed Ulmer, and I've been working in the vacation rental industry for over 20 years. I've seen a lot of changes in that time, the vacation rental industry is constantly evolving, and keeping up with the latest trends is essential for success. This blog explores some key factors that will shape the industry in 2024 and beyond, including consumer debt levels, booking patterns, alternative payment methods, and the importance of niche marketing.
What can we expect for 2024?
I subscribe to Elliot F. Eisenberg, Ph.D.'s blog, and I highly recommend it to each of you. His daily observations are not only relevant to our industry but also to the current moment. Here's a recent observation: "In quarter four of 2023, consumer debt rose by $212 billion (about $650 per person in the US). Mortgage balances increased by $112 billion (about $340 per person in the US), home equity line of credits by $11 billion (about $34 per person in the US), credit card balances by $50 billion (about $150 per person in the US), auto loans by $12 billion (about $37 per person in the US), and other balances such as retail cards and consumer loans increased by $25 billion (about $77 per person in the US). At the end of 2023, consumer spending was up by $208 billion (about $640 per person in the US), meaning that over 100% of the rise in consumer spending was debt-financed, not a sign of healthy households."
I think this is concerning for all of us, but with unemployment at 3.6% and inflation headed downward, how do we tie this to our industry? I've heard from several clients that December bookings for 2024 were greatly down, but things have started to catch up as we move fully into 2024. It sounds like the booking window is getting shorter, which is often affected by the price. It's widely acknowledged that in 2023, clients who did not employ dynamic pricing strategies experienced lower occupancy rates compared to those who did. Although the average daily rate was higher, it didn't always offset the difference.
Dynamically managing price is a safe bet for 2024. I would also really try and set owners expectations. With all the new owners who have recently purchased second homes many have been sold unreasonably high expectations. They may try and hold to price, so you may need to start with their price but set expectation that price may need to adjust if we don’t get the results by a certain time frame. You should set that time frame and that adjusted price up front if you can. This is a standard real estate method of getting the owner to work with you even if they start unreasonably.
One of our Partners, Beyond, provides an average increase in RevPAN (revenue per available night) of 35% after implementing Beyond’s Dynamic Pricing. They use data and analysis to optimize profits. An example of this is the Super Bowl, knowing that this past year there wouldn’t only be football, especially Kansas City Chiefs, fans but Swifties as well because Taylor Swift is dating the Chief’s tight end, Travis Kelce. This resulted in an impressive boost in occupancy. Keep this in mind for other events like the solar eclipse, and the world cup.
Back in 2022, I suggested that alternative forms of payment were going to become more universal. I was right but just a little early, as it was not a big deal for 2022 and 2023. This year, I think it will become more prevalent for a few reasons. Surcharge seems to have taken the US by storm. In my hometown of Henniker, NH, most of the services I purchase and try to pay for by credit card are now prompting me to agree to a surcharge. It is typically enough for me to try and pay by a different form.
Crypto has gone through a bleak value spell, but Bitcoin is now at an all-time high, and those using it have limitations on how to use it as a direct currency. According to Forbes, the average crypto user is males aged 18 to 29, which may be your niche.
Google, Apple and Samsung Pay tied to one's phone are becoming more relevant as “53% of (Forbes Advisor) survey participants responded saying they used digital wallets more often than traditional payment methods, such as paying with cash or swiping a physical debit or credit card.” “Overall, 51% of respondents have stopped shopping with a merchant that didn’t accept digital wallets, with younger spenders being most likely to make this call. Of those who responded to our survey, 78% of Gen Zers, 55% of millennials and 52% of Gen Xers have stopped shopping at merchants that only accept traditional payment methods.” Another thing they learned is that people who are higher income earners are more likely to stop shopping with a company that does not accept digital wallet. Finally, with what Elliot states above, vacation financing may be an option that starts to take hold. The point is that as you look to differentiate yourself, understanding how one pays should be part of how you define your niche.
I also focused on another important part of payment, which is that everyone wants to pay by credit card because they get points that have value. You don’t need a credit card to generate points if you have your own program. Reward points could also be set up as NFTs (non-fungible tokens) as they are limited and have value. Barefoot’s solution has internal rewards point program which allows you to reward the guest with not just rent discounts, it could be branded swag, a mid-week clean, etc. While this may not happen in the next year, we need to pay attention to the morphing of the NFT model.
I mentioned the importance of dynamic rent pricing, which many of us currently offer, but the ability to offer dynamic pricing on other services is important as well. A reduction in rent affects our commissions. Offering services to generate a reservation is based on perceived value. The cost of those services is often variable. Have you ever received a gift card and got a bonus card? Have you ever bought tickets in bulk and got a group discount? Have you ever belonged to a rewards program and got something additional like drinks, free luggage, or free Wi-Fi? All these items are marketing expenses. All these items can really touch our clients.
When my daughters were young, we went to Disney in Orlando. It was the year of a million wishes. As we checked into the Disney hotel, the front desk staff member asked my girls why they were here at Disney, and both immediately yelled to get autographs. In less than 5 minutes, Cinderella walked out with two autograph books and spent 15 minutes with my girls. For the next 10 years, we went to Disney yearly, and we bought a lot of Disney gear—a lot of Cinderella stuff. Understand your niche—Disney does.
In understanding your niche, concierge has started to become more relevant in our space. This has always been inevitable; great hospitality providers provide a vacation, not just lodging.
Of course everyone is talking about AI. It is a buzz marketing word as much as it is an efficiency tool of the future. The definition of AI is technology that enables computers and machines to simulate human intelligence and problem-solving capabilities. I posed the following prompt to ChatGPT-- “how might AI affect the vacation rental industry.” Here is their reply:
Simplified Operations: AI can automate repetitive tasks such as guest communication, scheduling, and property maintenance. This streamlines operations, saves time, and reduces manual errors.
Personalized Guest Experiences: AI can analyze guest preferences and behaviors to provide personalized recommendations and services. This enhances guest satisfaction and encourages repeat bookings.
Dynamic Pricing: AI algorithms can analyze market trends, demand patterns, and competitor pricing to optimize rental rates in real-time. This ensures maximum revenue and occupancy rates.
Predictive Maintenance: AI-powered systems can monitor property conditions and predict potential maintenance issues before they occur. This proactive approach minimizes downtime and ensures properties are always in top condition.
Enhanced Marketing Strategies: AI can analyze customer data to identify target demographics and tailor marketing campaigns accordingly. This improves marketing effectiveness and increases booking conversions.
Improved Security: AI-powered security systems can monitor properties for suspicious activities and alert managers in case of potential threats. This enhances guest safety and protects property assets.
Data-Driven Decision Making: AI provides insights from vast amounts of data, enabling managers to make informed decisions regarding pricing, marketing strategies, and property investments.
While all this makes sense, AI seems to mainly fall mostly into probability-- numbers are straightforward. The bigger the number set, the more secure you can be on the outcome, but again data sets are limited to known parameters and there is always the unknown or items that new previously unrelated. When you start dealing with language, tone, and multiple meanings, especially regional dialect, can play into the results. Think of a child's vision of the world—and then as they grow up it evolves and becomes more influenced and worldly, and they may start to build their own stereotypes.
My point is that we need to pay a lot of attention to this new opportunity. Realize that hospitality and real estate, which from my perspective are the parents of vacation rentals, are relationship based and deeply emotional. Owners and Guest want to feel special, and they are trusting you to be there for them. You need to trust that whatever AI you provide will not erode that trust. Once it is gone it is gone.
In conclusion, as we look ahead to 2024, there are several key trends and considerations shaping the landscape of the vacation rental industry.
Firstly, there's a notable concern regarding consumer debt and its impact on household finances. With consumer spending largely debt-financed, it's crucial for vacation rental managers to be cognizant of changing booking patterns and adjust pricing strategies accordingly. The shorter booking window observed towards the end of 2023 suggests a need for dynamic pricing strategies to optimize occupancy rates and revenue.
Moreover, alternative forms of payment, such as surcharges and digital wallets, are becoming increasingly prevalent. Understanding and adapting to these payment preferences can help vacation rental managers differentiate themselves in the market and cater to the needs of their target demographics.
Furthermore, advancements in technology, particularly AI, offer opportunities for streamlining operations, enhancing guest experiences, and making data-driven decisions. However, it's essential to recognize the nuances and limitations of AI, particularly in areas where human emotions and relationships play a significant role.
Ultimately, as vacation rental managers, maintaining trust and fostering meaningful relationships with owners and guests remain paramount. While embracing new technologies and trends, it's essential to ensure that they complement rather than undermine the personal touch and hospitality that define the industry.
As we navigate the evolving landscape of the vacation rental industry in 2024 and beyond, let us remain vigilant, adaptable, and committed to delivering exceptional experiences for all our stakeholders.
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Edward Ulmer is the CEO of Barefoot Technologies. For the past 20 years this system has strived to be the most innovative and cutting-edge system in the industry. With an average client size of 215 units and a 95% retention rate, there is no other system in the industry that is as consultative. Before his involvement with Barefoot, Ed was executive director of Destination Plymouth MA and the Bar Harbor Area Association, both innovative start-up non-profits that managed all forms of tourism for their respective towns. He also was the marketing director of the Pyramid Mall property and that is where he was introduced to the world of real estate and rentals. He has his real estate license in both NH and Massachusetts, and currently sits on the Board of Directors for Prime MLS, the MLS body for NH and VT and on the executive Board for the Capitol Board of Realtors. He has participated in many real estate sales transactions and vacation, seasonal, long term and commercial rental transactions in the 24 years he has held his licenses. Finally, he has acted as a tourism consultant including the setup of a Duck Boat business, adjunct professor of hospitality and tourism courses at Quincy College as well as taught seminars on revenue management, social media, guerrilla marketing, segmentation, asset management and tourism for multiple chambers of commerce, VRMA and other tourism groups.
