Like most of you, I have seen a few expectations articles for 2017. While I agree with them on most of the trends, I feel they should go further to suggest to you how you might be impacted or to position yourself to take advantage of the current market conditions.
Here are my thoughts about 2017:
There is a lot of money flowing into the vacation rental market. Two examples that immediately come to mind are:
Venture capital -- Vacasa received $35 million in venture capital. With 2400 properties at the time of the investment I think we can all agree that is a pretty crazy valuation.
Buy outs -- We lost two clients to Natural Retreats (another vacation rental company) in 2015. Some of our clients, like Long & Foster and Grand Welcome, have also been busy buying companies.
I think you will see this trend continue for the next few years. 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.
Whether or not that is something you are considering, everyone should take some time this year to make sure that they know what they are worth and armed with that knowledge, make sure that you have positioned yourself properly. Selling a business means an audit, so clean up everything. Define your niche and focus on the opportunity of that niche and be prepared to highlight. Your business has a complex value and if you are in real estate you already understand that it is based on proximity, market share, profit and opportunity. An educated and organized seller is powerful and you will not need to work with a consultant to sell your business.
Portals are maturing and competing head to head. They want your inventory. It is a major part of what 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 they fit your niche. Look for your competitors and your competing markets. You are looking to be first and stand out. 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.
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 means to continue to shop often. 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 other RBO’s deep into the obscure pages.
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. They may allow you to be a monopoly.
Finally, keep an eye on Zillow. They are in the long-term rental arena but as they get there MLS feeds resolved, I think you will see them move into this market.
Reviews continue to be very important. The best has a social aspect to them. 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” will become the norm.
There will be more mixed lodging in vacation rentals. Wyndham continues to buy up companies. Choice Hotels has a partner program. Corporate housing companies are eyeing shorter stays. All this ties to my point above that money is flowing into the market, and third parties are looking to capitalize on inventory. All of this means that there is going to be a higher level of professionalism.
Be a vacation company, not a vacation rental company. It is all about servicing your clients and providing something that they cannot get anywhere else. That means know your niche and have that property inventory. It means offer the services to compliment that niche. This is where you differentiate yourself from your competition and the portals. It is where you generate your real value to your clients, to your owners and to your exit strategy. It also is the last of the added fee opportunities.
Vacation rentals move further towards professionalism. 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.
Agencies are combining asset management services. As second homes sales continue to grow, smart agencies are looking at ways to benefit from being the local expert. 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.
Barefoot is working towards making addressing these trends easier to deal with in Barefoot Agent 4.0. If you have any ideas you would like to add or expand upon, please do. We welcome comments as that is how we all improve.