Trends in the Vacation Rental Industry: Q1 2014
The vacation rental industry is poised for success in 2014. Here's a look at the new opportunities- and challenges- VRMs will face this year.
This is the first in what is intended to be a quarterly review of the top trends in the vacation rental industry. It is impossible to make a piece like this completely exhaustive, but hopefully it will still be useful to many of you.
What do you believe are the top trends? What can vacation rental managers (VRMs) do to benefit from the positive ones, and to limit the detriment caused by the negative ones?
I discuss each trend in more detail below, but so far in 2014 the trends dominating the vacation rental industry appear to be:
Below I will briefly touch on what each trend is, and its implications for VRMs as well as the industry as a whole.
It is probably too early to make any believable claims about the growth of the industry in 2014, but one thing is certain: the experts say it will be a great one.
2013 was the year that people really began to notice how travelers were starting to replace hotel stays with vacation rentals. Though this trend fueled growth for the vacation rental industry last year, there was no guarantee it would continue. Despite this, experts believe the trend will not only continue, but actually accelerate.
This is great news for VRMs. A rising tide lifts all boats. More travelers looking to stay in vacation homes rather than hotels means higher occupancy and higher rates for you. But there is also a danger associated with this. As hotels start losing business to vacation rentals, hotel bosses are beginning to get scared. And as successful business people, they know the best defense is a good offense. This has led some of them to publicly call for more regulation, which brings us to our next trend.
If 2013 was the year of Airbnb v. The City of New York, then 2014 is shaping up to be the year of Vacation Rentals v. The World. As the vacation rental industry continues to grow in size and visibility (see the trend above), it is also growing the size of the target on its back. Those with vested interests in the status quo, such as hotel chains, are not surprisingly starting to fight back. As they seek to stymie innovation and change, they are increasingly using their lobbying power to combat the growth and popularity of vacation rentals in the courts, as well as in state legislatures and city councils.
Just a few months into 2014, and this fight has spread well beyond New York. Across the United States, from Palm Springs to Savannah, proposals for increasing regulation are cropping up. Even the state of Florida, once a reliable friend of the vacation rental industry, may soon turn foe. And this trend does not stop at the U.S. border. Even the French President has gotten involved, pushing to “slam the door on Parisian holiday rentals.”
This is a worrying trend, not just for vacation rental managers, but also for those travelers who enjoy increased choice, as well as the unique experience that vacation rentals can provide. Fortunately not all regulatory changes are in the same direction. Breaking from the protectionist trend noticeable in so many other places, Amsterdam has now “legitimized Airbnb with new short-term rental rules.”
As a vacation rental manager, this is a trend well worth staying abreast of. Though the battle may not yet be at your front door, there is no telling when this might happen. Fortunately groups such as VRMA and the Short Term Rental Advocacy Center are working to get ahead of this issue before it becomes a real problem.
Perhaps the best way to combat the trend of increasing regulation is to be vigilant in the fight to make the vacation rental industry more professional. This is obviously part of the mission statement of the Vacation Rental Managers Association, but that is not why I list it in this post. I list professionalism because it is a trend that has been picking up pace for a while now, getting coverage in such national outlets as the Los Angeles Times and the Chicago Tribune, and it has huge implications for those involved in the vacation rental industry.
The beginnings of this trend could be noticed towards the end of 2013. During that time HomeAway made a number of announcements that made clear its intention of being on the forefront of this professionalization of the industry. From launching its curated Andrew Harper line of luxury properties, to instituting its partnership program allowing homeowners to more easily work with professional managers, HomeAway began aligning itself more with professionally managed rentals than the RBO side of the market for which it is so well known. Add to this its push for instantly bookable properties, and the launch of a new pay-per-booking model (including an expansion of that model to VRBO in 2014), and the intent is even clearer. In addition, towards the end of the year HomeAway announced a number of partnerships, including ones with Interhome and Expedia, even further aligning itself with the largest professional players in the travel space.
As can be expected from the largest company in the industry, where HomeAway goes, others soon follow. Airbnb has long claimed that its most common user is someone who has a little extra space, and chooses to rent it out to help make ends meet, not professionals renting out their property as a business. Despite this, and maybe due to concerns regarding the long-term prospects of such an unprofessional model, 2014 is beginning to see a shift in Airbnb’s stance. Not only has Airbnb’s Co-Founder publicly stated that the industry could actually benefit from more regulation, but Airbnb is finally embracing its hosts who are renting as a business, including supporting them by providing professional cleaning services. And it is this shift that leads us to our fourth trend.
In an industry as large and as dynamic as the vacation rental industry, there will always be new entrants, so at a high level this may not seem like an interesting trend. However, I mean a very specific type of entrant. For a long time many have believed that the large listing sites were the biggest “brands” in the vacation rental industry. But we are beginning to see this is a misunderstanding of what these companies actually are.
With the huge variety in their offerings, from couches to luxury villas or even entire villages, it is hard to argue that any of the large companies in this space have true “brands” in the way the large hotel companies have brands. Rather, these companies are portals or even platforms; more akin what OTAs are to hotels rather than being the new Hilton or Marriott.
And it is on these platforms that new and exciting entrants are working to build brands, and beginning to change the vacation rental industry. From onefinestay’s “unhotel”, to Beyond Stays’ “stress-free hosting”, to MyVRHost’s “seamless vacation rental management”, to TurnKey’s low cost management model, to the plethora of “Super-Hosts” now active on Airbnb, the list of startups building on the backbone of companies like HomeAway and Airbnb grows almost daily.
With so many new entrants, the increased competition may be concerning to some. Though there will no doubt be winners and losers from all of this, increased competition means increased innovation, and that benefits us all. On top of that, this industry is so large, and growing so quickly, that there is plenty of room for quite a few “winners.”
The vacation rental industry continues to grow apace, and with growth comes change. Some of the changes are exciting, while others are scary. The best any of us can do is take advantage of the industry’s growth, and adapt with the ever-changing environment as best we can. For more on how you can ensure you benefit as much as possible from many of these trends, please see an earlier post on this topic, or feel free to contact me directly at Andrew.McConnell@vacationfutures.com. I look forward to hearing from you, and to seeing what Q2 brings.