Your Piece Of The Pie
My last article covered the signs pointing to continued strong growth for the vacation rental industry. This one will discuss how you can make sure you and your business are lifted by that rising tide, and not left behind wondering what could have been.
Currently losing market share
For many, the story of vacation rentals over the last several years has been the story of the rise of the listing sites. Much of the attention has been focused around how these companies contribute to the “sharing economy.” It is largely due to the growth of these kinds of sites that has led to professional vacation rental managers going from managing virtually 100% of the supply 10-20 years ago, to managing just over 40% today.
Who is better off?
But for all of the hype, there are real costs associated with this shift. For renters, the downside of working directly with a homeowner as opposed to a professional manager is pronounced. Does the homeowner offer instant booking, or does it take several days for him to respond only to tell you the dates you wanted are no longer available? When something goes wrong during the stay, is there a helpline the renter can call knowing that there is someone local on the other end who can immediately remedy the problem? How much does the renter really know about this homeowner, and will the photos they see really match the property when they get there? And on top of all of this, is the property they are booking even real, or just another scam?
For the homeowners, this shift can be just as damaging. The day they decided to manage their homes on their own, they essentially became small business owners. By HomeAway’s estimate, owners spend an average of 8.6 hours per week marketing and managing their homes. Homeowners who can afford these vacation homes typically have high paying, and demanding jobs. Those 8.6 hours a week have to come from somewhere, and whether it is less time to spend on their full-time job, less time to spend with their family, or less time being able to play golf, it is a tradeoff many in retrospect wish they had not made. Add to this that their lack of scale means they undoubtedly face higher costs (cleaning, etc.), and they rarely get as many weeks rented, or receive as much per week as a full-time professional vacation rental manager could, and self-managing the property looks to be a clearly losing proposition.
How to win
Given all of this, how best can professional vacation rental managers compete? Is the best course of action to compete head-to-head with RBOs and make the entire space a race to the bottom (on costs, service, and quality)? Unequivocally the answer is no.
We live in a society that is more than happy to pay for convenience. There is a reason so many restaurants have valet parking – most people would rather pay a few extra dollars than have to park their cars themselves. There is a reason that branded products can charge more for essentially the same offering as non-branded ones – most people associate known brands with the quality of their prior offerings, and rather than risk purchasing a cheaper alternative, they stick with the known entity.
The answer for vacation rental managers follows the same line of reasoning: become more professional; offer more, not less.
There will always be people who do not value their time, they just want a deal. This applies as much to the homeowners who do not care that they are spending over 400 hours a year managing their properties as to renters who do not mind rolling the dice to save a few hundred dollars per week on their rental. Are these really the homeowners and properties you want to manage? Are these really the renters you want in your properties?
No, you want the best homes, with the best owners, and you want to fill them with the best renters. Don’t keep lowering your fees. This just encourages you to offer less and less service and undermines your brand. Play to the strengths that come from full-time professional management.
Given this, what can you offer that RBOs cannot?
Brand – You have a name and a history behind your company. Make it mean something, and the renters who value that over the discounted online deal will flock to you.
Customer service – Increase your customer service. This becomes part of your brand. Offer services that others, cannot. This starts as early as initial inquiries, and carries over through the rental and beyond. The renters you want will pay a premium for it.
Scale – Take advantage of the fact that you have a company focused solely on this business. Your costs, spread across your entire portfolio, should be a fraction of the individual homeowner’s. Your efficiency in advertising, marketing, sales, and everything else should far exceed what a lone homeowner can do. Use this to your advantage.
Focus – The RBO homeowner typically only has one home he is focused on renting, and some managers argue that this gives him an advantage in earning more off of it than a property manager with tens or even hundreds of properties under management. DON’T LET THAT BE THE CASE. Treat each home like you own it (more on this in the next article), and make sure you maximize the potential rental value for it.
Others – I am sure you have some strong opinions on this. Please use the comments section to add other offerings that vacation rental managers can provide to further set themselves apart from the competition.
All of this to say: play to your strengths, not your competitor’s. If you do, you will have a superior offering, and be able to charge a premium for it. If you don’t, you will likely see market share slip as RBOs take an ever-larger slice of the pie. My next article will address different ways to take an even bigger piece of the pie by growing your inventory, and making more off of it.