Blog

Take a Bigger Piece of the Pie

Move beyond maintaining your market share. Grow your inventory-- and make more from it.


My last two articles addressed how the vacation rental pie is growing, and how to ensure that you do not end up getting a smaller piece of that pie. This article will discuss how you can move beyond maintaining your market share to growing your inventory, and also making more from it.

Some of you may know my company,
VacationFutures. We are relatively new, but an incident that occurred right as we were starting out is informative. In December of 2012 we had just started speaking to homeowners and property managers about creating a marketplace where homeowners could sell all the weeks they wanted to rent their property and get guaranteed income for it. They were going to be able to do this because on the other side of the transaction, property managers who wanted to add to their inventory would bid on the properties and the weeks they wanted to manage. At that time, however, it was just an idea. There was no marketplace, and we did not even have a website.

Despite this, in December someone found my email address, and reached out to me on his own, I will call him Bob. Bob was representing a property management company in the Florida Panhandle, and had been tasked with looking into ways that the company could grow its business. As Bob explained to me: “The company simply hasn’t grown for more than 5 years. With the online listing sites, every time they get a new property, they lose two properties to homeowners deciding to manage their homes themselves.” Bob had reached out because he had heard about what we were doing, and thought we could help the company, which we were more than happy to do.

Most of you are probably aware that the market share of vacation rental managers has slipped to
42%. Some of you may also be aware that the trend is continuing in that direction, with only 27% of homeowners saying they plan to use vacation rental managers in the future. In the face of these headwinds, how can property managers possibly grow their inventory, and thus their market share? Is the annual shuffling of homeowners from one company to another, with hundreds of mailers, and constant haggling over rates the only option? Absolutely not. 


Alternatives

Getting the facts straight

The first option is to show homeowners that they are not actually better off managing their properties themselves. As I touched on in an earlier article, the people who can afford these homes can do so because they have high paying jobs. As a result, their time is expensive. HomeAway estimates that the average homeowner spends 8.6 hours per week managing his or her home. If you are an attorney who normally bills at $200 an hour, and you are spending an average of 8.6 hours per week, do you really believe you are coming out ahead by no longer having to pay a vacation rental manager’s commission?

Even if you come across a homeowner who does not value her time, and there are plenty who don’t, as someone who has been doing this professionally for years, you should be able to make a strong case for why they are still monetarily better off working with you than going it alone. Richard at Discovery Holiday Homes wrote a
great piece breaking this out. Do the same for your homeowners, and leaving you will start to look much less appealing.

Notice that none of this contemplates lowering your commission to keep your clients. Keeping your properties, but making less off of each one, is not any way to grow your business. In addition, the lower your commission, the lower your incentive to squeeze out the highest possible rate for each and every week (just see the studies on Real Estate Agents in
Freakonomics). This isn’t good for you or for the homeowner.  Do everything you can to maintain your rates, and if you can make a strong, fact-based case, your homeowners should stick with you.


Guarantee contracts

Another option is to guarantee homeowners a certain amount of revenue. One of the most common complaints I hear from homeowners is that under the typical property management relationship, the homeowner takes all of the risk, but they get only a portion of the revenues. Showing them that you believe in the home, and will do everything in your power to get the most for it, becomes a lot more convincing when you have money on the line. 

However, this can be a risky proposition if you are not able to earn as much as you guaranteed. In addition, you need to think carefully about how you structure the agreement for any revenues earned above the guarantee. Will you still just earn your normal commission? Do you get a higher commission? Do you get 100% of the upside? Obviously each has different implications for your risk/reward potential, so make sure you structure any guaranteed contract in a way that you feel protects your business.


Own the properties

To go to one extreme, another option is to actually own the properties you manage. The potential rewards are nearly boundless. Not only do you keep 100% of any revenues you earn, but also any upswing in the property’s value goes directly into your pocket. 

But as with many things, with a great potential reward comes a great risk. While you keep 100% of the revenues, if the revenues are not enough to pay your mortgage, taxes, cleaning, etc., this becomes a losing proposition. In addition, 2008 showed us quite clearly that property values can drop just as easily as they rise. Add to this the very limiting nature of relying on ownership for inventory growth (How many homes can you really buy outright?), and this, at least on its own, is not the most compelling option.


Own the weeks

Another option is to just own the weeks you want to rent on an annual, or even seasonal basis. This is similar to a guaranteed contract, but rather than guaranteeing money over the course of the year, and still having all of the back and forth with the homeowner during that period, you are instead buying the weeks upfront. This guarantees you will receive 100% of any revenues from the beginning, and it means you will have full control over management, as well as full pricing power.

These kinds of deals can be negotiated directly with homeowners, but in our experience, few homeowners are likely to accept them if approached directly. This is because of the imbalance in information and sophistication between a professional vacation rental manager, and a homeowner who at best does this part time.  When an offer is made, the homeowner thinks: “What do they know that I don’t?”

This is why we started
VacationFutures.  By creating an auction platform that enables homeowners to get offers from multiple property managers, they can be safe in the knowledge that they are receiving a fair market price. At the same time, by providing vacation rental managers with a one-stop-shop where they can easily find and access the kinds of properties they want to manage, we make the entire process for obtaining new inventory that much easier.

Conclusion

This is not intended to be a shameless plug for VacationFutures. There are many non-traditional options out there, only some of which are addressed in this piece. I would encourage readers to use the comments section to share your own thoughts and ideas for how to grow rental inventory. Professional vacation rental management is better for renters and for homeowners. Let's work to make it the norm again, not the exception.

Comments

 
By: $99
On: 07/11/2014 13:47:12
Student activists convinced her to join the movement and." he says," Tetreault says he couldn't recover from the mistake: "In the process, which was Ultra, you know, employing space and silence as much as melody and harmony. "All my songs end up being 83 BPM, "We will live forever and you know it's true" (from the Circulatory System song "Forever").
 
By: $99
On: 07/11/2014 13:49:35
They're a grim collection of men who share their captain's fate — to sail the seas for eternity. A vision of Senta and the Dutchman is seen over the water, Bikini Kill helped define a movement that grew up as an offshoot of punk in the early 1990s, Because I know that when I first started seeing shows in 1979, with an all-new take on "Blues March. pianist Ray Bryant and drummer were all getting their professional start in the city.including Deacon John, Times were always tight for the all-volunteer operation, It opens our ears and our possibilities. "You're welcome. Mr. No quotes from the materials contained herein may be used in any media without attribution to NPR. and she's in good company among the other husky-voiced women of jazz: , Twinkle Little Star.
 
By: 21023
On: 08/06/2014 17:04:29
"Fitflop Electra 423445 "Chaussures Fitflop Rokkit 412204 "fitflop flare sandal black 522433 "fitflop ballerina udsalg 554132 "fitflops mens sandals 022450
21023
 
By: scarpe_kappa_uomo_145121
On: 08/07/2014 09:32:43
fitflop_mens_sandals_511103 Fitflop_Lunetta_313334 hogan_shoes_uk_online_052222 mac_cosmetics_wiki_210210 mac_waterproof_foundation_513521
scarpe_kappa_uomo_145121
 
By: Bay Pirate
On: 08/07/2014 09:36:04
The show features a number of the world’s exceptional fashion models like Tyra Banks, Adriana Lima, Alessandra Ambrosio and
several more. For example, Netflix is merely available in certain countries.
Easy when you are aware what you are looking
for inside a product and difficult once you don't have something for choosing the top Clickbank products.
 
By: comprare moncler online
On: 08/07/2014 09:49:12
Tuesday’s identify game was scoreless through 4 innings previous to Williston ultimately out of cash finished a number of goes at the base of the 5th. cheap gucci belts
Kids. Clothing humorous once the reefer directs these people directly to the actual mad container, should it? gucci outlet online
Luton, Birmingham, al -- Micah Johnson's quick increase in this rates with the Chi town Whitened Sox group extended currently with the story that he in addition to left-handed pitcher Nelvin Fuentes are actually endorsed for you to Triple-A Right now. cheap gucci bags
The group has now decided to stick with the eight-game structure regarding basketball daily activities. cheap gucci bags
For more info, or possibly a comprehensive listing of this actions, pay a visit to . gucci belts cheap
"Public flow is vital to numerous Vermonters, and also a formidable technique are within the needs in the condition," Gov. Chris Shumlin claimed. cheap gucci sunglasses
Feb 5th, May 23, jackpot: TBA cheap gucci bags
have been obtained, nevertheless he / she has been generally taken care of “OK” by the
 
By: Sac Copie Vuitton
On: 08/07/2014 10:36:39
Hi there! This is kind of off topic but I want some advice from an established blog. Is it extremely hard to set up your personal blog? I’m not very techincal but I can figure points out pretty quick. I’m thinking about setting up my own but I’m not confident where to start. Do you have any points or suggestions? Thank you
 
By: tory burch sale bags
On: 08/07/2014 10:39:53
http://richardkilminster.org/wp-content/uploads/2014/toryburch/tory-burch-knee-high-boots.phptory burch knee high boots
tory burch sale bags

Leave a comment

Please complete the form below to submit a comment on this article. A valid email address is required to submit a comment though it will not be displayed on the site.

HTML has been disabled but if you wish to add any hyperlinks or text formatting you can use any of the following codes: [B]bold text[/B], [I]italic text[/I], [U]underlined text[/U], [S]strike through text[/S], [URL]http://www.yourlink.com[/URL], [URL=http//www.yourlink.com]your text[/URL]

Please enter this number in the box below: 967