August 13, 2015
Is 2015 the Vacation Rental Industry’s 1952 Moment? (Part 3: The Future of Vacation Rentals)
The stage is set for consolidation, but what will it look like and why will it undoubtedly emerge? Historically, there has been a handful of larger vacation rental management players, such as Interhome in Europe and Wyndham in the United States. However, when it comes to the vacation rental inventory and experience they are not consistent in the same way large hotel chains like Holiday Inn or Ritz-Carlton are.
But, that is all changing as we speak.
Vacation rental managers are beginning to scale more than was previously imaginable. Vacasa, a vacation rental management company, was the 9th fastest growing company in the United States according to Inc. magazine. At the same time, millions of dollars of venture capital money is being infused into the space to fuel rapid growth through companies such as Pillow, Guesty, TurnKey, and InvitedHome. And, at the top end of the market, onefinestay is often mentioned in the same breath as Airbnb.
In the interest of full disclosure, I am the co-founder and CEO of a company that works to fuel vacation rental managers’ growth. My company, Rented.com, helps managers acquire new inventory rapidly through our online marketplace that connects them directly with homeowners looking to rent. Rented.com receives constant feedback that we are one avenue to power a manager’s portfolio growth.
That said, however the vacation rental managers do it, as management companies find new ways to scale they are finding greater benefits of that scale. One massive benefit is that as they become a more recognizable brand. Such identification and publicity creates organic growth that in turn helps them scale even more. On the other side of the equation, as more homeowners know the brand and sign up with them, more guests know them and want to stay at one of their homes for a vetted, branded, and consistent experience.
The managers are also landing more repeat customers that move across markets, as well as referrals in new markets. All of this aids geographic growth on the heels of customer recommendations and requests for expansion into new markets. This consistent demand, and growth of it, in turn enables trusted and known managers to command a price premium in the marketplace.
But the benefits of vacation rental managers’ scaling outweigh basic brand marketing alone. The larger the management company, the more scaled large costs become, which creates more efficiency and lowers costs as a percentage of revenue.
When will this market shift take full effect? Of course, none of this can or will happen overnight. But, if the current 800 pound gorilla of the lodging / accommodation space – the hotel – is any indication, the winners have the potential to reap quite a large reward.