December 3, 2015
What Consolidation Means for the Future of Vacation Rentals
Back in July, we made some predictions. While HomeAway had already been successful for over a decade and Airbnb had a whopping $20B valuation, we declared 2015 ripe for change in the vacation rental industry, and we declared 2015 the vacation rental industry’s 1952 moment.
It looks like we were right.
Vacation Rentals Today
For many, the first company that’ll come to mind when discussing vacation rentals will be Airbnb or VRBO. Neither, however, truly is a brand of inventory or experiences.
Today’s largest players in the vacation rental industry are merely technology platforms that aggregate listings, and the options available completely vary in quality, consistency, and experience. As we said in July, “The only true brands of inventory that do exist tend to be very localized vacation rental managers, who almost define a cottage industry.” While these property management companies currently exist, most do so in small, localized economies.
Vacation Rentals Tomorrow
With multiple benefits that come with scale including recognition, brand loyalty, and even further expedited growth, vacation rental managers and online travel agencies (OTAs) are scaling faster than ever. Last time we mentioned Vacasa, the ninth fastest growing company in the United States, and the millions of dollars from venture capitalists that are further fueling the market, but it’s not just the vacation management companies that are ready to compete for marketshare.
With Expedia’s recent $3.9 billion acquisition of HomeAway, it’s clear that the sharing economy is drastically reshaping the lodging industry as we know it and that the online travel agencies are likewise ready to compete in the vacation rental space. And that much is clear just from the numbers: Expedia paid more than twice as much to acquire HomeAway than it did to purchase Travelocity and Orbitz combined.
Expedia, however, is not the only OTA ready to compete. On November 30, Booking.com and Wyndham announced a new global distribution agreement whereby Wyndham Vacation Rentals, the largest professional management company, will be able to use Booking.com’s website and mobile apps to distribute its 105,000+ properties.
The sharing economy is changing travel as we know it, and, again, the pie is only getting bigger. In 2013, the traditional rental sector and the sharing economy sector combined was valued by PwC at $255 billion with the sharing economy sector a mere $15 billion. By 2025, however, that pie is projected nearly triple to $670 billion with the sharing economy growing by over 4,466%.
And with the consolidation of OTAs and the recent partnerships announced, the consolidation of the accommodation industry is only beginning. OTAs appear to be positioning themselves to compete with today’s sharing economy giant, Airbnb. HomeAway Chief Executive Brian Sharples told the Wall Street Journal, “We’re in a brand game and a brand battle and we’ve got another competitor out there that’s been a poster child of the sharing economy and has been getting a lot of press.”
To compete, HomeAway has already announced a restructuring of its fee structure to one more similar to Airbnb’s: In addition to the fees or commissions HomeAway is charging its hosts, the company will likewise be charging travelers fees to book properties.
Instant booking is also on the horizon, and it’s coming even faster than you may think. With the Expedia/HomeAway and Booking.com/Wyndham deals just taking place, it is clear that manually screening guests before allowing them to book will no longer be an option. At the Austin HomeAway Summit this year, the brand announced that 100% of listings would be bookable online by 2016. For the homeowners who still try to screen guests using the major booking channels, there will have to be a tradeoff of the guest volume that comes with using the platforms or manual screening by using alternative booking platforms.
Again, with all the recent changes in the lodging industry, it’s clear that 2015 has already proven itself to be the vacation rental industry’s equivalent of the the hotel industry’s 1952 moment.
Change is not coming slowly, but what does this mean for you?
Let us know in the comments below!
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