July 1, 2016

What Vacation Rentals Can Learn About Branding from Hotels

If you have watched tv or listened to the radio in the past few months, you have heard various hotel brands encouraging guests to book directly with them. Marriott, Hilton, IHG, and Choice Hotels are among the brands doing this and are offering various perks like discounted rates, free wifi (which should be free anyway), and additional loyalty rewards.

With booking fees for hotel brands on various online travel agents (OTAs) like Expedia and Priceline swelling to as much as 20%, it’s no wonder the major brands are willing to spend serious marketing dollars to combat these fees and encourage guests to do direct bookings.

The numbers show a clear trend: Companies are looking to leverage their own brands over OTA partnerships.

Web traffic likewise supports this. From March 2015 to 2016, direct traffic for hotels and accommodations has risen 15%, while referrals from OTAs like TripAdvisor are down nearly 27%.

Best Western CEO David Kong emphasized the importance of hospitality brands in a recent interview with Skift:

“It’s all related to the strength of the brand, because if the brand is strong then you can drive business to your hotels, and you have better leverage with OTAs [online travel agencies] in terms of distribution costs. A lot of the problems that we face in the industry you can stop if you have a strong brand.”

Among hospitality brands, Airbnb recognizes the power of branding, and SimilarWeb’s website rankings show Airbnb to be the second most trafficked “Accommodation & Hotels” site in the world. With over 57 million visits in the past 6 months, Airbnb sits above Marriott, the first ranked hotel in 7th, Hilton in 8th, IHG at #13, and Starwood at #15.

Hospitality is likewise quickly evolving: Vacation rentals, with the help of Airbnb and HomeAway, have skyrocketed in popularity over the past few years with no signs of slowed growth. Similar to Band-Aid or Kleenex becoming synonymous with adhesive bandage and tissue, so has Airbnb with short term rentals, driving the way for others to piggy back and grow their share of the vacation rental market.

Corporate housing companies like Bridgestreet have leveraged Airbnb’s platform. Hotel companies are investing in and even purchasing professional vacation rental management companies like Oasis Collections and onefinestay, and hotels have rolled out brands to specifically cater to the millennial traveler.

To date, the only hotel companies directly leveraging their brands across multiple forms of accommodation (timeshares excluded) are Wyndham, the largest vacation rental management company, and Choice Hotels, which recently formed a partnership with various local management companies. While Four Seasons likewise has a small contingent of residential rentals, it is nothing to the scale of Wyndham.

With hotels acknowledging the power of their brands and expanding into the vacation rental management space, it seems like there’s another player that could easily leverage their brand equity: Airbnb.

The company is rumored to be testing their own vacation rental management service, and with millions of already established short term rental contracts and a seemingly endless amount of cash to test, Airbnb could be the next company to successfully launch a vacation rental management megabrand.

Not only could this help Airbnb fight against onerous regulations; it could help them offer a wider range of products than hotels. Airbnb could easily scale up or back to accommodate demand. Additionally, according to a report by STR, Inc, the average price paid for an Airbnb short term rental unit was 25% higher than the average hotel rate, meaning Airbnb could also do it at a higher dollar value. With enough cash to buy a portfolio of boutique hotels, Airbnb has the means to diversify their offerings even further.

At Rented.com, we have long foreseen the consolidation within the vacation rental industry and the importance of a developed brand that comes along with it. For example, as a traveler, if you have a great experience with XYZ company in Destin, Florida, you have to find a different company to rent from in Lake Tahoe or the Outer Banks. This, however, is all starting to change.

There are large vacation rental companies staking their claim today and further developing national or international brands. Vacasa, for example, recently raised $35 million to expand nationally and internationally, TurnKey raised a three million dollar seed round, iTrip’s franchise and branding model is flourishing, and Natural Retreats (while somewhat under the radar) is also claiming their stake.

But what if Marriott, Hilton, and IHG wanted to enter short term rentals?

Rumors say that at least one of these three brands is getting close to entering the vacation rental industry. Leveraging their brand and loyal travelers could not only boost the (foreseeably purchased) local management company’s marketing visibility and profits; it could also attract many loyal travelers that are familiar and loyal to the brand name.

For short term management companies, now is the time to stake your claim as the big boys are coming. Leverage the brand you’ve created, recognize what makes your business unique, and safeguard your image.

Who do you think will be the next major accommodation brand that leverages its name and diversifies its lodging offerings? Let us know in the comments below.

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