The vacation rental and short-term rental segments are gaining more and more attention in the hotel space, but hoteliers and the general public do not fully understand this.
Some mistakenly think this is a new lodging industry, but many have been around longer than most hotel brands. For example, Elliott Beach Rentals in South Carolina was founded in 1959, Emerald Isle Realty Vacation Rentals in North Carolina opened in 1962, and Kauai Vacation Rentals was founded in 1978.
Here is some additional information for hoteliers who want to learn about this unique and growing niche in the lodging industry.
Although the terms vacation rental and short-term rental are often used interchangeably, vacation rental companies tend to rent in rural and suburban areas, primarily catering to beach and mountain vacationers, while short-term rental companies tend to operate in urban areas, focusing on both extended-stay business travelers and leisure travelers.
Mainstream media often confuse the public by incorrectly referring to distribution platforms such as Airbnb and VRBO in a way that makes them feel like they only offer rentals from individual owners. However, the majority of vacation rental inventory in most market areas is professionally managed or owner-managed, and many of these businesses are quite large in terms of unit count. While an “average” business might manage 100-200 homes, there are many that manage 500-1,500.
When I first discovered the vacation/short-term accommodation segment decades ago, virtually every business I encountered was locally owned. Many were offshoots of local real estate companies or builders/developers who started vacation rental divisions as side businesses to give buyers a way to generate a return on investment in the vacation homes they purchased. for personal use.
Time and time again, investors and even hotel brands have tried to launch national brand ventures in this space, such as ResortQUEST, which started in 1998 and was later bought by Gaylord Hotels, then sold and rebranded as Wyndham Vacations.
Vacasa launched in 2009, began aggressively buying businesses, and eventually bought Wyndham Vacations. Today, it offers over 35,000 properties. Other major national brands include Natural Retreats, which operates in 16 destinations; VTrips, which offers 13 locations on its website; and I Love Vacations, operating in eight locations.
There are national players on the short-term rental side such as Sonder, which currently has inventory in over 40 cities around the world; and Sextant Stays, a fast growing company currently operating in New Orleans, Fort Lauderdale and Miami.
You might think that locally run management companies are “small” companies, but many manage and let hundreds or even thousands of properties. Some of the smaller companies are run by investor owners who started out managing and renting their own properties, but later took on rental operations for a handful to a few dozen properties. Many others, however, manage large numbers of rooms.
In our training workshops, I often ask staff to consider the total number of “rooms” they manage, then ask them to imagine all those rooms stacked on top of their rental company’s office building. . For example, many of our clients rent 1,000 or more homes and condos, with an average of three bedrooms. That would be 3,000 rooms, which would be bigger than any hotel outside of Las Vegas.
The revenue stream of vacation rental and short-term rental companies is largely dependent on the number of properties, the size/segment of the properties – such as in ultra-luxury versus moderate – and of course the seasonality of tourist activity in their locations. Some popular vacation rental areas, such as the Outer Banks of North Carolina, generate most of their revenue between May and September. Other areas, such as cabin rental companies in Gatlinburg, have year-round seasons, allowing them to generate more annual revenue per unit than those with more expensive homes in seasonal locations.
As the vacation rental and short-term rental niches have evolved, so have their business models. Originally, vacation rental companies employed their entire staff, including housekeepers, maintenance staff, and guest services staff. Over time, many have outsourced some of these functions, particularly housekeeping, to local independent contractors and/or local niche businesses such as laundry services, while employing their key staff who interact with customers and owners.
Another major myth is that the vacation/short-term rental business model offers fully automated sales and customer service, with only housekeeping and maintenance functions requiring humans. However, the most successful companies I’ve seen have managed to combine the latest technology with highly personalized customer service, reservations sales and owner support.
For example, although these companies offer self-service check-in, most still have a lobby. Although they have text messaging and home messaging options in place, they still have plenty of humans to respond when a personalized approach is needed. They also invest heavily in customer service and hospitality training for all staff, including maintenance and housekeeping.
As mentioned, the most well-known distribution channels are Airbnb and VRBO, but properties can also be found on many other sites such as Booking.com, Expedia, TripAdvisor and others. Granted, there are plenty of companies, especially smaller startups, that sell nearly 100% of their inventory through these channels.
However, I’m still amazed at how many vacation rental companies book 100% of their inventory directly. Yes, you read that right, all bookings come directly through the website or voice channels, or an interaction of the two.
They are also big companies. I can’t think of a single mainstream hotel that can say that, and in all travel, I can only think of one company with 100% direct sales: Southwest Airlines.
For hoteliers interested in learning more about the vacation rental industry, here are some links to associations and resources: Vacation Rental Management Association, Short Term Rental Home Owners Association and Intel VRM.
Doug Kennedy is President of Kennedy Training Network, Inc. Contact him at [email protected].
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