This is part of an ongoing VRMA series of quarterly reviews of the top trends in the vacation rental industry. For those new to the series, you can find earlier posts under my VRMA Blog Contributor Page.
This series’ intent is to synthesize major trends and developments within the vacation rental industry over the period, not just to summarize them all. My hope is to stimulate discussion and debate, and as such I strongly encourage use of the comments section at the bottom. I would like especially to hear what trends you think I have missed and what can vacation rental managers do to benefit from positive trends while limiting the detriment caused by negative trends.
In my 2015 outlook, I proclaimed 2015 the year of experience. Now, as we look back on the last three months, we see clearly that the year of experience strongly continues. And, as 2015 emerges, we see from the convergence of major players, the old guard’s interest in vacation rentals and the shifting regulatory environment that the experiences sought after are the local and authentic experiences that vacation rentals can offer.
Convergence of Major Players
In the second quarter, we saw major players shifting to offer travelers both urban and non-urban vacation rentals in order to play to different types of travelers’ interests and to ensure plentiful local authentic experiences.
In late May, HomeAway announced its expansion into urban areas to compete with Airbnb, instead of focusing only on non-urban vacation rental inventory, as it did historically. As HomeAway shifts to cover the urban market, the company signaled its focus by making a strategic investment in Gogobot to reach the city traveler.
Just as HomeAway shifted into Airbnb’s market, we saw Airbnb tackling HomeAway’s bread and butter – professionally managed inventory. Also in late May, Airbnb announced that it is developing software to allow professional property managers to link their properties and assist with some of the rental legwork, including scheduling, pricing and more.
Established Players Understanding Vacation Rental Opportunity
In Q2, we saw old established players starting to take vacation rentals seriously; whereas previously vacation rentals may have been a threat, these major players appear to recognize its opportunity more as the sharing economy evolves.
Hyatt Hotels Corp., one of the largest and oldest hotel chains globally, invested recently in onefinestay, a website that acts as a sort of upscale Airbnb, with the key differentiator being that it actually manages its own properties. With onefinestay’s operations in major metropolitan areas, including London, New York, Los Angeles and Paris, Hyatt’s move to the home-rental industry is an acknowledgement that hotel alternatives may be able to best provide the local and authentic experiences that some travelers crave.
Likewise, Travelport’s CEO Gordon Wilson announced that that the company will add vacation rental properties to its distribution network and could be willing to work with companies such as Airbnb, yet another nod to the shift in hospitality that the sharing economy is nudging.
With all the movement in the vacation rental space, it is not surprising that new regulations are cropping up everywhere in a struggle to adapt quickly. Overall, the regulation is trending towards attacking property rights, such as in California where the Senate finance committee recently approved a bill to limit online vacation rentals. Such reactionary moves may have contributed to California’s vacation home sales falling to 5% last year while vacation home sales soared elsewhere in the US.
Though there are plenty of states and municipalities intent on attacking homeowner’s rights, others are beginning to more fully recognize the economic benefits vacation rentals can offer. For example, a study commissioned by Airbnb looked at rentals in 2014 and found that 72% of hosts use the rental income to supplement bill payment. This recognition of the economic benefit to the hosts and to the local economy has made some regulation more reasonable, such as in Fort Lauderdale where regulation exists but can be navigated by registering homes, providing a local contact, and paying appropriate taxes.
While regulation may seem like a burden to the vacation rental community, reasonable regulation such as done in Fort Lauderdale allows everyone to win. First, homeowners maintain property rights and the ability to rent out homes. Second, renters know their rentals are legal and have local contacts for any issues. Lastly, cities get benefits of more tourists and do not lose the tax revenue that they would if tourists stayed in hotels instead of vacation rentals.
As we review Q2’s activity, we see yet again that the opportunity in the vacation rental sector is bigger than ever. That said, as with any strongly growing market, the competition is also growing lockstep, and is expanding and morphing as giant tangential players move in. However, as we look to Q3 we should see these as positive indicators that business is booming and that we should all play to the embedded vacation rental strengths of local authenticity to reap the rewards.