January 26, 2016
How to Grow Your Vacation Rental Business
In Part 2 of The Goldin Standard: Q1 2016, we’re looking at expansion and acquisition for Property Managers. What options do you have when looking to grow your vacation rental business?
At VRMA, HomeAway, and other industry conferences and events, there always seem to be a few major topics warrant the most attention, the top two being short-term rental regulations and expansion/acquisition of property management companies.
In my experience with the vacation rental industry, there are two groups of people who choose this profession: The first group of people chooses this profession to provide for their families while also allowing them the luxury of a relaxed lifestyle in their favorite place in the world. The other group chooses the industry because of opportunity. They have recognized that the vacation rental industry is booming, especially with growth from $40 billion in 1999 to $150 billion in 2015 and companies like Airbnb having $25 billion valuations.
If you fall into that second group, you already know what you need to do to grow your business. Expand. Add more market share in your current market(s) and/or identify additional markets.
But how?
HomeAway shared some interesting data at Rezfest in Las Vegas this year. The second most popular summer destinations are cities, and the top US markets in terms of demand per listing are Chicago, NYC, Boston, Miami, and my hometown of Atlanta. These are the underserved markets, so who is going to go after them?
We at rented. have long predicted the consolidation of the vacation rental industry and related it to the 1950’s hotel movement. We are already seeing several companies expanding quickly by purchasing local management companies and several others growing into new markets organically, and both have their pro’s and con’s. Naturally, depending on your business/expansion model, you’ll do what is best for you company. If you are considering expansion through acquisition, however, be sure to know the risks and your options.
Likewise, there is the flipside to consolidation, which might resonate more with the first group of people I mentioned in this article.
Is now the time to sell?
I can certainly tell you that it is a hot market, but when is the last time you cleaned up your books? You’ll need to know what your average profit per property is, the costs of servicing each property, the average number of years your company keeps homeowners under your management, etc.
Before seeking a new arrangement, have a firm grasp on your numbers and data. If your numbers are underwhelming, work on increasing them before trying to sell your business. In other words, just because there are hot markets, you shouldn’t rush into something for which you are not ready.
Stay tuned for the next part in my three-part series, The Goldin Standard, for how to utilize dynamic pricing.
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