Three years ago I wrote a piece that questioned whether vacation rentals were about to have an expansion period similar to hotels’ “1952 moment". This “1952 moment" was the inflection point when hotels went from one-off boarding houses to international brands. The argument was that vacation rentals were about to follow the same path. We were all on the cusp of witnessing massive brand building and consolidation in the space. Now, three years later, it seems like a good time to revisit those predictions, and see how I fared.
A Quick Update
As the short-term rental industry stands right now, brands are being built and cultivated on a scale never previously seen. This in turn is attracting record amounts of investment into the space, no small part of it coming from the very hotel brands I previously referenced. Some examples of this that we’ve seen are Accor’s $169M acquisition of onefinestay, Hyatt’s investment in Oasis (actually purchasing Accor’s stake), and Marriott’s partnership with Hostmaker. The biggest deal yet has been Wyndham selling its European vacation rental arm for $1.3B.
So, on the surface it seems my predictions were spot on. Right? Maybe not.
A Different Perspective
Though brands are being built, and hotels are entering the space, there is a credible argument to be made that megabrands don’t have the same potential in short-term rentals as they have in hotels. Many of the arguments as to why this is aren't new. “Vacation Rentals aren’t cookie cutter like hotels so consistency isn’t possible,” and “Guests want the boutique experience” are indicative of the idea that megabrands can’t succeed in the space because the demands of experience between the two are so different.
Actually, I don’t believe either argument is completely correct. One can create a unique offering while still maintaining brand quality and operational standards at scale. Marriott is currently demonstrating this concept through its 30 different sub-brands by creating a unique experience within each. They've successfully created something unique even though they are themselves a big hotel company.
Thus, it isn’t that brands have no way of succeeding in a world that requires uniqueness and a lack of cookie-cutter potential. Rather, it's that the world in which we live in 2018 is so different from the world in which the major hotel brands were created in the 1950s that the value of brands in the first place is being diminished. In many industries before this one, we're already seeing the value of having a brand decrease due to the accessibility of information and the changing nature of work. Though this could be seen as a problem on the horizon for some, including certain players in the vacation rental industry, for many it could instead be seen as an opportunity.
Brand loyalty came about because people trusted the comfort and certainty that their favorite brand afforded them. Historically, hotels have spent a considerable about of time, energy, and money building their brand image. At first, they were simply using the listing sites as another channel to showcase that brand. Today it's listing sites like Airbnb, VRBO, and Booking.com that have become the “brand” in many guests’ minds; which allows the vacation rental and alternate accommodation space the opportunity of potentially leapfrogging the need for having an established brand altogether.
Think of it this way: in the 80's and 90's, mom-and-pop retail shops were crushed by bog-box stores such as Wal-Mart. But, what if during this time they were also afforded the ability to be represented by a company that could pour funds into building a brand image, and funnel business back to them? They probably wouldn't have seen the demise that they did. In this example, the hotels are the big-box stores that are moving in on the smaller mom-and-pop management companies; and thankfully we have brands like Airbnb and VRBO that can afford to pour resources into gaining market share in order to facilitate an opportunity for those smaller companies to stay in business.
For a long time independent managers perceived listing sites as a threat. However, since the explosion in popularity of vacation rentals, consumers can now look at reviews on platforms such as these listing sites; receiving the same comfort and certainty that the big-name brands monopolized in the past. Therefore, it's somewhat ironic that the feared listing sites may prove to be the savior instead, as they help prevent small property management companies from going the way of those main street mom-and-pop shops that were killed by mega retail companies just decades ago.