It seems like every month news publications are announcing new venture capital, acquisitions, or big name players entering the once-cottage industry of vacation rentals — now, the fastest growing vertical in travel. As these announcements continue to mount, in what position does this leave the owners and managers of the movement? And are they guaranteed a place in its future?
I am a very optimistic person. Way beyond vacation rentals or work in general, I tend to look at everything on the bright side — whenever I read news or learn about new information, it’s like I have this internal filter that asks, “what positive aspect does this bring to the table?”
I view this as a strength of mine — if nothing else, it helps to keep me happy and optimistic about the future no matter how dark or dreary times may be.
And whenever I see statistics (here's a link to my personal stash) furthering the growth of the industry I call home, I subconsciously tend to spin them in a positive light: rationalizing why this is good news for us all. Sometimes I share these positive spins on social media or on this blog. Other times I write them on my bathroom mirror or keep them to myself. But in all cases, each headline for me is another arrow in our quiver of validation — reaffirming that our instinct was right all along.
“It gave Marriott the data it needed to pursue homesharing officially,” said a recent piece in Skift[1. Marriott Is Officially Getting Into The Homesharing Business, Deanna Ting, Skift]. “It showed there is consumer demand for this type of product.”
“Exactly!” I can hear vacation rental owners and managers responding. “That’s what we’ve been saying all this time!”
But focusing only on the positives can also be my weakness, especially if in doing so I ignore the downsides. So I wanted to take the chance to address some of the very real concerns that arise when a cottage industry begins to go mainstream -- specifically to the core stakeholders who feel the growth most frustratingly -- and share my thoughts with the hope that the comments section of this post can be not a den for rants but a space for objective and skilled dialogue.
Whose “fault” is this growth?
For those that view this growth as a negative thing, the immediate (and emotional) reaction is to want to point the finger at an individual or a company (or companies) to blame — the single reason that our beloved vacation rental industry is not the way it used to be. And sure, there are plenty of players culpable: I for one, as an advocate for professional vacation rentals done properly, am willing to accept responsibility in that sense. Most of the big companies would certainly accept that too.
But if you really think about it, the story of a great value proposition (vacation rentals) catching on and becoming popular to the public — that’s not really anyone's fault -- that is the open market: that is to be expected. In this sense, anyone who has promoted vacation rentals to one or one million consumers has played a part in this growth. And in this sense, it's not anyone’s fault but rather everyone’s great work that has gotten the vacation rental industry to this point.
"It's not anyone’s fault -- rather everyone’s great work -- that has gotten the vacation rental industry to this point."
Who thrives in this growth?
With industry growth comes winners — the proverbial ships that rise with the tide. The growth creates winners because it means more travelers are considering vacation rentals for their next trip, more resources are being invested in solutions, and more clarity in who we are (and who we are not).
“Vacation rentals still struggle with lack of awareness among U.S. travelers," according to the last PhoCusWright report[2. U.S. Vacation Rentals 2009-2014: A Market Reinvented, Deepak Jain, Douglas Quinby, Maggie Rauch and Cathy Schetzina, PhoCusWright]. "Just over one in 10 have booked a vacation rental in the past year. Fewer than half of travelers even considered it as an option, and many hold misconceptions about the types of properties available, options for length of stay, and amenities offered.” [Note: This report was from 2014 so the numbers have certainly increased since then.]
Industry growth means increased category awareness, which means the pool of potential guests gets bigger by the day. So to an extent, all owners and managers are winners here. Granted, some more than others...
The biggest winners are those who have the right foundational elements in place to ride the wave — that includes a diverse marketing portfolio (see the 4 Stages of Listing Site Independence), a personality-driven business model (see the Theory of Limited Edition), and a profit-first philosophy (this goes for owners, managers and startups -- businesses who do not have the profit thing figured out yet should do so very quickly, there is still time). Businesses with this foundation are almost impenetrable to bigger, richer competition, not to mention industry shifts and market corrections: they have carved out their place in the future.
Video Summary of Listing Site Independence
Click here to Take the Listing Site Independence Experience
"Limited Edition vacation rental businesses are impenetrable to bigger, richer competition: they've carved out their place in the future."
Note for "the little guy": logistically, it’s easier for small businesses with fewer moving parts to achieve this balance than it is for large businesses. Not to mention the advantage of doing small-scale highly-personalized hospitality tasks. But regardless of size, the owners and managers who have built these foundational elements are likely to grow proportionally with the wave.
Who gets squeezed out with this growth?
Spoiler Alert: It's not explicitly "the little guy."
What we cannot ignore is that with industry growth also comes losers — stakeholders for whom the critical challenges are simply insurmountable. The stakeholders who are likely to get squeezed out fall into two camps:
- Commodity vacation rental managers who don’t have the foundational elements mentioned above. This is not to say that commodity PMs do not fill a necessary role in the industry: in fact, commodity PMs are necessary to our industry: they are the baseline standards and predictability that a fragmented industry needs most! But success for commodity businesses is defined in terms of sheer might: how efficiently can you operate? How fast can you scale? More on this in a moment...
- Big money brands who (for whatever reason) can't perform the way their acquirers want. Disclaimer: I don't know much about situations like the fall of LeisureLink[3. LeisureLink Ceases Operations, Leaving Many VRMs Unpaid for Reservations, Amy Hinote, VRMIntel], the newly-announced Expedia dropping the HomeAway name[4. Expedia Faces Stiff Headwinds in Re-branded Short-Term Rental Business, Dennis Schaal, Skift], or the slow fade of Luxury Retreats acquired by Airbnb other than that these brands/companies haven't soared as hoped. I don't really follow them because they're so far out of our control, but they are certainly proof that even big ships are not immune.
The commodity game is not an impossible game, but it favors those with the deepest pockets. Unsurprisingly, "commodity companies" like Vacasa and Turnkey are racing to the moon, which may eventually leave the commodity property managers (who don’t have deep pockets) in dangerous neutral ground asking "what is our role here?" If you sense that you may be in this category, now is the time to become a Limited Edition business. There is still time: we are still at the beginning.
"The commodity vacation rental game is not an impossible game. But it favors those with the deepest pockets."
How do we control this growth?
One thing I’ve learned about growth is that if it moves too quickly it becomes prone to burst. Unbridaled growth in the vacation rental industry is likely to yield unrealistic expectations from newcomers and as a result, unhappy campers all around. So an important question emerges: how do we control the growth? How do we (maybe even) slow the growth down?
To be clear, I don’t know the answer to these questions. Many ways to govern the velocity of the vacation rental industry fall outside of any one individual’s control. So many, in fact, that I’d argue that no one individual or organization can sway things too far on its own. So instead, we must turn inwards and control our own businesses first. And yes, this is "easier said than done."
However, I do believe there are some things we can do as independent stakeholders that, collectively, when added up, can make a significant difference. At the very least, these are the things that make us feel more in control...which is half the battle.
- Double-down on relationships: Any chance you get to really get to know someone in your vacation rental sphere (be it a guest staying for the first time, a vendor providing software, or a neighboring “competitor”) do so. Personal relationships cannot be accelerated or hacked: they are the precious resource of the future. I maintain that if you can be the first voice to introduce someone to a new product or service, you get to establish the baseline of what to expect.
"If you can be the first voice to introduce someone to a new product or service, you get to establish the baseline of what to expect."
- Focus on little steps: When training for your first marathon, they teach you to focus on individual steps -- maybe because thinking about the finish line is overwhelming. And for any ultra complicated problem, finding the Best Closest Proof is often the least-risky way to go. Same is true in the long-game of vacation rentals: don’t let the magnitude or the speed intimidate you. For marketing, focus on single tactics or projects in your current stage of Listing Site Independence. For operations, focus less on the big goals and more on the habits needed to achieve them. Establishing what your version of success looks like is key in this regard: it is the finish line you are working towards and it is entirely up to you.
Video Summary of "Best Closest Proof" (Aka. Little Steps)
Recorded at VRTech, Rentals United HQ in Barcelona, April 1, 2019
- Refuse business that is not on your terms: In environments of rapid growth it can be tempting to compromise your own needs/requirements in order to cash in on low-hanging fruit. This is dangerous for small business owners — it is a slippery slope. The more you do business that is not on your own terms, the less anchored you become. It’s better to tear off the band-aid now then to have the entire rug pulled out from you in the future.
- Creative conflict of interest: If you feel like too many people are entering the pool, consider publishing controversial or highly-critical perspectives that may seem — in appearance, to be conflicts of interest — but in the end may help filter out those who are not the right fit. If you are a popular destination, try a blog post, “10 Reasons Renting a Vacation Rental in Florida is NOT For You.” If you are in a remote place, try "10 Reasons This Is NOT Your Grandmother's Marriott." If you are a vendor, try a blog post revealing the harsh difficulties of vacation rental management.
- Divert, don’t block: Because the vacation rental industry is growing so quickly, it may be impossible to stop the momentum. Which means the next best thing is to divert the momentum in the direction you believe to be best. This means showcasing the best of what is possible, highlighting the best of what you region has to offer, acting as a role model for those entering the industry for the first time. (This is, at least, my gamble in creating The Vacation Rental Show.) With this in mind...
- Support the right organizations: 2019 is the time to proactively step forward and support events, companies, associations, and community leaders who stand for a vacation rental future you believe in. Consider Amy Hinote's Vacation Rental Women's Summit, Heather Bayer's Vacation Rental Success Summit, Antonio Bortolotti's Vacation Rental World Summit, the industry-leading events by the Vacation Rental Management Association, the pioneering Northwest Vacation Rental Professionals, the unifying Streamline Summit, the always-uplifting Liverez Partner Conference, Vanessa's VR Tech events, the VR Mastered Bootcamp, and Europe's one-n-only KigoWorld.
Should we be concerned?
The vacation rental industry is exploding -- it is turning into one of the great disruptions of our lifetime. This may come as a surprise to some people who stumbled into this industry accidentally. It may be obvious to others who recognized the raw materials. But one thing everyone has in common is the understanding that it's changing...and fast.
Should we be concerned about all this growth and newfound attention? The answer is yes. We should all be very concerned. Because it's our businesses, our passions, and our livelihoods at stake. The early stakeholders in any industry have as much to win as they have to lose: no one is guaranteed a place in the future. Which is to say, being concerned is a bit like having butterflies in your belly: it's a good thing. If you weren't concerned, it would mean something was wrong.
But we must use that concern to act.
The big difference (I have observed) between those who will enjoy the growth versus those who will be broken by the growth is control. Develop control about your vacation rental business and you get to steer your own ship -- you get to write your own story. Lose control of your business and you will rise like all the other ships in the tide, until you realize you're way off course, out in the open ocean, without a map or a compass to get back home.
Your input, comments, and arguments in the area below are appreciated as always...