When Small Is Tall (There’s Room For All)

Author: Matt Landau
Category: Limited Edition
February 15, 2017

Investors Looking to Cash In On the Vacation Rental Trend are Finding Innovators in the Most Unusual Shapes and Sizes

I was a really small kid growing up and my mother used to always read me a book called, When Small Is Tall. It was about how you don't have to be big and powerful in order to succeed. And when I was visiting my parents last month, I found the book and read it again several times. It's a really fantastic book.

“The cutting edge” of many industries is characterized by technology and innovation and advanced-thinking visionaries with radical, world-changing ideas. This cutting edge is where the influencers congregate. And it’s where the big money flows in order to align itself with more power.

The cutting edge is NOT typically comprised of people who are set in their ways. In fact, it's almost the antithesis of doing things the old-fashioned way.

But something very interesting is happening in the vacation rental industry that venture capitalists and big corporations are having a very difficult time digesting.

According to a report by Phocuswright[1. A Market Transformed: Private Accommodation in the U.S., Phocuswright, Douglas Quinby, Analyst], in 2016 vacation rentals grew twice as fast as the total U.S. travel market. “Traditional vacation rentals have transformed into one of online travel's hottest and best-funded segments. The segment will continue to outpace the overall market through 2017.”

The little industry that could! This is why we love vacation rentals so much!

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With Growth Comes Change​

With such explosive growth, the once-homogeneous vacation rental niche is splintering into two camps.

1. Commodity: Commodity vacation rentals fulfill a certain baseline of standards such as cleanliness, amenities, and security, thus eliminating much of the unpredictability that lies in staying in a vacation rental for the first time (a trend[2. More and More People Who Use Airbnb Don't Want To Go Back To Hotels, Bloomberg, Julie Verhage] that is voraciously gaining on hotels right now).

Because Commodity vacation rentals resemble in many ways the traditional dynamics of a hotel, they have become the natural focal point of big corporations such as Wyndham, Accor, and Marriott, looking to cash in on this profitable trend. And they will likely succeed in commoditizing an once-seemingly uncommoditizable product. When and how this will happen is relatively straightforward.

Lynn Gallimore, Sinya on Lone Man Creek

2. Limited edition: Limited Edition properties fulfill the basic commodity standards, then almost piggyback with an added injection of personality, authenticity, and sustainability that humanizes the property and the destination, thus separating themselves from the commodity market. A perfect example of Limited Edition as first featured in VRMB's 2017 Trends Course is Lynn Gallimore, who's property Sinya, an African-inspired safari tent just outside Austin, comes with personal welcomes, s'mores kits for the campfire, and bee-friendly toiletries.

To understand the Limited Edition vacation rental, consider great boutique hotels that are not affiliated with any big hotel chains. The small hotels that offer world-class experiences and sway travelers to forego earning points in exchange for something radically unique. The ones who have laid the groundwork, proven it’s possible, and appeal to increasingly discerning travelers.

The Cutting Edge Surprise

Investors looking for the cutting edge in the vacation rental industry — the prototypes that represent the truest, most unbreakable essence of the vacation rental movement — have to zoom in on Limited Edition properties. However, these Limited Edition vacation rentals are not familiar entities. They are by nature small-scale, ultra-personalized, and in a lot of ways, inimitable businesses. In a lot of cases, they were started accidentally without any business plan. In most cases, built on passion as opposed to business savvy.

Most hilariously, the very people pioneering perhaps the most innovative travel trend of our lifetime happen to be simple, empathetic, almost anti-corporate moms and pops who are unlikely to ever sell out. In fact, this "David" has very little concern for "Goliath" in general, as long as he consciously goes counter to (or better, totally away from) the behemoth's rules of the game.

What Does This Mean?​

Building a ​Limited Edition vacation rental business requires a lot of time and commitment and there will certainly be a wave of owners and managers turning their properties over to property managers (or even closing up shop) in the coming years because that's not what they signed up for.

But those who do see the value of doing something special will take comfort in knowing that few of their competitors will follow suit. And perhaps more importantly, that their future is in their own hands.

Both commodity and limited edition rentals certainly have their own place in an industry that is growing so fast. When small is tall, there's room for all in this incredible movement. But to identify precisely where it’s heading in the future, considering the battle of David versus Goliath. When the terms of the playing field are shifted, David can win every time.

Citations

About the author 

Matt Landau

Matt Landau is the Founder of the VRMB and the Inner Circle, two online resources dedicated to helping vacation rental owners and managers generate more bookings.

  1. One challenge that I think ‘mom and pops’ have is figuring out where it makes sense to stand apart from the crowd and where it makes sense to get in line with where the industry seems to be moving. It’s not always clear, and I think you have to really have a good sense of self and understand what it is about your rental property/business that makes it potentially “Limited Edition”. I’d go all in on those things and not sweat the other things that don’t matter as much.

    Here’s an example… working for a software provider, I occasionally see a mom and pop clinging to a rather unique and unorthodox rate structure. Why? Because they’ve “always done that” and it “works for them” and they don’t see the reason to adapt just because others are doing it a different way (naturally there are other valid reasons, so I don’t mean to put everyone in the same boat with this example). Now, if the property’s one-off rate structure isn’t a key characteristic of it being “Limited Edition” (which it probably isn’t), and if by clinging to this way of pricing makes it harder for renters to understand the cost, or for you to find software that supports your rate structure, consider simplifying and conforming on this non-critical item! Double down on the things that truly matter and make you unique.

    1. “Double down on the things that truly matter” amen to that. I’m working on an 8-steps to Limited Edition framework. I’ll pass it by your desk to make sure that everything that matters is included.

      – MATTers

  2. Great article Matt. I’ve read it many times over. I think it’s a great insight into where the future will lead.

    It inspired me to start scribbling … (attached).

    I’ve tried (guessed) to place some hotels into a space. Ultimately I think we can do the same with VRs.

    Curiously I think there is a channel up the middle diagonal that represents a sweet spot of … shall we call it ‘efficiency’. I think I could place a whole handful of Las Vegas resorts onto that diagonal. That makes sense as that must be one of the most competitive markets on the planet.

    So a whole bunch of questions …

    If big money does move into the VR space, will they tend towards this diagonal? Especially if this is where they find the max ROI?

    If they start there, over time will they pull themselves lower as they chase higher ROI by slipping their product towards being more generic? Generic at scale = efficiencies.

    While this diagonal might be where the efficient ROI is, it doesn’t mean there aren’t markets at every point in this space. My gut feeling is that the further away from that diagonal you move, the more you have to commit to your market. For example, if I ran a budget, Elvis themed motel in Orlando I wouldn’t be competitive against that diagonal. But I’d kill them if I market to Elvis fans who are visiting Disney. Ah Haaa!

    I’d love to hear any more thoughts on this as it’s something that I try to think about ever so often.

    To win as David you absolutely must take the playing field away from Goliath. That first requires that you know where Golith is playing.

  3. This From SteveH

    >>>
    https://uploads.disquscdn.com/images/0929b306155d14f9dde0e8d16ebd875468ca3b58850a3f01d231f126450bca83.jpg Great article Matt. I’ve read it many times over. I think it’s a great insight into where the future will lead.

    It inspired me to start scribbling … (attached).

    I’ve tried (guessed) to place some hotels into a space. Ultimately I think we can do the same with VRs.

    Curiously I think there is a channel up the middle diagonal that represents a sweet spot of … shall we call it ‘efficiency’. I think I could place a whole handful of Las Vegas resorts onto that diagonal. That makes sense as that must be one of the most competitive markets on the planet.

    So a whole bunch of questions …

    If big money does move into the VR space, will they tend towards this diagonal? Especially if this is where they find the max ROI?

    If they start there, over time will they pull themselves lower as they chase higher ROI by slipping their product towards being more generic? Generic at scale = efficiencies.

    While this diagonal might be where the efficient ROI is, it doesn’t mean there aren’t markets at
    every point in this space. My gut feeling is that the further away from that diagonal you move, the more you have to commit to your market. For example, if I ran a budget, Elvis themed motel in Orlando I wouldn’t be competitive against that diagonal. But I’d kill them if I market to
    Elvis fans who are visiting Disney. Ah Haaa!

    I’d love to hear any more thoughts on this as it’s something that I try to think about ever so often.

    To win as David you absolutely must take the playing field away from Goliath. That first requires that you know where Golith is playing.

    1. I am so loving this comment and the brilliant napkin art to boot! Curious to read folks’ feedback as I think this may take me a few hours to sink in!

    2. Steve I’ve read this several times over and gained something new each time. I think the most profound takeaway for me is your last statement. That David must figure out where Goliath is playing. The next logical step is to play somewhere else. Kind of like being a big fish in a small pond instead of the other way around.

      Limited Edition does not try to be everything to everyone, but to serve a niche market by diving very very deep into that market, learning how to think, act, and talk like that market, figuring out what their hot buttons are, and designing the entire experience for them. Committing to your market, as you said.

      Thanks for the drawing. It has helped to clarify some things for me.

  4. When small is tall is the story of my life lol and it has been no different with our villa.
    The concept is even more important as businesses such as AirBnB come online where not only do you have the commodity type properties to content with but all those people who figure this is a great way to make extra money.

    We are in a very competitive area where everyone thinks beachfront is the bees knees. We are not beachfront but a mere 2 minute walk away. For a long time, I kept kicking myself for not going beachfront but we have ended up with a property that is very unique, both in offerings and in service. We have more amenities than almost any other vacation rental around – including most of the beachfront ones. We also have a high level of service with chef, butler, etc. Concierge type service. http://www.MakeItJamaica.com.

    As a limited VR, you have to be able to show your difference succinctly and quickly once someone gets to your website. We need to work on that some more. I’m not so sure that people really realize all that we offer off the bat. Also, as someone else mentioned, you have to figure out how to get seen. People can’t book what they don’t know about.

  5. This is an excellent article. As a “David” myself, I have to believe there is a future for Small, Limited Edition propositions, such as what we are trying to do with http://www.passepartout-homes.com As someone mentioned here earlier, clients are returning to their local butcher. The challenge, as usual, is to drive direct bookings without breaking the bank, in a world dominated by the Goliaths.

  6. Hi Matt,

    This post spoke directly to the initiatives I’ve been working on over the past 18-24 months. Discovering the things that truly matter and going for it. We’ve always had a niche market and now we have plan to push past the next transition. Just didn’t know what to call it so thank you for bringing “Limited Edition” into the mix. Per usual brilliant.

    Thank you,

    Julia

  7. Great idea again, Matt. In an area where there is a lot of competition, setting your home and yourself apart is challenging. I am trying to give super service with restaurant guides, my guide to Tahoe favorites, and tailoring information to each guest. The house itself is beautiful (www.vrbo.com/56320). The next step for me might be video footage (drone shots over the house and inside too) and sigh (of myself). Thanks for all your help and on to the “limited edition” concept!

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