Over the last several months, fast-growing vacation rental companies have begun to describe themselves as “technology-enabled” or “tech-enabled” in the media and in their communications. However, in a sector facing rapid innovations in technology, the differentiation between a tech-enabled vacation rental manager (VRM) and a VRM that simply utilizes technology is becoming less clear.
Last month, over two hundred vacation rental professionals and technology leaders, including Phocuswright, Wyndham, LiveRez, Vacasa, Evolve, East West Resorts, Invited Home, Vacation Rental Pros, Expedia, Streamline, Red Awning, Sky Run, Beyond Pricing, AirDNA, and more, met in Denver to discuss the state of technology in the vacation rental industry.
Andrew McConnell, CEO at Rented.com, said. “It comes down to technology really being the competitive differentiator for the business and, in many ways, comes down to the ‘direction’ from which the company tackles problems,” said McConnell. “Many legacy businesses that use technology are just digitizing their old processes. This creates some efficiencies but is not really a game changer.”
McConnell continued, “On the other hand, many of the ‘tech-enabled/forward’ or ‘tech first’ companies start from a business problem (e.g., spotless properties) and work back from there to figure out what technology can do to get the desired result as quickly and cheaply as possible while, ideally, ensuring even greater consistency. In using the technology, they are not led by or beholden to the old analog way of doing things.”
McConnell provided an example of how a tech-enabled VRM thinks differently. “So an illustration again with cleaning could be a VRM who still requires seven-night minimums, and all turnovers are the same day, but [it] uses technology to help schedule [the] cleaning crew and coordinate sending them to homes,” McConnell explained. “A tech-first company would have check-ins and checkouts automated, triggering the system for instant scheduling, and then use technologies and business processes to track and measure performance (e.g., quality of cleaning) and efficiency (e.g., speed of cleaning) rather than being dependent on spot checks and/or guest reviews and complaints.”
Technology Currently Available for Vacation Rental Managers
In the last three years, the industry has seen an explosion in the technology that is available to VRMs. Automated guest-marketing and communications tools have advanced to reach out to travelers from before they first think about going on vacation to the time they choose never to vacation again. For operations, technology is being created to manage every aspect of property care, housekeeping, maintenance, human resource management, expense tracking, smart-home automation, energy management, and more.
Over over seventy VRM functions currently have technology solutions available.
The Reality of an All-in-One Solution
Is it reasonable to expect one technology provider to offer the best-in-class solution for all of these functions? Likely not. As more tech tools become available, it is improbable that any single software company will have the resources to be the best supplier of every technology tool the industry needs. Consequently, increased levels of open integration will be necessary, but some software systems have been slow to provide integration.
“Currently, reservations and accounting are at the core of the vacation rental technology model, and the other functions are secondary,” said Doug Macnaught, founder of The VRM Consultants and former president of Instant Software. “For each of these secondary functions, third-party technology companies have an opportunity to be best-in-class. If the secondary technology is valuable enough, the property manager will put in the extra effort to get around the integration.”
“Ultimately, though,” Macnaught continued, “the primary software providers who will win in this game are the ones who open up their system to allow interaction with the best-in-class systems and allow these systems to supersede the options available in the primary software. For example, if there is an outside company that has a better work order system, then the software company wins by allowing the VRM to use it. It doesn’t hurt the primary software company. The VRM will still use and pay for their core system.”
As vacation rental managers shop for new software systems, they are likely to find it increasingly critical to choose software providers that provide the ability to integrate with the tools that they determine are best for their companies.
Vacation Rental Managers Search for a Competitive Advantage
As vacation rental managers examine the contents of their technology toolboxes, they must begin asking the question “Are we a tech-enabled company?” While a “no” answer is perfectly acceptable, the next question should be, “Which technology solutions will have the greatest impact on our bottom line?”
For example, in some markets, investing in the best tech solutions for property care yields the biggest gains in revenue and market share. In other markets, investing in channel distribution management produces larger returns. In others, revenue-management technology has the maximum benefit.
It is also useful to compare current technology utilization with that of competitors to identify core tech strengths and to communicate those strengths to prospective and current customers. In some cases, a lack of technology can provide a competitive advantage. For example, if a competitor is promoting automated inspections as one of their selling points, a response could be, “We don’t use automated inspections because we have live inspectors personally check before and after each stay to make sure that everything in the property is ready for the next guest.”
Not all technology solutions are right for all businesses. In many cases, the functionality that the primary software system provides addresses the need adequately. For example, the websites and online marketing tools that a software provider offers may work well in a market where the majority of bookings come from third-party channels.
Although the technology solutions needed by each VRM vary greatly, knowing what tech tools are available and understanding how utilization of these tools potentially affects business are imperative in facing the future of property management.