Last week’s Vacation Rental Management Association (VRMA) International Conference in Las Vegas was the largest yet with over 1,700 attendees, and the event proved to be a microcosmic commentary on the macro state of the vacation rental industry.
Historically, the VRMA’s annual conference centered on networking and hands-on education about operations, management, and marketing for professional vacation rental managers; and the show certainly had plenty of learning opportunities with over 150 sessions. The VRMA also partnered with the Vacation Rental Housekeeping Professionals (VRHP) to add an even more in-depth element of education for attendees.
But what really stood out at this year’s conference was the addition of representation from venture capital groups, private equity firms, global travel industry consultants, OTAs, urban short-term rental providers, and even Google.
From commercial banks to back-of-the-house managers, market analysts to marketing experts, and fund managers to fun managers, the conference was unparalleled in its diversity of roles that comprise the vacation rental industry.
As a result, the accelerating pace of change in the vacation rental industry was apparent to all.
I’ve spent some time thinking about the conference and trying to figure out the best way to summarize the thousands of takeaways. I agree with a view shared by Rented.com founder and CEO, Andrew McConnell: “With ~10 sessions often running simultaneously, my takeaways are obviously limited to those I was able to attend personally, or discuss with others.”
But after dozens of in-depth conversations with attendees, it is becoming more clear. At the risk of oversimplifying, the conference presented two distinct ways of looking at the vacation rental industry: global and local.
Global vs Local Perspective
Global: The global perspective from OTAs, private equity investors, venture capitalists, analysts, and consultants revolved around the $150 billion worldwide opportunity in this expanded “alternative accommodations” sector.
With a broad-brushed look at urban short-term rentals, shared accommodations, and traditional vacation rentals, attendees with a global view discussed scalability, standardization, and consolidation.
The upside of new investment in our industry is the increased funding that is contributing to technology innovation, as we are seeing millions dedicated to finding new and more efficient ways to use technology to improve operations.
However, profitability was not part of these “global” conversations—for tech companies or for property management companies. Venture capitalists and investors on the panels promoted their interests and investments, OTAs laid out their strategies for commoditization and monetization, and analysts looked to support the ratings they had given to publicly-traded OTAs. In addition, multi-destination property management (PM) companies made their case for consolidation, and urban short-term rental providers watched closely recognizing that their segmented market opportunity was largely independent of market dynamics facing traditional markets.
Local: But the more sustainable discussions were locally oriented. The education being shared among in-market professional PM companies, many of which manage hundreds of properties, included sustained profitability, marketing strategies to reach core feeder markets, setting and delivering on customer expectations, deepening trust-based relationships with owners and guests, improving property care, and working locally with city officials to preserve the industry for decades to come.
Commoditization vs Differentiation
The overarching comparison between the two schools of thought is about commoditization versus differentiated, personalized experiences. OTAs naturally want more commoditization. Expedia, Booking, and Airbnb want instant booking, flexible cancellation policies, fewer fees (except their own), uniform rating systems, revenue management, and the ability to list vacation rentals next to hotel rooms in commoditized fashion.
In contrast, sessions geared toward in-market management companies revolved around differentiation, trust, relationships, direct bookings, guest services, and financial management.
End-to-End Customer Service
In a general session moderated by Simon Lehmann, Bachcare founder, Leslie Preston, gave an insightful description of why her company has decided to operate without full reliance on OTAs. She summarized the PM perspective, explaining that every booking has a marketing cost so the reason for using OTAs sparingly and strategically is not about the cost. It is about providing the best end-to-end service for guests.
The OTAs limit interaction with guests in the booking process. As a result, vacation rental managers do not have the same ability to set customer expectations and communicate with guests. At Bachcare, they are intentional and strategic in how and when they use OTAs in order to preserve an optimal guest experience.
Throughout the conference, several large property managers shared that they had decreased or eliminated their reliance on OTAs; and many more expressed a desire to do so. What was interesting was that they did not make the decision because of the cost of using OTAs. They made the decision based on quality of guests that were coming in from OTAs, the time of year their calendar was being filled from OTA bookings, their decreased ability to communicate with guests in the booking process, and the customer service the OTAs provided to guests that did not reflect their brand or policies.
Owner Relations and Property Care
Almost every session and discussion geared toward in-market managers (in contrast to the “global” sessions) prioritized educating and improving relationships with homeowners, managing guests, and taking better care of homes. While it may have been a result of adding VRHP to the conference, there was a marked change in the focus on preserving and enhancing relationships with homeowners and in working together with these owners to improve guest service. Some of these conversations also included discussions around the choice not to renew contracts with homeowners who have little interest in improving their properties to meet standards and expectations. Keeping subpar homes in the management portfolio is clearly more of a drain on resources than a benefit. Positive relationships with homeowners are at a premium, but only if the property can meet brand standards.
Peer Groups and Networking
The most valuable sessions I was able to attend were peer groups and forums among property managers. They discussed the pace of change, the advantages and disadvantages of new technology offerings, channels that were over- or under-delivering, owner relations, regulations, profitability, and staffing.
It was clear in talking to attendees, the value of the VRMA’s annual conference still rests in what property managers learn from each other. Although with a larger and more diversified attendance, PMs expressed missing more personal networking with each other.
I’m not sure when Sea to Ski with Sarah and T’s podcast discussing their takeaways will air, but PMs should definitely check it out.
Competitive Advantages For Local, In-Market Vacation Rental Managers
After hearing both the global and local viewpoints of the direction of the vacation rental industry, it is apparent that in-market management companies possess unique competitive advantages, including (but not limited to):
- Large, multi-destination vacation rental businesses have yet to prove sustained scalability and profitablity over multiple unrelated markets.
- Technology is largely undifferentiated. The “tech-enabled” PM designation is just a label. Most enterprise-level management companies offer keyless entry, smart home technology, advanced reservation systems, flexible and secure online payments, SMS and online guest services and communications, owner communications, trust accounting, and more. The new PM companies just do a better job of promoting these tech offerings.
- Enterprise-level property management company websites are, in most cases, more advanced than their OTA counterparts, as they are able to provide more destination-specific search options, relevant information, and a more secure trust-building booking path.
- Online, local marketing to core feeder markets and audiences is easier and more cost-efficient than global or national marketing strategies.
- In-market knowledge, personal relationships, and relevant one-on-one communications are critical for owners and guests, as booking a vacation rental is more of a “considered purchase” than booking a hotel room.
- Local managers understand market pricing dynamics better than OTAs.
- With a lack of venture funding, in-market companies are forced to operate profitably, creating a more sustainable and secure management offering for homeowners and a more attractive opportunity for workforce development.
The VRMA will be selling session recordings, and you will benefit from purchasing them. If you are a vacation rental management company who is not a member of the VRMA or has let your membership lapse, I implore you to join the association. The industry is changing rapidly, and PMs need to have a collective voice now more than ever.
No association in any industry is perfect, but current market dynamics require the entire ecosystem to come together. If you are in a traditional vacation market, I especially urge you to get involved in the VRMA. This is the only global industry coalition we have, and your voice needs to be heard.
VRM Intel Note
Over the last few months (and especially during this conference), we’ve experienced a “first” in writing and reporting about the industry. We are beginning to see some vendor companies provide information to us that is misleading and not entirely accurate. We have always had companies give us information that helped to promote their agendas (which is understandable), but we have historically benefited from enough mutual respect in the industry to know that the information was true, even if the context around the information was slanted in their favor. However, with newcomers and outside investment in this fast-growing industry, we are now in the position of having to truly “vet” the industry intel being provided to us. I can assure you that we are going to be doing just that. I am saddened that the industry is growing in a direction that trust is being eroded. At VRM Intel, we understand NDAs and the timely release of sensitive information; but I hope—as new companies invest, acquire, and jump into our industry—that they honor the transparency and authenticity that is foundational to this space.