The professionalisation of vacation rentals
The vacation rental sector has undergone significant change in recent years and it’s anticipated the market will reach US$193.89bn by 2021*. Key to this growth will be the ongoing move towards professionalisation. Gianbattista Vespucci, Commercial Director Partner Services at Booking.com explains
If we look at vacation rentals of the past, everything was offline and property managers prevailed. It was a complicated segment that was hard to position online given its distinctiveness, and there was lack of consistency on the side of both the customer and host. Where hotels had standardisation, holiday homes had personalisation. Today, those lines are blurring and vacation rentals are becoming an altogether more professional proposition.
Historically, putting your property online was a scary prospect. The operational needs behind homes and apartments are intense and hosts are often solely responsible for the entire journey – welcoming guests, providing keys, cleaning rooms and so on. The instant-bookable model, made popular in the hotel sector, also heightens the need to be ‘guest-ready’ at shorter notice.
Additionally, the sense of security and trust towards customers is really different for a homeowner. In most hotels there are staff available round the clock if something tricky happens, but in a home or apartment you rarely have anyone onsite and the guests are left to their own devices. Recently we introduced pre-booking communication (available on the Extranet) so that partners and guests can connect even before a reservation is made – this really helps build the trust from the beginning.
In recent years, a more entrepreneurial host has emerged and online platforms have disrupted the market. The online rental market is growing fast; in the US alone it was anticipated to rise from 24% of total vacation rental revenues in 2012 to 55% in 2018, when the projected value of online bookings was US$20.1bn. Before, to rent out your property you most likely had to go through an agency but today you can list your property online with ease. These platforms helped introduce more standardisation across the likes of policies, and new technologies such as channel managers, while maintaining and promoting what was unique about the property.
Property managers of vacation rentals are becoming more attuned to things like revenue management – we are starting to see the adoption of flexible pricing models, for example, that anticipate the trends of the market. Single property owners are also adapting, from hosts that maybe only rent out their home for a few weeks every year but also those that are more like entrepreneurs: there is a real movement where owners start with one property and then scale, becoming investors and eventually creating their own companies having discovered their skill for this sector.
Competition is getting deeper – customers of hotels and apartments overlap. The quality is now so high that the same customer will consider both sectors depending on factors such as their reason for travel, the season, the composition of the group. According to Phocuswright, in 2016 26% of US travellers said they had stayed in a private accommodation in the last year, compared to just 8% in 2010.
The future of professionalisation
This continued move towards professionalisation needs to be easy. Follow the lead of hotels, with the introduction of appropriate policies and restrictions. You should avoid overly restrictive payment policies or guests will turn away, whereas instant-booking and comprehensive property information provided upfront will entice custom. Whether booking a hotel or an apartment, the customer expects that journey to be simple.
Vacation rentals don’t need to behave like hotels or they’ll lose their point of differentiation, but they do need to leverage the strengths of hotels and integrate products that will boost their property performance accordingly. The category has already evolved significantly and is predicted to grow further, with Statista reporting a 6.2% annual revenue growth rate. This will undoubtedly be supported by a more strategic approach to business.
Looking to the future, don’t think too much about what will change as what will never change. The focus on quality should never go away. Vacation rental hosts need more time to think and listen, so the ones that will be more successful are those that decrease the amount of time they spend on operations – standardising processes and finding efficiencies through technology. Can you automate the check-in process or reduce time spent communicating with guests by setting up message templates on the Extranet, for example?
The great differentiator will not be technology itself but in the interaction, the attention to detail and the care of the guest. That’s where I’d invest my time.
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Gianbattista Vespucci is Commercial Director, Partner Services at Booking.com.More by Gianbattista Vespucci