Like virtually all industries these days, the vacation rental business is experiencing a period of extreme disruption. For so many years this niche of the lodging industry was overlooked by large corporations and travel distribution companies. I remember when I spoke at my first VRMA conference in 1996, as I was expanding my hotel training company into the VR space. Back then hotel industry was suddenly being severely disrupted by a number of factors such as the emergence of hotel mega-brands, new pricing and revenue management data (STR Reports), and a tidal wave of new distribution models now known as “OTAs.”
Yet the VR space seemed immune to these changes and remained a relatively simple business for many more years. Attempts at creating the first large national brand (ResortQuest) fell short. Revenue trend reporting companies like STR showed no interest in the VR space, probably because they saw the complexities of aggregating the data (too many non-standardized unit types and attributes, far more PMS systems than the hotel side.) Most VR companies continued to thrive as locally owned “mom and pop” business models, a large percentage of which were truly owned by a mom and a pop!
During this time there was a change in the VRMA board leadership and I took a break from a 10-year run as a conference speaker, skipping 5 straight years and instead focused on training in the traditional hotel and resort industry. When I returned to VRMA as a speaker in 2015, I was absolutely amazed at how much had changed. Now it seems the VR industry was suddenly facing a level and pace of disruption even beyond what I had seen happen to traditional hotels.
- The emergence of enabling technologies for “by owner” rentals. This included “smart homes,” remote key access, and of course owner-friendly distribution websites such as VRBO and Airbnb.
- Established national brands (hotels and others) entering the VR market. Initially, the buzz was all about Wyndham and Choice, but now we have the premier brands such as Accor and Marriott moving in.
- OTA’s promising to create new demand by exposing new clients to the concept of a vacation rental, but charging significant fees to do so; possibly inserting themselves between the company and its existing direct booking repeat guests.
- Tech companies offering data and systems for dynamic pricing and better revenue management.
Yet when I speak with our numerous KTN vacation rental training clients, it seems that by far the biggest disruptor of all is the proliferation of national (and international) VR focused mega-brands entering the market, backed by seemingly unlimited private equity venture capitalist funding. These companies are buying up local brands and siphoning off inventory by offering guaranteed rents and seemingly lower commissions, while cutting operational costs by pushing guests to use apps and outsourcing operations.
Certainly, these companies will continue to experience some degree of success just as the mega-brands have in the hotel space. However, there plenty of market space open for the local brands in the VR space, just as the independent “boutique” and “lifestyle” niche of lodging has continued to thrive. (In fact, in recent years independent hotels have shown a significantly higher growth in ADR and RevPAR than branded.)
Since the vacation rental business is by definition about “vacations,” which is a very personalized travel experience, local brands can be especially successful if they play to their strengths when selling and servicing guests. Similarly, most owners of VR homes have a personal connection to their place. Therefore, if local brands find new and better ways to engage with owners, they can also out-service the mega brands to protect inventory.
In summary, here’s my message to the locally owned vacation rental leaders. Rather than trying to fight the latest disruptors at THEIR game, beat the disruptors by playing YOUR game REALLY well! Here are some suggestions.
1)Encourage human interactions with guests. Be accessible when they need you most.
Mega VR brands seem to be doing everything possible to push guests away. Perhaps it is because they buy-in to what I call the “Millennial Tech Myth” and truly believe guests prefer full automation, but I also suspect it is to reduce labor costs. Instead, go in the opposite direction and take advantage of having in-house, on-site experts.
- Post your phone number prominently on your website, especially on your mobile website.
- Add text next to the number that says something like “Call Our Local Area Experts” or “Call Our In-house Vacation Planners.”
- Provide online click-to-chat, but train your staff to offer to call the guest right now if the exchange gets complicated. If the guest is asking for opinions on which property to book, or if their words start to indicate frustration of dissatisfaction, click a note that says “May I call you right now to better assist?”
- Post after-hours numbers prominently in the rental accommodations so that guests can reach someone with a quick question at a critical moment.
2) Empower your frontline staff.
– Guests are more likely to experience problems and quandaries during a stay in a VR home than in a hotel room for many reasons. The accommodations are larger and have more moving parts, with larger and more diverse age-group parties staying as guests, and with guests spending more hours of the day in their accommodation than they would at a hotel. Being local and having actual employees on the ground, as opposed to VR brands who have to rely on less-loyal contractors, allows for the empowerment of the frontline staff.
Push decision making power down the organizational chart to your company’s “First Responders” who are literally closest to guests. Responding promptly and reacting with creative solutions can generate goodwill out of what would otherwise result in a stinging review. Similarly, empowered colleagues who go “above and beyond” for guests’ special needs can turn indifferent guests into social media promoters.
3)Put names and faces on your local brand, literally! Buy business cards for all guest contact staff including maintenance and housekeeping supervisors. Include headshots in email signatures. Post pictures of support staff, such as a group picture on the “about us” company page and also pics of key players who service owners. Make sure your website tells the “story” of your company’s founders or owners. Today’s guests crave local, authentic experience and experience a “feel-good factor” when spending their discretionary funds with small businesses. If your company owners are up for it, make them as visible as possible. Otherwise, promote a key leader as the local face of the company.
4) Train your staff to pro-actively offer “local insider’s” tips and to volunteer information beyond what is asked for. Encourage your rental sales staff to sell vacation experiences and your on-site operations people to volunteer helpful ideas during conversations. This might require you to conduct a bit of local area “familiarization” training to bring your staff up to date on the local attractions and events, as locals often are too busy to take do what tourists do.
5)Embrace both “High Tech” and “High Touch” business practices. Find ways to use “tech” to increase a sense of “touch!” (Something people of all ages and cultures appreciate!) Reservations agents should use screen sharing to walk guests through online images instead of sending them links or redirecting them back online. They should also send cameraphone pics when guests have specific questions. If you ask me, the biggest opportunity right now is to use personalized, individual video email to engage prospective guests, connect with in-house guests, and also to personalize communications with homeowners. For two years now I have been sharing this concept in my VRMA conference presentations and private, on-site trainings, yet the adoption rate has been very low. If you are interested in this just shoot me an email and I will respond with a sample message. [email protected] I recommend a particular app that can be used on any smartphone to quickly and easily send personalized messages such as:
- Personal video welcome messages (at least for those booking higher-priced homes, multiple units or longer stays.) This takes less than 2 minutes, so not having enough time is no excuse.
- Sending all in-house guests a welcome message of the week with insider’s tips provided by staff.
- Video messages to homeowners and prospective homeowners still in the funnel.
This is a concept that I do not see mega-branded VR companies ever embracing and even if they tried it would be difficult to personalize from a remote location. Your staff on the other hand can easily work this into their day-to-day business practices because it takes even less time than sending a guest a personalized email or text.
In summary, the vacation rental industry is at a fork in the road. Mega companies are headed in one direction, which is to rent out “units” as if they were a commodity like an airline seat. They will end up “homogenizing” the VR business to some extent, just as mega hotel brands have done. Today, a room at a full-service Hilton, Marriott, or Intercontinental hotel room is essentially the same room. A Hilton Garden feels identical to a Courtyard Marriott or Holiday Inn Express, and they both serve the same free breakfast. Yet boutique and lifestyle hotels reflect a fast-growing niche where rooms command a higher ADR. Surely, national VR brands will succeed at what they do best and some guests and owners will give them a try. However, if local brands do what they do well, and do it with pride and passion, they can continue on as viable businesses for many more years to come.