The short-term rental industry enjoys multiple conferences yearly, some of which Yes Consulting attends and often presents at. This year is no different, and the presentations are available on request. Add your email here for copies at the bottom of the newsletter,
We attended the following European shows: Scale UK in London, Scale Italy in Florence-Italy, VRWS in Porto-Portugal, the PASCUK manager forum and Air Success in London from HCH. These conferences always give insights into the industry and its trajectory: headwinds, opportunities, players, investments, and undercurrents of how the industry is fairing at all levels with owners’ and managers’ mental health!
Below are the high-level takeaways that we believe will affect many within the industry in the next 12 months.
1. Artificial Intelligence (AI) | The Big One
We may all have AI news fatigue, but it is a fundamental part of the future of all hospitality industries. The graph below shows the global expectation of investment, and this is significant; there is no disguising this. The web link for the image below
But where will this feature in travel? As always, the guest comes first (ask an OTA). Embedded within this is the opportunity to replace people with tech, allowing 24/7/365 support, increasing margin and, in theory, improving service. Image weblink
But how will it affect the supply of short-term rentals and other types of accommodation and how they operate? A helicopter view of the industry is needed to understand our ecosystem and how the fragmented nature at all levels will drive the tech industry to a more linear and scaled supply chain. This graphic from AJL Consulting illustrates the vast number of technology companies active in the market, and this is not the whole list, which is now estimated at 600+ suppliers.
Many of these tech suppliers are now focused on developing AI tools to support their specific functions. Imagine 600 AI agents all just focussed on one product niche.
AI Chaos, Increased Cost, Confusion
The issue with the abundance of tech businesses noted above, as well as a developing torrent of AI-connected tools, means all opportunities to improve efficiencies across a single company are lost. An AI agent needs data from all sources within a single source structure to prove useful, to continually learn, and to provide comprehensive business intelligence.
Using multiple connected tools, each with its own AI model is nonsensical. An AI system will become the brain of operations, build communication flows, provide financial modelling and integrate external market data to offer improved business intelligence. As you can see from the AI travel benefits schema above, guests can access efficiencies provided the source has wide-ranging data. The STR market is famous for its multiple touch points that ensure a successful business model.
For example, suppose a prospective guest calls after office hours to book the next day. In that case, an AI agent picks it up and negotiates a price for the arrival the next day, incorporating owners occupancy and ADR wishes and offering a selection of suitable properties matching the request. This could be a number of people, type of property, proximity to events, etc.
The agent also organises an early clean and a fix of the AC unit scheduled earlier than anticipated. The guest has been charged, communications have been sent out, and the agent will follow up pre-in and post-stay, too. Any review issues or guest problems are recorded and analysed, forming part of process and staff metrics. Plus, the booking data forms part of an ongoing marketing opportunity, as well as financial and property assessments that are valuable to the company and the owner.
This is just scraping the surface of its potential, but it is acting like a human, 24/7/365, and capable of data access much faster and with the necessary skills. This requires digital training, SOPs and more, but so do humans, and they get sick and have holidays 🙂 An unspoken outcome of this is that VAs are under threat when their activities rely on interacting with guests, with responses solely generated from an FAQ system or remote database access. The same will also apply to accounting, pricing and formalised protocols as time progresses.
The Growth of Technology Businesses
The narrative will change and is already edging into the industry. Instead of a PMS, dynamic pricing, guest app, owner app, guest ID, operation management software, local and international reporting software, chatbots, CRMs, email agents, accounting tools, websites, etc., all connected via APIs, we will see the evolution of big tech.
One stack does it all, and AI is like the bloodstream with data flowing across the whole architecture as illusrated by BoomNow at the Air Success show in London.
2. Data
Over the last few years, we have been heading toward a more data-aligned industry. Data businesses such as AirDNA and SeeTransparent (now TheLighthouse) have been acquired, and others, such as Key Data Dashboard, have seen investment as they connect to more sources of truth (read PMS).
As a company, we have often been asked about ideal company metrics in terms of performance. This has become even more critical as costs rise, OTAs plunder the market, oversupply, and legislation push company profitability. Margins have never been high but are increasingly under pressure.
We presented comparative company metrics from 20+ businesses at the VRWS showing a wide discrepancy. The variation of business modelling certainly affects net profit, a significant exit factor as demonstrated through these three businesses below.
Every business will need to become far more attuned to data, and this is not just scraped pricing information; pan company data is rapidly becoming the deciding factor of success and failure. Consider all the data requirements relayed to your business. Here are a few:-
- ADR, Occupancy, RevPAR
- Reviews on properties
- Staff metrics
- Detailed company finances
- Dept splits by cost centres for marketing and distribution
- Distribution and payment data
- Technology costs (hardware/software)
- Cost of acquisitions (CAC) guest and owner
- Lifetime values
- Local and national market competition at property and marketing levels
Suppliers of external pricing and occupancy data are on the increase. It is not always 100% correct, especially if scraped, and sometimes insufficient if there is limited source data. Use it carefully and combine it with your local knowledge. Build your local metrics, too, from online and offline research. Use AI and deep reporting tools to analyse your company’s performance. Ensure you have the data and make time to analyse it!
Thanks to AirDNA and KeyData Dashboard for all their help this year on data.
3. Legislation
We rarely say: “Hooray, more legislation”, and the same applies to recent developments in the European and UK markets. There have been two significant developments:-
a) ViDA, VAT in the Digital Age:
November 2024: -The EU Council has agreed on a new VAT reform package to modernise digital economy tax rules. Key changes include mandatory electronic invoicing and real-time VAT reporting for cross-border transactions, making it easier to detect tax fraud. Online platforms will be required to collect and remit VAT for short-term accommodation and transport services when providers do not. The package also expands the VAT one-stop-shop system, simplifying compliance for businesses operating across member states. The new rules will fully digitize VAT reporting by 2030, with interoperability across national systems by 2035, streamlining tax obligations and boosting competitiveness in the EU.
What does this mean?
It sounds so innocent. It required ratification from all 27 EU states, which eventually happened despite one state (Estonia) holding back for some months but eventually conceding. The kernel of the changes are:
From 1 July 2028 (at the earliest), a key proposal is that a taxable person who facilitates, through the use of an electronic interface, the supply of short-term accommodation rental (maximum 30 nights):
- the underlying service provider communicates to the platform their local VAT ID or the ID number allocated under a particular scheme, and
- declares that they will charge any VAT due on that supply.
Member States will be required to apply the rules from 1 January 2030 at the latest (meaning that a long lead-in time exists), and special schemes for small enterprises and travel agents are excluded. Platforms can also leave it to underlying sellers to collect VAT. Not all platforms will be caught, and there will be carve-outs for platforms that process payments, list or advertise or merely redirect customers, although this is unclear. Given the substantial differences between the original EC proposal and the compromise text, the European Parliament must be reconsidered through a simplified written procedure. This approval should be forthcoming because the start dates are well into the future, and the compromise text reflects a balance of factors.
If you are in the UK, we are unaware of any changes or implications on platform booking outside the EU; however, the jurisdiction for the charge is the property’s location.
b) UK FHL changes & Registration
The UK conservative Government announced abolishing the Furnished Holiday Letting scheme in the Spring Budget, which provides capital allowance benefits, capital gains advantages, and interest payment relief. The Labour government has followed through; however, it has not listened to anyone, and it will come into law in the next tax year (2025). Will it raise much tax? No. Will it provide many more homes for the demand made by a lack of housebuilding? No. The numbers are insignificant compared to empty homes and residential lets under a Renters Reform Bill. Will it damage local economies if we see less tourism due to less accommodation? Possibly, and needs research.
Enforced registration is generally well accepted and will ensure bad actors and freeloaders are identified. Exposure will result in a reduction in numbers, as will the incapacity to net off interest payments and hence the increase in the number of properties currently for sale, hoping to sell before April 2025 and benefit from a 10% capital gain benefit.
At the Scale UK show, we presented data on “buy-to-let” loans, inventory increases, ADR, and occupancy changes. We predicted the volume of inventory across the UK, assuming all the promised changes happen.
We advise you to keep a careful eye on all of these changes and any further ones introduced by local councils or the government.
4. Revenue Management
Of all the discussions, questions, and growth sectors this year, RM is seeing a groundswell of need. However, before commenting further, these points all want and need consideration:-
- Not all owners want 24/7/365 bookings and may be very circumspect
- Not all locations have the same demographics, seasons, stay times
- Levels and quality of competition differ
- Over and undersupply are vital factors
- Booking periods can vary wildly
- Not all systems are equal
- OTAs want maximum numbers of bookings, not necessarily the best prices
- Reviews are a key metric
- AI is increasingly in the game
- Not all blocked calendars are bookings
- Not all blocked calendar bookings are sold at OTA prices
There is also often a misunderstanding between Revenue Management and Dynamic Pricing.
- Dynamic Pricing is a subset of Revenue Management focused on adjusting prices in response to market changes.
- Revenue Management encompasses a broader strategy, including inventory decisions, market segmentation, and long-term demand forecasting.
Key Differences
| Aspect | Dynamic Pricing | Revenue Management |
|---|---|---|
| Scope | Focuses on price adjustments. | Involves pricing, inventory, and sales strategy. |
| Approach | Reactive and algorithm-driven. | Proactive and strategy-driven. |
| Time Horizon | Short-term, real-time adjustments. | Long-term planning and forecasting. |
| Tools | Automated pricing tools (e.g., price optimizers). | Revenue management systems (RMS), data analytics, human expertise. |
| Objective | Maximizing occupancy or short-term profit. | Revenue management systems (RMS), data analytics, and human expertise. |
The Problem
We have many dynamic pricing tools in the industry. However, three are generally quoted: PriceLabs, Wheelhouse, and Beyond. I wish I could quote more, but I have not met a manager who used a different one in 2024. Congratulations on the market penetration!
However, the issues that have arisen this year relate to predictive pricing and several complaints about underselling and non-booked properties. Each of these requires deep investigation, of course. However, a private survey showed 60% of users were unhappy with their suppliers’ performance, and anecdotally, it was those who put the systems on autopilot. Expectations may be too great, but fewer managers are prepared to let the tools run their pricing automatically. It only takes one grumpy owner to highlight the problem for a manager to worry about the entire portfolio.
The consensus is that, as shown above, dynamic pricing tools are reactive and algorithm-driven, relying on other data or their own in the same locations. Market fluctuations due to one of many events may drastically affect prices. Previous records may be of little value if inventory has grown substantially or there have been local disasters, fewer public events, or closures of major attractions.
Does everyone need a Revenue Manager?
Certainly, it’s clear that letting dynamic pricing tools run on autopilot, especially in lower density, higher value, and less OTA-driven locations, causes more problems. It is also evident that local knowledge, deep property knowledge, and a good understanding of industry direction will improve income and booking opportunities. People are expensive, but can you grow without internal or contracted skills to get ahead of the game? AI will also enter this space, as it has done with OTAs.
The OTA influence
OTAs want bookings, and (although not in print too often) keeping the booking flywheel running rather than trying to achieve the maximum price per booking is preferable to shareholders. OTAs have a simple approach to life online:-
- Great properties
- Great reviews
- Low prices
- Free cancellations
- No support calls or emails
- In the most popular destinations
- Available 24/7365
- Min one stay stays
- Upsells themselves
- New properties get an immediate fillip to get them to commit and engage
They will, of course, rank properties according to their rules, and there are also subcategories of ranking:
- Content
- Photos
- Amenities
- Regular attention to the listing.
With millions of listings on OTAs, competition for bookings is fierce, and more intelligent tools are needed. We are including two companies we have been super impressed with and are new players in the market: Otamiser (inc Autorank) and MyDataValue. The former is focused on ensuring that listings perform and rank well, and the latter is a Revenue Management Assistant. Check them out!
5. Upselling (general)
One for 2025 as increasing numbers of managers seek extra margin. With Airbnb threatening to revolutionise experiences in 2025, this PR and industry noise may add energy and awareness of the opportunities. Local managers are best placed to advise, add a personal touch, and add more recognition to their micro-brands. With tech making this more accessible, we will see more companies chasing the extra margins made from their local partners on commission.
Commissions are tough to increase, and often, booking fees, insurance, and damage waivers are already embedded. Increasingly bespoke and tech-enabled businesses are being connected such as:-
- Additional Services:
- Spa treatments
- Airport transfers
- Guided tours or local experiences
- Grocery delivery or fully stocked fridges
- Family-friendly kits and kid-specific amenities
- Pet-friendly amenities
- Chef services (increasingly being used)
- Seasonal or Location-Based Activities:
- Equipment rentals (e.g., kayaks, bicycles)
- Local event tickets
- Seasonal activities (e.g., winter sports or summer beach setups)
- Wellness and Sustainability:
- Yoga sessions
- Health-conscious meal options
- Eco-friendly practices like bike rentals
- Business-Focused Add-ons:
- High-speed internet
- Workspace setups
- Printing services or meeting room access
Some advice on the approach:
- Timing:
- Introduce upsells before or immediately after booking.
- Avoid intrusive offers during the stay.
- Personalization:
- Use guest segmentation (e.g., families, business travellers) to tailor offerings.
- Base upsell suggestions on guest preferences and booking history.
- Bundling:
- Create appealing packages (e.g., spa + dinner).
- Offer small discounts for bundled services.
- Exclusive Offers:
- Promote limited-time or unique upsell options to create urgency.
- Visual Presentation:
- Use high-quality images and engaging descriptions to showcase upsell value.
Communication Strategies:
- Highlight the added value and benefits of upsells.
- Avoid overwhelming guests with too many options at once.
- Use friendly, guest-focused language to present offers as enhancements, not just sales.
How:
- Property Management Systems (PMS):
- Automate upsells during the booking and check-in process.
- Avoid setting up multiple rate plans for added services.
- Booking Platforms:
- Use built-in upsell functionality (e.g., Airbnb, Booking.com).
- Automated Messaging:
- Use email and SMS campaigns tailored to guest categories.
- Tools like Upstay or Charge Automation can integrate upsells during booking and follow-ups.
Then, there are full-blown personal concierge services for those who want less tech, more tailored, and more organised for their experiences. Two shout out here:
Mount: An is an award-winning business that allows managers to monetise experiences and activities. Thousands are available, and the process is easy to engage with.
yhangry: A platform that solves the problems of finding chefs and makes it easy for managers and their guests to do the same. It’s great for chefs, and it’s great for guests!
Upselling, Sustainability, Margins and More Owners!
It looks like a winning combination! We can’t find any issues that would prevent this. To achieve this multi-mix, a rich selection of monitoring tools, market needs, and owner wishes is needed. Understanding more about the ResiCentral product shows it sits ahead of competitors and offers all of these sensor and monitoring tools. Imagine adding this product to an established operational system for entry, cleaning and maintenance. This toolset completes the circle of owner benefits and helps the planet, too!
6. M&A
Last but certainly not least, it only relates to a modest number of conference attendees. How modest? It depends on how the question is phrased.
Are you thinking of selling soon or perhaps in the process? or…
Are you organising your business with options to sell or benefit in othe ways financially, in the future?
You may be surprised by the answer to both, as a consolidated number was well over 30% of companies with more than 50 properties. The larger they were, the more focused and knowledgeable. 30% didn’t have an opinion, and 30% looked askew and wondered about the motive!
Reading between the lines and hearing about the increased challenges, I see that the trend is an increasing need for awareness, positioning their businesses correctly, and keeping aware of the market changes in previous years.
With some of the big acquirers back in play, there is an opportunity for companies to acquire or merge in southern Europe despite the legislative noise. There are even some discussions on companies working together to save costs, align brands and use increased size to leverage larger multiples.
Several new players, too, are building sustainable businesses and seeking smaller companies that are often overlooked by international concerns. If you want to sell at some point or are wondering about prepping for it, get the free December M&A 2024 report in preparation right now.
7. Associations Mentioned
In an era where governments often impose legislation with little clarity or consistency, vacation rental companies face significant challenges navigating regulatory landscapes. Short-term rental policies can vary dramatically and are often influenced by numerous external pressures, such as housing, climate, over-tourism, crime, and more. Joining a professional association offers significant advantages. These organizations serve as a collective voice, advocating for fair and transparent regulations that protect businesses while addressing broader social concerns.
Associations provide members with a collective voice and a unified platform to engage with policymakers, ensuring that legislation is informed by industry expertise rather than unilateral decisions, even if sometimes they don’t listen. When governments implement ambiguous rules or fail to establish clear guidelines, associations can negotiate on behalf of their members, working toward practical solutions that align with compliance and operational feasibility. By pooling resources, members gain access to legal counsel, best practices, crucial updates on policy developments, and how to add their voices.
Moreover, membership in an association signals a commitment to professionalism and ethical standards, which can enhance credibility with regulators, partners, and customers. It highlights bad actors and drives the industry in the correct direction. Never has this been needed more when entry to short term rentals has such a low bar. In times of legislative uncertainty and we are in one right now, being part of a well-organized, influential body can mean the difference between thriving in a challenging environment and facing costly disruptions.
Please consider joining and supporting these organisations and some shoutouts below:
- England and Wales, join PASCUK now with thousands of members, both independent and agencies, and thank you for the sterling work on all aspects of FHL, H&S, and the never-ending rules and regulations.
- In Scotland, the ASSC is now a strategic partner to PASCUK on all matters in the UK.
- In Europe, head off to EHHA and select the appropriate country. Congratulations to ALEP on their Portuguese successes.
- For South Africa, head off to SASTRA, a new but necessary association
- For Bulgaria, head off to BESCO. Again, it’s new but necessary, and congrats on the recent news.
8. Booking.com vs Airbnb & VRBO
Almost last but not least, the three heavyweights in the booking channels. We are told VRBO is getting back on track after its Expedia tech integration and marketing hold. Now, it is entering the urban market with its loyalty program:- “Onekey”
Airbnb has announced much the same a previous years on increasing experiences (do your own and don’t lose control of this one as it will eat into your business!) But they have announced EU expansion of their Co-Host approach for 2025 too. Take note of this, it undermines managers, even if Co-Hosts can be considered “managers”. It is not a great message to politicians however!
Booking.com, my share recommendation last January, seems to be taking more of Airbnbs & VRBO market share or breaking new ground at the expense of direct bookings too, according to Key Data Dashboard!
We will be following up on this subject of OTAs early next year! Stay tuned.