Welcome to the Yes Consulting vacation rentals newsletter. The Lighthouse is for hosts, managers, agencies, and operators in the short-term rental sector.
OR IS THERE ANYTHING NEW OUT THERE?
Over the last year, these newsletters have covered a multitude of subjects related to Short Term Rentals. I have spoken to literally hundreds of people, helped sell management companies and been involved in many aspects of the industry, from people to pricing, from sofas to strategies. But one thing is abundantly clear the newscasts, products, webinars and information is all getting a little “the same” and we are seeing an overwhelming number of them. We try to challenge the status quo and uncover issues and look over the horizon hence run of mill information may be published but not as main newsletter content.
This newsletter is also accompanied by a longer one related to tariffs and the challenges faced going forward, it is linked here. This includes revenue management, dynamic pricing and OTA/Owner effects on guest pricing and what’s going to happen.
What’s new? There have been some highlights of course, such as scalerentals.show which positioned itself differently as a conference and some of the mentions below are an indicator of change, new approaches. This month coming is the conference period and I really hope the large sponsors when given stage time, focus on the new, their actual challenges, and how they will support supply! A report on the new things will follow from:
The Web 3 in Travel Conference (14th September) This is definitely new and continues to be another horizon gazing opportunity. Still, in its infancy, it has a dedicated following and I like others am waiting for the avalanche of opportunity. It still requires some simplification, stability and scale but this is why the conference and its aficionados will cover it.
The Vacation Rental World Summit This has been going since 2014 is this week, the 15/16th of September and has grown yearly with great destinations to travel to!
VITUR SUMMIT (6/7th October)
I’m very interested to learn more about small EU managers, their challenges and aspirations, companies who want to develop niche marketplaces, adopt full software systems under license (as opposed to be under third-party control) and anything new! Feel free to connect or tap me on the shoulder.
A lot of content below and some theories by me in quotes at the end of each section. Some nice imaginary property images at the bottom too!
Nothing new except they all need more inventory, appears to have spent a lot on paid marketing (despite continual commentary they will try to wean themselves off it). They are very focused on App downloads and use to assist the removal of search dependency. In fact are the OTAs worth giving so much airplay to? It just gives them more brand development. However if you really want stats this chap has compiled some interesting ones for Airbnb for 2022 which shows the scale of our industry.
Now there is a new kid on the block, however, Super App Hopper! The interesting thing about Hopper is they bring a new model and have accumulated significant inventory quickly, which means API connections to larger suppliers and here is to be found the OTAs and large platform Achilles’ heel. Managers need margins and therefore prices are elevated via API as can be seen in my tariff article which covers commission charges where the first 9 properties reviewed were 18% more expensive than the manager themselves. This cannot last and even Hopper’s new model will presumably be challenged even with a net rate approach. Their game plan is not so linear however as 70% of all ticket bookers buy a fintech product! Some lessons to be learned here on the booking processes by tech companies and #bookdirect
Don’t forget the most important customer in an OTAs existence is the guest! Its just the way it is and can’t change. Look after your own life & business first. Use a healthy mixture of distribution and marketing. Forget the “all eggs in one basket” approach.
If you are a small manager just starting out, then you have 3 problems: 1) Tech 2) OTAs 3) Large and “Supermanagers” and one benefit: personal service.
- Technology is often very confusing to newcomers who generally don’t ask the right questions on day one and have a lifetime of challenges.
- OTAs are without doubt their booking opportunity early on and is like a drug, hard to get off!
- There are a lot of bigger and more cash-rich companies competing with small managers who know the ropes and have a lot more direct traction.
The net effect of being a small/new manager is that OTAs receive higher prices, guests pay more and owners receive a lower % of the advertised price. Large companies have the capacity to drive direct and more profitable business and if run well, work effectively with owners. These large managers in their regional/national destinations keep growing, some profitably (Sykes or VTRIPS for example) and some not (Vacasa), but even they have challenges. Growth is important and one of the most talked about subjects this year.
So how will Supermanagers grow? Looking over the rental horizon, then I would expect US and UK (who have some of the biggest companies) to seek EU growth through acquisition. We have also seen alternative accommodation flourishing, such as Yurts and Shepherd huts etc, but what about more of a focus in Europe and UK on the massive static caravan and lodge market? The smaller parts of this market are 10 years behind from a supply management and distribution perspective and is a huge opportunity (and challenge).
THE MEDIA, ANALYSTS & INDUSTRY
I’m always bemused by reporters who duck into a subject and write an authoritative report, which just scrapes the surface of an ocean of information but influences the consumer. The same applies to a number of analysts who seldom see the rocky foundations but just the shiny towers. A recent example was the yearly Which cottage accommodation report in the UK. Without going into detail, only surveying your own biased, by definition, members, adding in Booking.com, Airbnb and VRBO as a comparison alongside managers, is too much of a stretch and all credibility is lost. This expert in saving money has written an extensive report, comparing VRBO to Airbnb but is full of errors. See how many you can find! It would be interesting to look back at analysts’ reports too. Although they may have a herd mentality and be wary of stepping too far away from the rest, they are always worth reading. I’ll keep an eye on this one about Vacasa.
It is time the STR industry and all its moving parts was understood to a greater degree by the consumer, the media and analysts. Brian Chesky also did not invent the rental business despite rumours to the contrary. It’s still fragmented and personal and getting more expensive to guests.
WHO ARE THE TECH AND OTA TARGET MARKETS: OWNERS OR MANAGERS?
This is a real conundrum! Millions of owners and micro-managers and a couple of hundred thousand professional “managers”. For management companies the target is clear, owners. For tech companies, this is a problem but its clear they want to attack it.
Consider a management company that pays £2-3K per month for their core tech (PMS, channels etc), but are extremely conscious of their margins. They have real businesses to run and will pressure suppliers and often pass on any increases! A service product company (guest app for example) would need 20 to 30 individual owners on product subscriptions to match this. I personally am not aware of any companies in the software service side that have RR on a hundred thousand owners. There are limited professional global managers with increasing consolidation of the prime management businesses so a narrowing market in certain parts of the world for the hundreds of competing tech companies to work with larger client accounts. Despite the difference in income per client, we are no doubt going to see a push alongside that of the OTAs to sell software to owners. The problem in accessing the volume of owners is “reach”. You just need to ask Vintory, how tough this is and how sophisticated a management company needs in marketing and messaging to be to make the numbers work.
The Guesty investment (linked on my favourite blog, but recently acquired by PriceLabs, which is interesting) is one to watch to see how this materialises as it must see a bigger picture not to mention excellent customer retention. Is it new tech, acquisition (hard to merge techs though), focus on the large, the small, marketplaces or something else?
Now consider Beyond Pricing, a well-known dynamic (and rev management) company, that has launched a web builder too!! This is a demo site. A WordPress site with property integration. A nice idea on pricing data on webs, provided the traffic is there. Curious that properties need feeding from a PMS, and many PMS systems offer up their own websites. Conflict of interest or a user bonus on choice? There are plenty of web builders and vastly improved presentations, so a lot of choices. A hard space to occupy in volume as visual is personal and requires support and API integrations with payment gateway and pricing challenges. One to watch though as webs keep small clients or owners sticky as the web is a secondary affair to OTA importance.
Smart homes aren’t going away and with the major corporations in the space: Amazon, Google, Apple, Bosch and lots of IoT companies with home tech, such as Wink, EcoBee and lots more. In our space, we have Operto making hardware and guest connectivity and others with noise and environment monitoring. The implementation of these hardware systems will require connectivity and maybe the top of the power curve for control of PMS software selection just as the need to be linked to OTAs was 5+ years ago. After all, if an apartment block uses one specific networked hardware system, they are unlikely to choose any management software that does not integrate seamlessly!
The next battle/push by some tech players and of course OTAS will be for the individual owners. Tech companies will keep elaborating and developing relationships with financial and real estate businesses where “Smart Homes” will influence management software selection (slow but certain) and operations.
NICHE IS KING
If you’re not focussed on your niche, whether this is your personal devotion to hospitality, sustainability, super discounts, last minute, dogs, babies, weddings, skiing, LGBT, activities, super luxury or very specific accommodation, then you’d better hurry up. Unless you’re a rental market superpower it’s going to get tougher. The differentiation is the only thing between you and an OTA or Supermanagers. Guests’ expectations are greater and they are more informed. Blame the smartphone!
Even in my own co-founded company (Rentivo), we are pivoting to specialise in geo and activity niche aggregated platforms. We can expect to see more of these arise as the markets are still very local and the specialist segments require expertise and deeper levels of information. Surprisingly I still witness bookings in the $40K plus on an OTA, where a guest could save $6K. I’m pretty sure AI and web/trust developments and lower commissions marketplaces will within 5 years make this less common.
Subscriptions (yes subscriptions not commissions) to niche sites will see an increase with simple tech connectivity and book direct options. Prices will be lower than the OTAs.
REQUEST FOR PROPERTIES: Dogs Niche.
If you have a really dog-friendly property (not just the tick box approach) I’d love to hear from you! email me below I have some freebies for you!
Without mentioning any names, a certain large real estate company staff member told me a couple of years ago: “that rentals (aka Airbnb) were considered pond life by the directors”. Commission real estate sales is the best business. Depending on the country and even region the two do not often work together well. In Spain, Portugal and Italy the management and sales combination has been common but is a much more sophisticated and less leisurely business to run these days than 10 years ago. Rentals are now very specialised and real estate is in the headlights of e-commerce marketplaces.
At the polar ends of the spectrum, we have EU agents taking 5-6% off EU10M+ sales, not bad for some representation (EU500K). In rentals, this may take a 100+ property agency/manager a few years to accrue. At the other end of the spectrum such as the UK, %’s are much lower and the commission can be matched by a year’s rental. So why do we not see the big rental agencies embracing the real estate sector more as a door opener, rather than vice versa where rentals are to the established agencies, a headache? Some agencies have to offer rentals to keep the acquirer happy for a resale and to close a purchase, but it’s not a mainstream activity. Increasing partnerships and acquisitions must be an option too.
There is also a lot of concern about increasing interest rates and economic uncertainty. This Fortune report in the US quotes: “Across the country, home shoppers are putting their home search on pause. On a year-over-year basis, new home sales and existing home sales are now down 29.6% and 20.2%. And single-family housing starts and mortgage purchase applications are down 18.5% and 23%, respectively. Simply put: Housing activity is contracting—fast.”
Across the Atlantic, we have a number of challenges and reasons why including a lack of rental accommodation for locals and seasonal workers. There are threats of local and Govt control not to mention a slowdown in the property market. A few links are below on the challengers. There are literally thousands of posts in the USA too.
- UK Homeowners facing a crackdown in the UK
- The number of holiday lets up 40% in 3 years
- 1400 holiday lets set to leave Wales
- UK Govt launches review into the short-term rental market
- It’s not just UK/EU/USA it’s global e.g. New Zealand
- Australia rental real estate cooling
- An interesting EU fund. If you’re into Digital Nomads, Sustainability or Corporate read here
- The road to 2030 by Phocuswright
Taxes, licensing and legislation will affect all markets. Be prepared and engage early. We will see an increased number of ex-rental properties coming to the market in leisure destinations over the winter of 2023. Whether they will be bought is a different matter!
THE FUTURE OF CONTENT
The internet has billions of pages of content. Google crawlers and search algorithms must be pretty bored trawling billions of rewritten words and uninteresting content (I’ll check the indexing of this tome later). With AI and ML on the rise, we are seeing many tools becoming available to write or rewrite the content and this just adds to the problem. With content a big part of long tail SERPS and large company keyword focus it is easier to create but also will become harder to rank. Google has been telling us for ages that EAT is important and qualified authoring as part of this is necessary to get the right results. So will the automated and reconfigured sentences be of any use to improve SEO? Probably for now, but the future of this may be a little mechanical and we may find that actual recognised experts in their field are the only way to get ranking from content delivery ane this means an online personal profile.
We all know the image copyright threats from “borrowed” images and many have no doubt received the” pay now or be sued” by the large licensing photo libraries (there is a method to deal with this BTW). Now we don’t have to worry about that as AI is now an opportunity to create unique images instantly. Here are a few created in a few seconds using “Midjourney” and “OpenAI”.
Only one problem, using AI, Google will increasingly use AI and tools to sort the wheat from the chaff and if AI created the content then it must be an AI conflict, how can it be original and humanly authoritative. Google is content aware and it’s still a big part of Search, however. For all you WordPress fans there is even a plugin that uses GPT3 to create snippets for you!
Start researching this now and don’t think these are just toys, they are the part of something much bigger and being used by your big competitors already.
- An excellent explanation of all those data, rev. management acronyms, terms and explanations of each from Key Data Dashboard
- Spencer Rascoff’s warning to VRMs from Jarvis ML – Also linked in the previous news post, “tariff challenges“
- Booking.com makes 60% of its bookings in its app! Do they need such an intensity of Google search use for much longer? Airbnb thought it didn’t, but ad spend is up!
- The top 25 islands to visit in 2022 ( even if Asia is still a wasteland of international travellers, comparatively)
- Google can’t pass its own speed tests 🙂
This social business platform is great for connections. But what’s new? Not surprisingly increasing attempts to sell and promote products. I personally receive several messages per day/week asking if I’d like to get a demo or subscribe or book a call on a calendar (really). The very annoying thing is that seldom do these people research your profile and just rely on the sector without the detail. Groups too are subject to product advertising by private posts, let alone the real sponsored ones you pay Microsoft for. I now post 99% of the time in the Vacation Rental Professionals Group, which is also challenged by the over-posters and no doubt has a lot of moderation work to do daily!
I’m happy to connect, just don’t try to sell me something cold.
Thank you to Wheelhouse for their post on top influencers. I’m humbled.
THE QUEEN: I’d like to add that Her Majesty Queen Elizabeth II served and represented the United Kingdom in a most outstanding way for 70 years. She brought stability & in our industry, visitors and respect, maintained valuable traditions and has been the envy of the world as a person and in her role as Queen. Her loss will be felt throughout the World, not just in the UK and the Commonwealth. She has made an unparalleled contribution to our country. Our thoughts and prayers are with the Royal Family at this very difficult time.
Feel free to connect with me and share your strategy. and if not subscribed to these occasional posts please use the link below or visit yes.consulting to subscribe