Vacation rentals impact on hotel revenue

Vacation rentals have the hospitality industry in an uproar lately and for good reason. Recent reports indicate that vacation rentals, like Airbnb, are taking their toll on the average daily rates of hotels in larger metropolitan areas. According to STR data, NYC hotel rates dropped by 1.7{97f5de9008dbce478b9914384118bb17bc275beb18053f10d4c63e347dc71139} in 2015, the first drop recorded since 2009. Early 2016 reports indicate this trend will continue through the year.

How Vacation Rentals Got Their Start

The concept of vacation rentals has been around since the early 2000s. Initially, management companies provided a way for unique and seasonal properties to be bookable. As internet search became more refined, the need for a more organized approach was apparent. An efficient system of organizing and uploading search-friendly descriptions and quality photos simply didn’t exist.

HomeAway launched their vacation rental product in 2006, providing a platform for a wide variety of properties to market themselves online. Property owners paid a monthly subscription fee to list their property and HomeAway took their cut. Acquired by Expedia in 2015, it still remains an outlet for families and groups to find the right space for their needs.

Airbnb: Filling in the Vacation Rental Gaps

Like many hospitality technology providers have learned, if your platform doesn’t grow and evolve with the needs of the marketplace, you can quickly get left behind (or at least give competitors a great chance at stealing your market share.) While HomeAway provided a VR booking channel, it lacked the authenticity and search experience that users craved.

Airbnb was created out of the need for two dudes to make rent. They rented out air mattresses in their own home for a small fee (like Couchsurfer but with profit – genius!) As they continued to suss out market demand, they stumbled upon an unanswered need: people looking for authentic experiences and instant connectivity. They learned that the buying decisions and motivations of modern travel shoppers are more complicated than they used to be. Guests seek personalized experiences and an inclusive booking process that mimics the flow of technology they already know and love. As such, Airbnb built a platform entirely around the user. They’re so tuned in to being responsive to the human element and it is entirely the key to their success.

How Revenue Managers Can Prepare

Part of a revenue manager’s analysis is price-value position against similar competitors. Vacation rentals are prominent in every major tourist destination thereby competing for the potential guests of your hotel as well as your competitors. To stay ahead of that, it is important to look at a broad set of data for your marketplace that includes competitor data and vacation rentals. This is your key advantage – having access to data that vacation rental owners often don’t have. Use data insights to know your ideal guest and intelligently respond to their buying signals through personalized messaging and a targeted channel mix.

About the author

Mary Beth has been working in the hospitality tech industry for over 5 years and is enjoying learning more about revenue management.
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