Today we have an insightful trends report from Your.Rentals CEO Andrew Martyn. This contains some important tips to help vacation rental managers and hosts remain competitive and informed. Let’s get started!
Vacation rentals are not just vacation rentals any more
Over the past few years there has been a strong growth in urban short-term rentals, which has fueled a massive expansion of what we’ve traditionally called the vacation rentals industry. One proposal is to rename our accommodation segment “alternative accommodation“.
This is important because it provides a broader context for us to understand how our guests are changing, and how they experience the product/service that we provide. Urban rentals are opening up our “alternative accommodation” to younger Guests.
Younger guests tend to travel more to city destinations and often don’t yet have families — therefore they don’t have the same need to relax on vacation as I do! These younger guests are growing up fast. And as they start to have families, they are crossing over into more traditional vacation rental accommodation.
Based upon their use of sites like Airbnb and Booking.com to book accommodation, guests have learned to expect that they can book instantly, as they do for flights and hotels. They don’t have the patience to inquire and negotiate with property managers and owners to hear if a property is available. Channels have realized this and have pressured property managers and owners to accept “instant bookings”.
They are doing this because they saw a trend of guests making 10+ inquiries per booking — guests do not have the time and patience to make 5 or 10 inquiries one after another to find an available property. This is a horrible guest experience. As a property manager or owner, this impacts you! You may find that today you spend a lot more time answering “dead” requests than you did 5 years ago, and if you don’t answer immediately, the opportunity is gone. Perhaps more importantly, if your property is not listed as “Instant booking” on OTA channels, it will be de-prioritized in search results, and many guests will skip over it.
HOST TIP → You should ensure that your availability is accurate in all sales channels, and that you enable Instant Booking if you are able to. By taking care of these things you will have a higher conversion rate, and spend less time dealing with inquiries.
More and more bookings are coming through OTA channels
I think all property managers can feel the rise of the OTA channels. It is impossible for smaller sites and companies to compete with their marketing budgets, their large choice of accommodation options and customer bases. Over the past few years, the OTA channels have been on a steep learning curve to understand how to sell vacation rental bookings — and have often done so by acquisition of vacation rental specialists.
For example Expedia’s acquisition of HomeAway, TripAdvisor’s acquisitions of HolidayLettings, Flipkey and HouseTrip, and Priceline’s focus on their Booking.com and Agoda businesses. We can see a fast maturation of the way OTA channels market and sell vacation rental bookings. The new age is here.
Based upon the vacation rentals industry data, in 2012 OTA channels accounted for around 35% of online bookings — a majority of bookings were made directly with property managers or owners. By 2016, this share has grown to 63%, and is forecast to grow to 75% in 2018.
HOST TIP → You need to be in OTA channels, and to take advantage of most channels your properties need to be instantly bookable.
Supply of vacation rentals is growing quickly, but so is demand
As mentioned previously, the massive marketing done by Airbnb, HomeAway, Booking.com and others over the past few years has opened up the “alternative accommodation” segment to more and more travelers. Latest estimates show the US market size grow from $23 billion in 2012, to $29 billion in 2015, and is forecast to reach $37 billion in 2018.
Phocuswright will publish new data for the European market in the coming months which is expected to show an even larger market size. At the same time, supply of “alternative accommodation” is growing just as quickly — particularly in urban areas. In Amsterdam, there are 29,000 hotel rooms, and in 2017 alternative accommodation supply has reached 27,000 bedrooms!
While in urban areas we are competing with hotels, the hotel chains are not reporting any down-turn in demand yet, which can only mean that demand is growing in line with supply.
HOST TIP → Focus on your competitive advantages and make sure your distribution is strong — the demand is there but your property needs to stand out from the crowd.
More bookings are made within a month of travel
Another key trend presented is that the share of bookings made close to arrival is growing, presenting you with a challenge but also an opportunity. Due to the increase in supply of instant bookable properties available in OTA channels, guests are able to plan their accommodation later than ever before.
In 2012, the percent of trips booked within a month of travel was 12% of total bookings. In 2016, that number has grown to 52%.
Last minute bookings are more difficult to manage because there is more stress and time pressure both on the guest and the property manager (who is likely already checking in arrivals). However in terms of helping your occupancy rates grow, a focus on last minute bookings is key.
HOST TIP → To grow your share of last minute bookings it is critical to ensure that your availability is up to date and that your pricing and discount strategy presents great deals to guests. The closer to the travel date, the more likely it is that a guest will choose an instantly bookable property.
Average length of stay is decreasing — more bookings are for shorter stays
We are also seeing that the average length of stay is decreasing. A case study during the conference from a US property manager showed that by embracing OTA channels and relaxing booking rules, they are seeing a large growth in the number of bookings and occupancy rates with 121% increase in revenue from OTA bookings and 181% increase in the number of bookings (ie. more bookings of a lower average stay).
HOST TIP → If you are sure of filling your peak season with stricter booking rules and minimum stay, then by all means stick with that — we all want to 100% occupancy in peak season. Outside of peak season, use much more flexible booking rules with shorter minimum stay to boost occupancy — the OTA channels work well to find off-peak bookings.
Local service is still the major part of the product
While the trends above are to do with supply, demand and the booking process, the quality of your rental, amenities and the local service that you provide is still the key to the Guest’s experience — and whether they will return.
A lot of discussion during the VRMA conference was about how to deal with shorter length of stay in profitable ways, and the use of technology to help provide a better guest experience — such as electronic locks and better messaging between property managers and guests.
HOST TIP → Ensure that you have good operations in place for having real-time availability updates without doing any extra work. When your share of online instant bookings via OTA channels grows, and you have confidence in your calendar accuracy, you’ll be able to spend more time on ensuring your product and service is a step ahead of the competition.