Harnessing Our Industry’s Recovery A
By Nicolas Galantini and Simon Lehmann
fter 20 months of an unprecedented global pandemic, the travel industry—as a whole—has deeply suffered, and recoveries across the travel industry have not all been equal. As we now know, leisure vacation rentals with drive-to feeder markets significantly outpaced all other travel verticals—a trend we expect to continue in the near term. According to the recent Vacation Rental Barometer survey by Generali Global Assistance, 71 percent of US and European travelers plan to book a vacation rental by the end of 2022. Compared to previous research shared by Phocuswright in 2019 showing that 34 percent of travelers booked a vacation rental, this is a huge shift. Sustaining this booming interest in vacation rentals once travel resumes to pre-pandemic levels would more than double the accessible consumer market for vacation rental managers.
In other words, if you thought that the rise of Airbnb in the previous decade had a massive impact on the vacation rental industry, buckle up for the years to come. As we consider this significant shift in consumer behavior, here are some questions we should collectively ask ourselves:
How can we retain these first timers once staying in a hotel is not deemed as risky as it is right now? How can we implement a regulatory framework that will enable vacation rental businesses to thrive and to be considered as a legitimate hospitality vertical and not simply as a hobby for those with second homes to make an extra buck?
How can vacation rental managers capitalize on this upward trend, become more profitable, and build sustainable businesses both financially and operationally? Of course, none of this will happen overnight, especially when everyone is overwhelmed servicing the increased demand. However, these questions are necessary to raise the bar in the vacation rental industry.
B A Scream for Revenue Management Revenue management—the process of establishing the right price for the right property at the right time—is still in its infancy in the vacation rental industry when compared to hotels or airlines.
We have already been quite vocal about this topic and have developed our own algorithm to tackle this problem with the AJL Profitability Solution. Nevertheless, if you are not doing any type of proactive revenue management or using any of the tools on the market, you are simply missing out on a lot of revenue.
COVID-19 has created a tremendous change in the demand for vacation rentals. First, the volume of guests interested in vacation rentals as a lodging option has increased. Historical data sets are almost irrelevant now, and every vacation rental management company must make the best decisions they can with the pricing and performance data they have access to.
Additionally, pent-up demand must be considered because the booking pace will change dramatically as any restriction is lifted in a region
As an example, Awaze—the largest property management company in the world—saw one booking being made each second in its UK cottage portfolio right after the announcement of easing restrictions by the UK government. If you do not have a solid strategy in place with automated rules and some capacity to anticipate activity as restrictions ease, you will miss out on a lot of potential revenue when such a booking frenzy emerges.
Another factor to consider is the origin of the guests. With international travel partially halted and some important source markets still restricted, it is crucial to consider this aspect when determining rates, minimum stay requirements, and distribution and marketing. In Europe, for example, property managers who decided not to fall back on their domestic market are and will still be negatively affected by the consequences of the pandemic. Companies that shifted their strategy to target domestic drive-to markets still have a business and are even growing as their strong performance is bringing new homeowners into their property management programs. Another important consideration-even if it is now normalizing in some markets because of higher consumer confidence-is the booking window (i.e., the time between the reservation date and the arrival date). Indeed, the booking window has shortened for most markets compared to pre-COVID-19 levels, and we can expect continued variation because we are still far from returning to normal.
Finally, market seasonality may have changed. Not because of global warming (although this is a growing concern in several destinations), but simply because the guests who were coming from farther away simply might not be able to come. At the same time, guests coming from regions closer to the destination might not follow the same booking patterns, avoiding what is still perceived as high season in tourist hot spots. Because of the lack of international travel and the increased appeal of outdoors after months of being locked inside, some winter destinations are offering activities during the summer and are experiencing a highly lucrative summer season for the first time ever. This leads to operational challenges but is also a fantastic case study in adapting your revenue management strategy to capitalize on emerging trends. Last but not least, remote work and remote learning are enabling families to book outside of the typical holiday weeks and allowing them to stay longer. This dynamic should influence the revenue management strategy as well.
C Standardized Uniqueness Unlike hotels or serviced apartments, most vacation rentals are unique. Hotels have well-established standardized operating procedures and standardized inventory, whereas vacation rental VRM Intel Magazine | Fall 2021
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