Looking back and ahead – vacation rentals in the mainstream
As we reach 2016, Tnooz is unveiling its customary series of reflections on the year behind us and what the travel, tourism, and hospitality industry might expect looking ahead.
And, as always, we’ve asked friends and family of Tnooz to help us out.
Here is part five of our our 13-section bonanza – vacation rentals are in the mainstream.
When the Expedia/HomeAway deal was announced, my phone rang off the hook for two straight days. Everyone wanted to know if the vacation rental sector had reached a point of maturity, where consolidation would replace innovation.
To the contrary, the vacation rentals industry is just getting started! Here’s why.
First off, the rental market is intensely fragmented: the top four players hold just 22% market share, which means that 78% of the market still consists of hundreds of vacation rental sites, property management companies, and individual owners.
We’re currently seeing supply growing and coming online faster than ever before. This rise of supply is leading to heightened competition among rental sites, which will bring about increased innovation as they all battle it out for bookings in 2016.
The most significant innovation recently is the rise of online bookings. For example, HomeAway is aiming for 100% of their inventory to be online bookable by 2016 and Tripping.com launched metabookings, another industry first in 2015, over the summer.
Just two years ago, it took an average of nine days for a vacation rental booking to be confirmed. Today, ow it takes seconds. This is a HUGE win for rental sites and travelers alike, adding convenience and accountability to every online transaction.
And, in addition to being a massive technological advancement for the market, online bookings attract travelers who might have otherwise opted to stay in a hotel.
In 2015, the lines between hotels and rentals also became increasingly blurred. Industry followers expect vacation rental bookings to outpace hotel room bookings, causing brands to look for new ways to stay competitive.
Between Airbnb openly accepting hotel listings, Expedia acquiring HomeAway, and Hyatt investing in Onefinestay – to name just a few things that happened this year – we’re seeing the convergence of the two predominant sides of the accommodation market. Expect this to continue into 2016.
When we launched in 2011, we believed the industry was at least 10 years behind hotels in terms of technology and consumer engagement.
The industry is catching up fast — fueled by the rise of supply, online bookings, and overall consumer awareness. As the vacation rentals sector evolves from being a cottage industry to a travel industry powerhouse, 2016 is sure to be a pivotal year.
Expedia/HomeAway is just one of three giant deals in accommodation in 2015 — the others being Marriott/Starwood and Accor/Fairmont/Raffles/Swissotel. While all are important, it’s not necessarily for the reasons many assume.
First, the deals signify that the distinction between hotels, timeshares, vacation rentals, etc. are false constructs. All of these are just accommodation or lodging or whatever label you choose to put on it as a category. At their essence they are places where you can sleep when you are not at home.
As OTAs, hotel groups, alternative accommodation giants, and other players come realize this, they will consolidate and converge.
Secondly, these deals are significant because of their size: $2.9 billion for the Accor deal, $3.9 billion for HomeAway, and $12.2 billion for Starwood. These seem like monstrous sums, and yet compared to Airbnb’s latest $25.5 billion valuation, they are peanuts.
This demonstrates that we are in the midst of tremendous change in terms of what “accommodation” and even “travel” looks like.
Sure, there is a marked difference between public and private markets, but something is only worth what someone else is willing to pay for it. Thus, by definition there are individuals and institutions willing to pay MUCH more for a share of Airbnb than they are for any of these other brands.
It is the last deal of the year, Accor, that demonstrates a third point: the incredibly global nature of the space. Travel by definition has a broad geographic scope, but many of the big brands garnering attention to date have been US-based.
The Accor deal, where a French company bought from two Middle Eastern funds, also demonstrates the US has no monopoly when it comes to consolidation or success in travel. The US may have a lead, but the rest of the world is fast catching up.
All of this leads to the fourth and final point: the future will NOT look like today.
Yes, there is convergence occurring across categories. Yes, there is consolidation within and across categories and geographies.
But there is also a tremendous consumer-driven change taking place in how people discover, book, and ultimately travel. Airbnb and Uber have been the poster children for this change. They have changed expectations. They have changed experiences. And ultimately, they are changing entire industries.
This convergence will lead to huge players, who may look the same, but only in the sense that they all will have to stop being the same. To survive they must continually strive to provide unique offerings and authentic experiences.
NB: Vacation rentals image via Shutterstock.
Special Nodes is the byline under which Tnooz publishes articles by guest authors from around the industry.