That noise you can hear is self-management dying on Airbnb and vacation rentals

No matter how you cut it, this was a rough week for those who believe owner-managed vacation rentals are the future of the short-term accommodation space.

“How can I say that”, you ask? Let’s read the tea leaves together.

NB: This is an analysis by Andrew McConnell, co-founder and CEO at Rented.com.

To begin, Airbnb quietly rolled out its “Find a Superhost” page. This may not seem like a big deal at first glance, but think about what it implies for a second.

First of all, Airbnb – the same company that built its brand as one that helps retirees rent out their spare room in order to keep the house they could no longer afford – is finally admitting that a good number of people actually don’t want to do all of the work it takes to manage an Airbnb.

No matter how slick the site, the time consuming and often dirty work of managing an Airbnb is simply too much for the vast majority of people.

No harm there, you might think. But that is just the start. Airbnb is also not-so-subtly acknowledging that guests actually prefer a more professional and businesslike service.

Why have the Superhost badge otherwise?

If people didn’t actually prefer this more professional service, why go out of your way to highlight it and encourage the less professional, self-managing Airbnb hosts on your site to work with them instead?

Sure, they use the euphemism “experienced”, but we all know what that really means. A Superhost is a small business.

But an experienced Superhost looking to add properties? That is an aspiring mini-hotelier, and in the vacation rental world, we call them vacation rental managers. They are businesses, they do this for a living, and they do it well.

Welcome to the fold, Airbnb.

But surely if I am one of the few that prefer to host/self-manage on Airbnb, there is still a place for me, right? Not necessarily.

Reality

Airbnb does not make its money from the number of listings it has. Instead, it takes a cut of the bookings.

The higher the price and the more nights booked, the more money Airbnb makes.

Will Airbnb make more from an amateurish listing, when the owner is working a full-time job, cannot be as responsive, and only rents about half the time that is available?

Or will Airbnb make more from the professional manager, I’m sorry, Superhost, who is now doing this full time and can rate optimize and max out the calendar?

And if Airbnb makes more from one of those types of “hosts” than the other, might they be tempted to provide preferred placement to listings managed by one type of host versus the other

Maybe even going so far as to create a new category, badge icon, and filtering feature to highlight and select just such people, and maybe even encourage the lower performing people to instead just work with their top performing ones?Exactly.

Exactly.

At this point, the other main option for the amateur vacation host is to go to VRBO. After all, “rent by owner” is in the name. That, however, is where things get REALLY bad.

This week happens to be when HomeAway, owner of VRBO and itself owned by Expedia Inc, hosts RezFest for the professional managers who use its software.

It is a great gathering where the industry gets together to hear what the company has planned for the future.

Post-acquisition situation

Now, before I say what happened, it is probably worth noting that since its $3.9 billion acquisition by Expedia, HomeAway has not been shy in saying it is moving to having all of its listings online bookable in the near future, and very deliberately shifting to a revenue model that is no longer based on listing fees, but rather on booking fees taken as a percentage of the entire booking.

Sound familiar?

And, like with Airbnb, which listings do you think will make HomeAway (Expedia) more money?

The one from the amateur renting a few weeks a year, or the Conrad Hilton to be who is looking to build a rental empire?

Fortunately you don’t have to guess. As Brian Sharples, co-founder and CEO of HomeAway, said while on stage this week in Orlando:

“You have a huge advantage as a PM [professional manager] against your competitors [self managers] with the new best match algorithm.”

So go ahead, switch from Airbnb to VRBO. You are just as likely, or rather as unlikely, to show at the top of search results and get bookings.

Okay, so the two big dogs are not on the homeowners’ side anymore. Time to find a new listing site. This, however, is where it gets even worse.

You see, the same day Sharples let it be known that managers would get preferred placement, Airbnb raised another round of financing – $555 million at an estimated $30 billion valuation.

The OTHER brand

So what? Sure Airbnb and Expedia have deep pockets, but a competitor serving hosts still has a chance, right? Maybe. But it’s probably worth checking where that round of financing came from…Google.

Yes, Google. The same Google that launched a new app on Monday that aims to “revolutionize” how you vacation.

Who will Google make sure shows up at the top of search results when people are looking to book a place to stay?

And once you visit the site they place up top, who do you think is going to show up at the top of the search results on that site?

So yes, with new features and product launches, and with hundreds of millions of dollars of investment pouring into the space, it may have been a monster week for the short-term rental space as an industry.

But, please, spare a thought for those self-managing hosts who no longer stand a chance.

They are the ones that helped get us here in the first place.

NB: This is an analysis by Andrew McConnell, co-founder and CEO at Rented.com.

NB2: Vacation rentals image via Pixabay.

Share on FacebookTweet about this on TwitterShare on LinkedInEmail to someone
 
 
Viewpoints

About the Writer :: Viewpoints

A founding principle of tnooz was a diversity of viewpoints from across the spectrum. Viewpoints are articles by guest contributors from around the travel and hospitality industries. The views expressed are those of the author. and do not necessarily reflect those of the author's employer, or tnooz and its partners.

 

Comments

Your email address will not be published. Required fields are marked *

  1. John

    Ladies and gents,

    My comments are directed to all of you.
    I have owned one short term property for over two years and the other one for a year now. Both properties are on VRBO and AIRBNB. I also have numerous badges on both sites. One property rents out for around 220 days a year and the other for around 250 days a year. This being said I have enough experience in my market to say what I’m doing is correct and the wife and me manage both properties.
    I will try and keep this short and to the point.
    1. I will never allow a management company to manage my properties. Yes I said never
    Why: regardless of the sales pitch a management company gives you , you will never , yes I said never again run my property as well as we have. I know the area,the people who live here, I know why people come to my city and I know how to best serve them. Most importantly I have skin in the game and it is ultimately up to my family if we succeed or not. If I wanted a management company then why not keep my money in a 401k IRA etc and pay a financial advisor. Then I would not have a need to worry about anything. Well that’s the sales pitch and why I moved all of my money in the market to Vanguard. You know where Im going with this.

    2. The subject line has little relevance.
    Why: Saying that 60% or so of people manage themselves and 40% or so choose a management company is irrelevant. The questions should be, how does a well managed short term rental compare to one being managed by a management company. Bottom line, what do the numbers say?

    3. Someone mentioned that an average home owner who manages the property spends around 8 hrs a week. You wish. My first property I spent it least 20 hours a week in addition to a full time job an 8 and 10 yr old daughters a dog and 4 chickens. Which I had to final sell. (: Alot of people are jumping on the wagon thinking they can purchase a house and turn it into a short term rental. Its not easy at all. We are constantly making adjustments to the way we do business and we thrive on being successful. At time we still put in over 20 hours a week. We are available 24 hrs a day.

    What is the point here.
    It is my opinion that management companies do work for some people, however I will never rent from a management company. I will only rent from someone who has numerous reviews and also has great reviews. Too many issues come up when an owner is not fully involved. Therefore you will see numerous short term rentals close their doors over the next few years. In my city alone of over 5 million, only 15 or so houses rent as well as we do. The rest sit there with empty calendars and wait for some miracle to occur.

    My two cents

     
    • Andrew

      John – Thank you for the thorough response. It seems we are in more agreement than might at first be apparent. The 8+ hours a week I referenced I took from HomeAway’s own site (https://www.homeaway.com/info/media-center/press-releases/2013/vacation-rental-performance-rema). I have long believed the actual number is higher as HomeAway has obvious incentives to make it seem like less work, not more.

      That being said, the fact that the average they cite is less than half the amount you typically work seems to show that you could also be in the minority of truly dedicated, diligent, and in many ways, professional RBO owners. Most may just do it on the side, do not really enjoy it, and thus do not dedicate the time required to outperform a professional management company.

      For these people, a manager might actually be the better answer, even though, as you say, it will never be the right answer for you. All the best.

       
  2. Kyle

    Great article! Right on

     
  3. Sylvain Roullier

    Interesting analysis. To get that 5-star rating takes hard work and time. So if you are only a part-time host with no staff or little time to allocate of addressing the guest’s needs/requests and every detail of the booking process, becoming a superhost will not be easy, but still possible.

     
  4. Philip Haines

    A thoughtful piece – but a key driver is the guest experience, and to an extent customer service. The OTAs currently add little to the latter, which is where they can make a point of difference. Professional hosts are definitely what is needed – but that is what self-managers need to deliver. If you get the guest experience, and customer service right the revenues do flow – but it’s not a hobby, it must be a business if you want to be successful. At ExeterSelfCatering.com we strive to deliver all of those objectives.

     
  5. Johnny Thorsen

    Great article and very valuable insight in how the mega players in the accommodation space are creating the basis for a new distribution model which could very easily move into the hotel segment as well – an Airbnb promoted by Google is a powerful combo which probably will be matched by Expedia and Facebook teaming up at some point.

     
  6. Steve Sherlock

    It was a good read as plot thickened…

    I’ve stayed in a number of superhost properties that were managed by the individual owners. I find the superhost label helps to better compare quality i.e. in addition to reviews.

    I reckon that the majority of superhosts are still individual owners (any data on this?) Hence if we could measure how many superhost properties are managed by owners with 1-3 listings vs. superhosts who actually manage other peoples’ properties, and over a 3 month period, I think that would be a somewhat reliable measure of the superhost trend i.e. towards vrm’s or owners.

    However that aside – yeah I guess the power of “economies of scale” will likely apply here too – but I’d say more so towards “the whole property” as opposed to “shared accommodation” option on Airbnb.

     
    • Deborah

      I have 6-12 properties listed on Airbnb at any one time. I had Superhost status, until I got a 3 star rating at one new property, from it’s third guest. The 3 star was for Accuracy. “the place looks bigger in the photos.”, the said photos were courtesy of the Airbnb photographer. All the other properties have recieved the appropriate rating to qualify me for Superhost status. But because of one 3 star rating at one property, I am not entitled to the status. I have pointed this out to Airbnb, and of course, it has fallen on deaf ears. I have turned over more than $130K this year so far with peak season still to come, but still nothing from them. I am aiming for more site independence. Leave Airbnb to the rookies in short term rentals industry.

       
  7. Jazz Poulin

    An interesting post Andrew

     
  8. Bob Bourassa

    The vacation rental market has indeed changed, but not due to changes of heart from the owners, but more by the conglomeration by two heavy hitters manipulating the market for their own profit.

    The purpose of people managing their own rentals is that in most cases management agencies charge anywhere from 15% to 40% commission. That is a huge chunk of change for the owners, who are assuming all of the risk. And, from my own experience in using rental agencies, you get very little bang for your buck.

    HomeAway and VRBO were great tools for owners to use to rent out their vacation homes, the operative word being “were”. The changes to HomeAway and VRBO to emulate the AirBNB model this past year has caused a downward spiral that has turned into a free fall. This has been caused by two major changes. 1) Renters are not as stupid as you might think, and they see the increased cost to them with the new service fees turning them off, and 2) The new “best match” search algorithm which widens the search areas to include homes not even remotely close to where you want to go, thus burying actual listings where you are looking deep into oblivion.

    The writing is on the wall.We know what is coming next. And owners are scrambling to find alternative means to market their vacation rentals. In response to this, new listing sites are popping up and old ones are trying to re-invent themself. There are at least a half dozen national sites that have been launched. However, without huge capital for marketing to be serious contenders to the big guys, they stand little chance of succeeding.

    Alternatively, regional sites are also being launched. There is a distinct advantage to this model. A regional site does not have to spend millions of dollars on marketing, as they are able to concentrate their marketing efforts where they know their vacationers typically come from. In this way, they can compete with the big guys who are marketing worldwide.

    Owners are not afraid of doing the work. They just need the right tools to do it easier.

    Now, while my comments are intended to voice my opinions, they are also a shameless promotion of my regional site, http://www.carolinavacationhomerentals.com, which I launched a month or so ago and services North and South Carolina. Our intent is to go back to the basic VRBO model, which worked so well for the owners. No service fees, no forced restriction, no BS. Our motto is “It’s your property. Manage it your way”

     
    • John Banczak

      As a full-service property manager I definitely disagree with your comments “owners are assuming all the risk… and you get very little bang for your buck…” from a manager! At TurnKey, when we start managing a home, we pay for professional photos, we pay for and install a high-quality digital lock, we also pay for a custom Samsung tablet and spend a ton of time getting a property listed properly – from writing the description all the way down to identify the HVAC filter sizes – there is a lot that goes into getting a home ready to rent. All of that is done with no expense to the owner at all – we put out over $1,000 in cash expenses before taking a single booking, not even counting all of the labor. We risk quite a bit on every home.

      What we have found is that the range for commissions varies – but many companies are charging 45% and higher. Our biggest competitor charges 35% commission, and recently added an 11-15% consumer booking fee on top of that pushing their real commission to around 47%.

      At TurnKey’s 18% commission – we do feel we provide real bang for the buck. It takes a lot of time and energy to manage a vacation home – I used to manage my own and it was not easy. I received more than one phone call in the middle of the night, and going on vacation myself was always a crapshoot – would everything go okay or would I get calls on the beach? When companies like ours take on all of this work, clearly we have to charge something for it – staffing a call center 24/7, 365 days/year is expensive. Having full-time staff available in every market around the clock every day of the year including holidays to visit homes and take care of problems is expensive.

      In addition to taking care of homes, quality managers provide a lot of expertise in marketing, pricing, and we are pretty good maximizing revenue for homes. At TurnKey we’ve got data showing as a PM we convert more lookers into bookers than any other large PM, and far more than the industry average. We get twice as many guests to leave reviews, and 99% of every review left on sites like VRBO is either 4-5 stars. We also very tightly manage housekeeping quality, 96% of guests rating the housekeeping portion of their stay at 4-5 stars.
      So do we think the PM industry should be charging 47%? No way – that is why we started TurnKey to be the highest value PM. Do we think there is a lot of bang-for-the-buck at 18%? Absolutely.

       
      • Drew Meyers

        “We get twice as many guests to leave reviews, and 99% of every review left on sites like VRBO is either 4-5 stars. We also very tightly manage housekeeping quality, 96% of guests rating the housekeeping portion of their stay at 4-5 stars.”

        This is why I don’t really buy into reviews. They simply do not mirror reality. The vast majority of experiences are so-so. Vacation rentals, restaurants, real estate agents, doctors, hotels, etc. All you get in review systems is the edge cases…the great, glowing reviews or the scathing, angry reviews. Not to mention the fact that we all know anyone with time/money can game any review system. And many do.
        rant over..

         
        • John Banczak

          I completely disagree. Roughly 40% of our guests leave reviews and they cover all cases. The key is to set expectations properly – a guest can have a consistently great stay if they know exactly what to expect and the process of booking, paying, checking-in, checking-out and in-stay support is smooth. Doesn’t mean things can’t go wrong. If a guest is having a bad experience, just like great hotels, the key is to step in and make them happy with the service. It isn’t gaming the experience, it is stepping in to satisfy the customer.
          While you may not value reviews, guests sure do, the stats on booking numbers for highly reviewed properties speaks for itself.

           
        • Drew Meyers

          “While you may not value reviews, guests sure do, the stats on booking numbers for highly reviewed properties speaks for itself.”

          Sure, highly reviewed properties get more bookings. But I’d wager a guess that’s because those are the ones that actually get seen by potential renters (versus other ones being buried pages and pages deep). It’s not necessarily because they are better.

           
  9. Drew Meyers

    “Airbnb is also not-so-subtly acknowledging that guests actually prefer a more professional and businesslike service.”

    The guests they are targeting now, yes. But 30-40% (I actually think it’s closer to 50%) of the 4 billion+ trips a year are stays with friends, family, friends of friends, etc. They’re neglecting a massive, massive segment of the travel population with their shift to property managers/superhosts.

     
    • John Banczak

      So you are saying you personally just ignore reviews, and will book a property that has no reviews just as quickly as you would book a property with years of 5 star reviews? That would make you one-in-a-million!

       
      • Drew Meyers

        Not at all what I’m saying. But what I am saying is that one person I actually know/trust saying “this was a great place” is equal to or greater than dozens of reviews from random people I don’t know.

         
  10. John Banczak

    Hi guys, John Banczak here, I’m one of the founders of TurnKey Vacation Rentals. Full disclosure – we manage rentals for owners, and I was the original VP of HomeAway Software for Professionals so I am very familiar with the RezFest conference!

    For years about half of all vacation rentals were managed by owner, and about half by professionals. Even though we clearly would like to manage rentals on behalf of owners, we don’t necessarily see managed by owner going away. There are a lot of really smart owners who have a real passion for hospitality and enjoy the work involved.

    What we have seen is that there have been a number of companies like TurnKey come up in the past few years that have made professional management more affordable than ever. Companies like ours offer rates that are about half the industry average. These low rates also include better technology and full local service, so it isn’t surprising more and more owners are choosing to go this route. Our best customers have managed their home on their own just like I did years ago – they appreciate just how time-consuming and stressful it can be.

    We believe that the distribution channels understand that some owners have full time jobs and just don’t have the time to manage on their own. It is great to see the tools they are providing to managers are starting to catch-up with the complex needs of taking care of an owners property for them.

     
  11. sean

    Should probably be more prominently noted that the author runs a business that profits from selling vacation rental owners on switching to professional property manager.

    I also don’t think the data backs this statement up: “the time consuming and often dirty work of managing an Airbnb is simply too much for the vast majority of people.” Vast majority?

     
    • Andrew

      Fair point, Sean. I guess there are three points I would make in response:

      1. You could interpret the fact that I founded Rented.com as evidence that I am self-interested in Owners connecting with Managers. Or you could interpret it as I looked at how the industry was evolving, and decided to start Rented.com BECAUSE Owners preferred to connect with Managers. Slight distinction, but important.

      2. On the “data” part 1. HomeAway’s own materials say that owners spend 8.4 hours/week managing their homes. That is more than a full working day, and over 400 hours a year. Seems time consuming to me, but perhaps that is a subjective assessment.

      3. On “data” part 2. The “vast majority” point. Yes. By a LONG shot. Combined Airbnb and HomeAway have less than 2.5 million unique listings globally. Considering there are roughly 10 million such homes in the US alone, yes, the VAST majority of owners prefer not to do the time consuming and often dirty work of managing an Airbnb themselves.

      Hope that clarifies things.

       
      • sean

        Andrew,

        Thanks for the much appreciated response! Expanding on my points in response to your reply…

        Regarding your response #2 about the data – yes, I am not arguing it’s work or that the work is too much for some owners. I was taking issue with the statement that the work is “simply too much for the vast majority of people”. According to data from HomeAway a few years ago, 57% of the inventory in the US is rented by owners. Regardless of any possible shifts within the past few years since that data was published, “vast majority” feels like, at a minimum, a big exaggeration. Have you seen any data that demonstrates which segment is increasing in inventory as a % of the whole? Would be interesting to see if there’s a trend one way or the other, and I’d guess that the Airbnb inventory skews further towards owners than the HomeAway published data since it began with a real community focus.

        Regarding your response #3 about the data – there’s some fuzzy math going on here. You’re using the inventory not on the market as an argument that it’s too much work to do for the owner – but they’re also not using a property manager, so it could equally be an argument against property managers – as property management is a well established offering. Perhaps a unit is not on the market because the owner doesn’t trust property managers to do a good job or find them too expensive. Or perhaps they just don’t want people in their vacation home or one of a dozen other reasons. Since more inventory being rented in the US is rent by owner vs a property manager, I have a hard time with the argument that this data proves the work is too much for the vast majority of people – since the data I shared above seems to indicate that more owners choose the rent-by-owner option than the property manager option. Thoughts?

        Thanks for listening!

         
        • sean

          …and thumbs up on moving the mention of the author’s company to the top of the article. 🙂

           
          • Kevin May

            Kevin May

            @sean – the author’s name and details were always positioned at the top and foot of the article, sorry you didn’t notice on the first read-thru…

             
        • Andrew

          Sean – I think we are largely in agreement here. The response/questions on 2 and 3 have a lot of the same answers. Of the ~60% of second homeowners who choose not to rent at all, there are no doubt some who are so rich that no matter what they will never rent to a stranger (e.g., I can’t see Gates or Zuckerberg opening their homes up).

          That being said, we (Rented.com) see a shocking number of homeowners who come to us having never realized before there even are professional managers who will do the work for them. This is all the more surprising when you consider how much longer professional property management has been around compared to VRBO and Airbnb. Once these owners learn it is an option, they are incredibly excited by the prospect of being able to help cover the cost of the home through renting, or even turning a profit.

          You rightly highlight, however, that a good number of the non-renters are sitting on the sideline even though they already know about property managers because they distrust them, or believe they charge too much, or think they will not maintain the value of their asset. This is a perception problem professional management no doubt must overcome as there are great managers and there are bad ones (as with any industry).

          In terms of the trends, I am not sure if the numbers are publicly available yet, but the data I have seen from PhoCusWright shows that in looking at the properties available for rent, from ~2000-2010 or a little later, self-managed homes were gaining market share from Managers, but in recent years the tide has turned. When you combine the more recent proportion of homes managed by professional managers combined with the proportion out of the 60% of unrented inventory that don’t rent because of the work and hassle related to renting, again, you come up with a large majority who are not renting because of the work and hassle it requires.

          Hope that helps.

           
        • sean

          Trying to respond to Andrew’s latest comment below, but looks like I need to start a new response to this earlier comment since there’s no ‘reply’ on his comment.

          Anyway, I am not sure that we’re largely in agreement. The title of the article is that self-management is dying and a key data point is that the “vast majority” of owners find the work too demanding. I don’t agree with either. As discussed, more properties in the US are rented by owners than property managers, and you’ve just noted that property managers predate sites like VRBO and Airbnb that enable owners to rent on their own. I think you could argue that there are actually more distribution options and technology tools to help the rent-by-owner than there were in prior decades.

          Now, it may absolutely be the case that the tide is turning on RBO’s eating into PM market share and that could certainly amplify… time will tell. And I DO suspect PM’s are making a but if a comeback (and in particular, a newer breed of PM’s like John Banczak’s company) – also partially due to better tools, broader distribution, and key distribution sites catering to PM’s more. I just think the proclamation that self-management is dying isn’t yet evidenced by any available data and feels premature/exaggerated.

           
    • Elena

      Spot on, Sean:)
      Thou’, some things from the article are quite true (ie: dominance of Google who favors its own stuff, etc)!

       
 
 

Newsletter Subscription

Please subscribe now to Tnooz’s FREE daily newsletter.

This lively package of news and information from Tnooz’s web site provides a convenient digest of what’s happening in technology that drives the global travel, tourism and hospitality market.

  • Cancel