Technology startups are approaching things differently these days; vacation rental operators should pay attention.
A recent article in TechCrunch so aptly entitled Miami won’t become the next Silicon Valley because we don’t need one, is a useful analogy to what’s happening in the vacation rentals industry right now.
The author makes the general point that we can no longer look towards old models to define how we do things going forward. For tech startups, access to talent, capital, and markets is no longer concentrated.
The dominance of Silicon Valley as the place to go build your tech company has been waning for a decade. The pandemic pushed this trend into overdrive by officially decentralizing work, spurring on out-migration from the big cities, and turning investors on to teams in emerging geographies.
Next generation vacation rental operators will also need to run on decentralized teams, look toward new geographies when it comes to supply, and cater to a new travel consumer mindset.
The new traveler
“Today’s travelers are also asking questions like, where is my next big opportunity professionally and personally, and how should I align my travel plans to achieve these objectives?”
Many vacation rental operators already know first hand the key trends on the consumer side. The convergence of life and work; longer stays; etc. The industry has witnessed a complete shift in traveler behavior.
Yes, professionals are no longer bound by geography; i.e. the office is no longer at the center of life. Conventional thinking would posit that travel will boom under these circumstances. While this is likely true, vacation rental operators also need to understand that traveler intent has changed.
With the acceleration of virtual work, we are seeing another “great migration” highlighted by the emergence of second and third-tier cities, and the subsequent rise of small town living as a substitute to the big cities. Once sleepy vacation towns are transforming into boom towns.
The same professionals that can afford to stay at your vacation rental are seeing this rapid change unfold in front of them. As a result, they are actively asking themselves different questions when it comes to travel:
They still want to know where to go for that weekend getaway. They are also asking, where is my next big opportunity professionally and personally, and how should I align my travel plans to achieve these objectives?
I highlighted this trend in detail in a previous post entitled: Longer Stays & Guest Centricity In Vacation Rental Management and talk about why this matters and what vacation rental owners should do about it. In short, this is the time to rethink your customer contact strategy and to deliver on a high-touch, guest-centric experience that is profit, rather than cost-driven.
The next wave of consolidation
“This is a good time to scale your vacation rentals business, but speed and strategy will differentiate the acquirer from the acquired.”
Judging from the growth trajectory of our many partners, we anticipate a third wave of consolidation in the vacation rentals industry.
The first wave was marked by consolidation in marketing & distribution tech i.e. the rise of platforms like HomeAway, Booking.com, Airbnb, Google.
The second wave of consolidation was the rise of venture capital in VR, with companies like Vacasa scooping up smaller operators nationally, focusing on growth with less regard for profitability.
The Vacasa model proved vulnerable with high costs and losses even before the pandemic. Scaling too quickly, fueled by venture-capital, with very limited local market knowledge and connection to local operations, but also disconnects with things like local real estate trends, taxes, accounting etc.
This next third wave of consolidation will look different – more organic.
Rather than a hub-and-spoke model with just a handful of large players dominating the headlines, we are now seeing the rise of smart, ambitious small-to-medium sized operators scaling quickly, first by “owning their backyard” and then looking outward to nearby towns and geographies that would not have otherwise made sense during the 1.0 and 2.0 era.
In short, this is a good time to scale your vacation rentals business, but speed and strategy will differentiate the acquirer from the acquired.
How to win with distributed teams
“The concern here is that core strategic functions e.g. supply acquisition, tech adoption, financing growth etc. tend to fall to wayside of day-to-day operations.”
How do we move quickly as a boutique operator?
What we have seen recently is that founding teams need to get out of their own way to grow. In other words, scaling a vacation rentals business means that you need to re-prioritize and free up your time to actually focus on growth.
This is a challenge because a) founders – out of necessity – wear many hats, essentially doing everything from customer experience, to digital marketing, to accounting and other essential functions and b) the cost of recruiting, hiring, training, and managing new team members can by cost prohibitive.
The concern here is that more strategic issues e.g. supply acquisition, tech adoption, financing growth etc. tend to fall to the wayside of day-to-day operations.
The good news is that, with the right partners and applications, there are opportunities to automate and outsource business functions cost effectively.
Putting your vacation rentals business into growth mode means restructuring teams, freeing up your core staff to focus on growth, avoiding the duplication of roles – particularly as you expand beyond your “backyard”, and doing it in a flexible, cost-effective way that allows you to scale up or down.
With Extenteam, we are helping our vacation rental partners grow by minimizing the risks and costs associated with growth. We are more than a recruitment company. We are team builders and industry veterans delivering & managing the talent you need to grow in this rapidly changing market.