NATIONAL REPORT—The vacation rental industry is not new. People have been renting homes for vacations in destinations like Myrtle Beach, the Outer Banks and Aspen for decades. But, certainly, the proliferation of sharing economy sites like Airbnb and HomeAway has put a new focus on so-called alternative accommodations—and hotel companies are taking notice.
Earlier this year, Choice Hotels International Inc. launched Vacation Rentals by Choice Hotels. AccorHotels acquired Onefinestay, a 49% ownership stake in Squarebreak and a 30% ownership stake in Oasis Collections, platforms that aim to provide guests with vacation rentals that are professionally managed. (In 2015, Hyatt Hotels Corp. had been among a group of investors for Onefinestay.) And Wyndham Worldwide—which has operated in the home rental space with Wyndham Destinations Network for some 15 years—recently acquired Dayz Resorts and Friendly Rentals, following a bevy of additions in the past five years that bolster its market share in this industry.
These examples of hotel companies aligning with the sharing economy—OTAs are doing this too with moves like Expedia Inc.’s acquisition of HomeAway last year—highlight the fact that what once was termed alternative is more mainstream now. But the vacation rental industry is still going through growing pains, and many companies aim to capitalize on that.
Yves Lacheret, SVP of business development, AccorHotels, noted that the company’s investment is this sector is designed to explore a complementary offer in the hospitality industry. “We position ourselves to better understand the expectations of guests in a sector where the stay experience and the quality of service are particularly important,” he said. “Our focus remains the expertise in hospitality that our loyal customers will experience through this new type of consumption.”
“It’s an exciting time because you’re really going to see the industry grow up over the next five years,” said Steve Caron, VP and head of Vacation Rentals by Choice Hotels. “In the last few years, the vacation rental industry has gotten a lot of visibility with companies like Airbnb and HomeAway. They didn’t create the space, but they created a lot of buzz about the space.”
That buzz has created a greater awareness among guests, especially in the U.S. Gail Mandel, president & CEO of Wyndham Destination Network, said, “In the past, when I’d explain about vacation rentals and what was happening in Europe, I would say, ‘Have you ever rented a home down the shore?’ and they said, ‘Yes.’ Well, that’s a vacation rental. People didn’t necessarily associate that.”
Traditional vacation rental destinations, like this property in Choice’s portfolio, are still popular with guests.
But while many players in the sharing economy include one-offs where homeowners can list their properties to guests directly, hotel companies are offering professionally managed options. “There’s a lot of churning in the industry today—pressure from OTAs, pressure from small players,” said Caron. “We feel strongly that those professional managers can deliver a quality stay and experience to our customers. There’s a lot of listing and OTA sites and a lot of ways to drive traffic and many of those suck the customer away from the property manager and turn them into key makers and cleaners. These managers don’t want that. They’re proud of their brand but they lack someone to underpin their brand and help them grow their business, protect them from the outsiders and help them decrease their costs. We see our brand as an underpinning to their brand.”
Mandel noted that having a professional experience is equally important to guests. “We’ve got 10,000 associates all around the world… We allow travelers to vacation with confidence because we check all the boxes for them. As a professional manager and a trusted hospitality brand, we’re there with customer service before, during and after your stay,” she said. “If you’re in one of our properties and your air conditioning breaks, we have somebody 24/7 who is going to be there to get to you and fix your problem quickly so you can have that dream vacation experience.”
Caron agreed. “With the one-off sharing economy, not to say they don’t deliver a quality experience but there’s no guarantee,” he said, noting that consistency is important.
Both agreed traditional vacation rental areas would continue to be a focus. Choice, which has eight destinations open today and another dozen deals in various stages of contracting, will be popping up heavily in the Southeast—Florida, the Outer Banks, Myrtle Beach and the Tennessee markets, said Caron. “We’ve started talking in the U.S. ski markets, particularly in the Rockies. We want to have a national footprint but we want to roll it out in a regional way so we can focus our marketing effort and energy into a locale,” he said, noting that a lot of Choice Privileges members are heavy on drive-to locations. “We focus on where we have a strong base: What markets can we easily address early on and make the most impact?”
Mandel agreed that Wyndham’s sweet spot to date has been resort destinations, but the company—which has more than 108,000 properties in nearly 600 locations—is expanding. “The acquisition of Friendly Rentals is a step forward for us to augment our urban rental product because sometimes guests want to have part of their vacation in a city and part in a resort location,” she explained. “Prior to Friendly Rentals, we had a few hundred scattered around… It has a Barcelona base and a concentration in Spain but also some other locations. That’s part of our opportunity for growth.”
Greater awareness has brought new travelers looking for experiential travel—which means going beyond traditional homes. “We have condos, houseboats, a tree house in the Netherlands, villas in Italy, this wide range of product type. That’s what’s been attracting a diversity in age,” Mandel said.
And aside from the ability to earn loyalty points with the hotel company, Caron noted there are opportunities for mixed-use developments. “We can do a lot of joint work with our Ascend Collection, for instance, where there will be hotel and condo business,” he said. “There’s a ton of opportunity out there.”
Both agreed that sites like Airbnb have been a double-edged sword for professionally managed rentals—these sites provide competition, but they also strengthen enthusiasm for the product. “The sharing economy has almost disrupted the professional managed side. Brought awareness, but disrupted it. So it’s a give and a take,” said Caron.
Mandel noted, “A rising tide will swell boats, so the awareness is great. There was a recent study that showed nine out of 10 homeowners who have rented their homes dread some aspect of it. Seven out of 10 prefer to use the professional manager because it makes their lives easier, so as far as attracting new homes into our portfolio, it’s given us this great opportunity, and then the same thing for the consumer.”
Caron noted that with a huge push in cities like New York to better regulate the industry, more opportunities could arise. “The people who are playing by the rules will benefit when the nonlegal inventory falls out of the marketplace,” he said, “or those markets become legal because the laws change. I encourage municipalities to find common ground where they can make product legal because there’s clearly demand and need, and it’s a matter of making sure consumers are protected. There’s a lot of push on the industry to do that, and when that changes we’ll be there.”
Mandel said that there’s opportunity in the future given it’s an $80-billion global industry. Added Caron, “The whole pie will grow as the industry continues to evolve. We’re seeing the beginnings of that maturity now.” HB
