Consolidation Within the Vacation Rental Industry and What it Means for Property Managers

The vacation rental industry is in a state of evolution. The industry has seen a fair share of consolidation, rapid growth, and heightened competitiveness during 2020 and into 2021.

The impact of 2020’s global travel restrictions created a market of extreme uncertainty that remains a catalyst for investment and influences the strategic decision-making of everyone within the industry.

From the onset of Covid-19, the industry has been hit hard. Cancellation rates skyrocketed and new reservations came to a standstill. Major property managers such as Stay Alfred declared bankruptcy and the industry went into hibernation mode. Resulting in an unprecedented layoff of staff and other measures to minimize expenses.

But in the words of Warren Buffet, “be fearful when others are greedy and greedy when others are fearful.”

The shakeup of the global tourism industry may have been a perfect storm for companies wise enough to seek opportunity.

Mergers, acquisitions, venture capital funding, and rumors of IPOs are more commonplace than ever before within our industry. This extends to every segment of the industry including property managers, OTA’s, software, and hardware.

The real question is what does the Airbnb IPO, the merger of Vacasa and TurnKey, Guesty’s acquisition of MyVR and YourPorter mean for your property management business? How about Greater Sum Ventures roundup of Liverez, Streamline, and Bluetent, among many others? On a day-to-day operational basis, probably nothing. But when thinking about the long-term outlook of your business and your strategic direction, these shifts within the industry are certainly worth monitoring.

Three Macro Industry Trends Property Managers Should Monitor:

1. Heightened Competitiveness Among Major OTAs
2. Consolidation of Vacation Rental SAAS and Increased Integration Focus
3. VC Funded Property Managers are Growing through Acquisition

Within this article, we will outline these industry trends and try to explain how these will impact property managers in the future.

Heightened Competitiveness Among Major OTA’s

The dominance of Airbnb within the vacation rental industry is being challenged. VRBO has been strategically targeting Airbnb hosts and property managers to get them to list on their platform.

Hosts that used to be completely brand loyal to Airbnb are experimenting with new sales channels such as VRBO and Booking.com. This presents a challenge for property managers already listed on these sites, as new property managers start adding thousands of additional listings to the platform each week.

The rapid growth of new listings on VRBO risks drowning out pre-existing listings. VRBO’s “fast track” program has been providing heightened visibility of Airbnb superhosts on VRBO. Fortunately, the risk is mitigated because VRBO is not only growing listings but has also seen strong growth in reservations. In order to stay competitive, property managers need to start prioritizing the optimization of listings on VRBO. Those not considering the rapid growth of the channel risk seeing dropping rankings resulting in shrinking earnings from the channel.

Consolidation of Vacation Rental SAAS and Increased Integration Focus

The vacation rental software industry has been crowded since its inception. There are countless software solutions for hosts and property managers to choose from and seemingly more and more being developed every day. However, the software industry may be seeing some major changes that shrink the number of solutions and slow down the creation of new start-ups.

Consolidation within the vacation rental software industry may be an indicator of a few major players rising above the rest. This in conjunction with increased API integrations among systems may make it difficult for new software startups to break into the industry in a meaningful way.

The consolidation within the industry also risks leading to less innovation, higher prices, and lowered levels of customer service. Companies going through mergers and acquisitions are forced to seek operational savings and synergies which often ends up at the expense of customers. This trend has been evident among Streamline and Liverez. It is too early to see the impact of the YourPorter, MyVR, and Guesty mergers but if the trend holds true customers may notice a degradation in customer service, stifling of innovation, and rising costs.

VC Funded Property Managers are Growing through Acquisition

Major property management companies such as Vacasa are constantly looking for acquisition targets. Vacasa has been on a buying spree for the last few years including major property managers Wyndham Vacation Rentals and TurnKey.

Venture capital has been funding property management companies within the vacation rental industry, such as Vacasa, Sonder, and Evolve. Property managers with a stronghold in competitive markets may be targets for acquisition from some of these national companies, alternatively, they’re also at risk of new competitors entering the market.