This article was originally published in VRMA Arrival’s Fall 2021 Issue
There’s much to be excited about in the vacation and short-term rental industry right now. With challenge and disruption comes opportunity. New ways of working are emerging, new markets are opening and we’re looking at old problems with a fresh perspective.
Globally, one of the most fundamental shifts over the last 18 months has been the way we now work, teamed with our approach to ‘location’ whilst doing our jobs. Much has changed over the last 18 months, but so much hasn’t. It’s just the how, why and where that’s now looking different.
It wouldn’t take a genius to notice that corporate travel has greatly suffered through the pandemic. The hotel industry in the U.S. lost a decade’s worth of revenue and job growth due to coronavirus, and will finish 2021 down more than $59 billion in business travel revenue, compared to 2019, according to the American Hotel and Lodging Association and Kalibri Labs. The ‘suffering’ is set to continue. As we’ve all heard numerous times over the last year, Microsoft co-founder Bill Gates has predicted that over 50% of business travel and over 30% of days in the office will go away in the pandemic’s aftermath. Indeed, research carried out recently by short-term rental booking platform, Leavetown.com, showed that 81% of respondents think they will continue to work remotely post pandemic at least part of the time, with 45% agreeing that they will continue to work remotely most of the time.
But what does all this mean for the short-term rental industry and what’s the opportunity for the sector? Firstly it’s important to note that so-called ‘business travellers’ come in all shapes and sizes, with different personas having unique motivations and expectations. Much is talked about the Digital Nomad. This independent traveller type is made up of freelancers, entrepreneurs or those lucky enough to have bosses and teams that never expect to see them except on Zoom. This lifestyle, once a dream, has become a reality for many. These ‘business travellers’ want comfortable ‘home-like’ accommodation in attractive locations to suit their budget. To reach these guests, property managers need to be on the platforms that they are searching and be able to offer rentals (with appropriate pricing models) to suit staying put from anything from days, to weeks to months.
With a predicted decentralization of office life and many SMEs as well as corporates adopting ‘hybrid’ models of working; fleeing big expensive cities in favour of outlying metros with cheaper house prices and a perceived better quality of life looks set to be a real trend for many workers. There’s still a need to come to the office from time to time and so these hybrid workers will be in the market for accommodation on either a short-let or permanent temporary basis. Thinking about how to service this type of guest looking for a home from home during the working week offers an interesting proposition for a property manager.
Business always needs to be on the move. Large corporations with national and global teams value meeting in person and are continuing to relocate staff and entire teams. Here lies potentially the real opportunity for the short-term rental industry. Typically the domain of the corporate travel management buyer and the relocation management team – business stays of under and over 3 nights and then extended stays linked to relocations are a source of market share for the short-term rental industry. According to Skift, if the short-term rental industry could gain just 5% of the global business travel market, it would be looking at an opportunity worth $8billion. To some, this is a conservative estimate – but there are potential pitfalls and issues for the short-term rental industry gaining share here.
Through the pandemic, rentals have had a ‘moment in the sun’ with travellers across all types preferring them due to real and perceived levels of privacy and safety. Technology, something the short-term rental industry has been an early adopter of, has helped to ensure that properties meet standards and are without ‘friction’ and it’s been a good fit over the last 18 months.
However, it’s important to remember that the business travel buyer and guest (note; these are not always the same) have expectations. Firstly on ease of purchasing and secondly on quality of product.
Business travel’s ‘flirtation’ with rentals, born perhaps out of necessity, will only continue if the short-term rental sector can consistently meet these two criteria. Firstly; “if they can’t buy it, you’re not going to be able to sell it”. Travel buyers use legacy systems, notably the GDS, to purchase products. The GDS is cumbersome and difficult to navigate for rentals, and until things significantly change – the technology disadvantage should not be underestimated. It is a huge barrier to entry for operators unless working with specialist platforms.
Quality, standards and compliance do matter and they matter a lot to business travel. Travel management companies have a duty of care towards employees with internal rules, liabilities, protocols and preferences. They can’t afford to take risks over where they house their staff. Unless the rental sector can sufficiently solve the quality problem, then the business travel opportunity might never quite be realized. Accreditation through third party providers may well go a long way to solving this, but bringing on quality inventory is also key.
It’s clear that the window of opportunity to ‘crack business travel’ for the short-term rental sector is short and not without significant hurdles. This was the clear takeaway from the Short Stay Summit in London this September. During a panel discussion with representatives from STAA, AltoVita, SilverDoor and Quality in Tourism, it was noted that the sector hasn’t got long to hold onto its current advantage and will be sharply rejected if it doesn’t live up to expectations.
Indeed, Skift’s Recovery Index just announced that hotel bookings are now consistently outperforming bookings for vacation rentals around the world – a first for 18 months. Unless the issues with distribution, quality of inventory and ease of purchase are solved – then that $8 billion may not seem so realistic after all.
About Jessica Gillingham
Jessica is the founder and director of Abode Worldwide, an award-winning B2B public relations consultancy and agency focused on raising the profile of transformative technology solutions operating within the global short-term rental, hotel and real estate ecosystems. The agency sits at the heart of the developing intersection between work, life and play in the property and hospitality markets and partners with technology solutions playing a lead role in this transformation. www.abodeworldwide.com