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When $24 Billion Just Ain't Enough - Vacation Rentals: Gunning for the Leisure Hotel Shopper - By Douglas Quinby |
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PhoCusWright estimates that approximately 70% of hotel business in the U.S. is driven through branded properties. Indeed, about 10 or so companies account for the lion's share of the U.S. hotel market. |
Name 10 vacation rental companies. Yep-try it right now.
OK, if you get stuck then just try five...
Three?
This is a defining characteristic of a large, multifaceted and incredibly fragmented marketplace. New, landmark research on the vacation rental marketplace from PhoCusWright reveals that there are more than 5,000 companies actively engaged in managing and marketing vacation rental properties, most with fewer than 100 units under management. What's more, there are hundreds of thousands-and potentially even millions-of vacation homeowners who also market and rent directly to travelers.
This vast and complex universe of vacation rental "suppliers," however, should not be underestimated. According to PhoCusWright's Vacation Rental Marketplace: Poised for Change, vacation rentals accounted for more than 333 million available unit nights in the U.S. market in 2007 and nearly US$24.3 billion in rental revenue. Approximately 10% of all U.S. adults and nearly 20%1 of all online travelers have booked a vacation rental.
Hundreds of millions of investor dollars have flowed into this space in recent years, whether to rental-by-owner behemoth HomeAway (which just announced a staggering $250 million placement on Tuesday) or B2C and B2B online players such as Escapia, LeisureLink, VacationRoost and Zonder. Vacation rental management companies across the industry have identified online distribution and investment in technology among their top strategic business priorities. Wyndham's concerted push with its Endless Vacation Rentals brand is but one of many.
But there are also hurdles. Legacy practices of the vacation rental industry-seven-night minimum stays, hefty upfront deposits, lack of industry standards for service and property ratings, low incidence of revenue managed pricing-do not merchandise well in a hotel-centric online distribution environment. A two-bedroom condo may be more expensive than a room at a comparable hotel (and thus display lower in search results), but it may offer a better value to a family of four looking to book two rooms. And even the very top-of-the-line vacation rental properties may not qualify as a three-star hotel if they don't offer 24/7 front desk check-in.
Not Your Grandma's Vacation Rental
But such barriers are meant to be broken, and opportunities are there to be realized. So online agencies, take notice! Hotels watch out! And online travelers... get ready for an upgrade! The vacation rental marketplace is gearing up to go after all of you. This very fragmented frontier of online travel could well be tomorrow's growth opportunity. Vacation rentals represent a rich landscape of property management companies and individual homeowners with low online penetration but plenty of ambition. Say goodbye to one-week minimum stays, hefty deposits and BYOB ("bring your own bed sheets"). Today's innovative vacation rental players, no longer content with their $24 billion market, are starting to think, market and distribute like hotels. And several new technologies and online services have emerged to turn that ambition into bona fide business.
In addition to the forthcoming report PhoCusWright's Vacation Rental Marketplace: Poised for Change, PhoCusWright will host a Workshop on the new dynamics of the vacation rental industry at The PhoCusWright Conference on Tuesday, November 18 at the Renaissance Hollywood Hotel. Presented by six leaders in the space (Endless Vacation Rentals, Flipkey, HomeAway, LeisureLink, USDM.net and VacationRoost.com), this Workshop will delve deep into the powerful changes and new opportunities in the long understudied-and underestimated-vacation rental marketplace.
Don't miss this Workshop - find out more online.
1 PhoCusWright's Consumer Travel Trends Survey Tenth Edition
Source & Copyright - PhoCusWright
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