Retooling for Survival

Scott Leggat, Seaside Realty
George Volsky, Industry Consultant
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Maturing Markets
3rd party distribution
Flood of new expensive technology
Hotel entry into vacation rentals
Investment in Next-Gen Business Models
Limited new construction = stalled growth
 Shrinking inventory
These trends encourage:
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 mergers and acquisitions
 specialization in luxury homes
 investment in Next-Gen business models
▪ growth by breaking through geographical boundaries
▪ Sparsely populated areas
▪ Multi-state territories and new scale economies
Getting between VRMs and their renters
 Diverting more renters every year
 Higher booking costs
 Lower inquiry-to-book ratio
 Few if any offsetting revenue benefits to date
Pressure to spend $ (& recurring annual service fees)
 Web site analytics
 Paid search consultants
 Tools that supplement reservation software
 Housekeeping scheduling
 3rd party reservation services
 Dynamic rate making
The Danger: Diversion from Survival Essentials
 Exaggerated importance to vacation rentals
 Unhelpful return on investment calculations
 Hedging bets in the lodging industry
▪ Vacation rentals stay strong when the economy slows
▪ Investors don’t expect return on investment
 Bringing world-class:
▪ Marketing
▪ Data management
▪ Management systems
•Next-Gen VRM business Models Are Here Now
•They are perfecting innovative processes
•They have mandate to invade mainstream markets
•They have the funding to do this
New Efficiencies / Lower Costs
Eliminating expensive home visits
Eliminating check in offices and
regional service buildings.
 Reducing the cost and stress by
marrying smart home and mobile
technology to coordinate cleaners,
inspectors, dispatch, and check-ins
 Leading edge pricing and marketing
 Unlimited opportunities to grow
inventory by breaking through old
geographic limits of rental programs
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New Economies of Scale / profits
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Eliminating brick and mortar, key
handling and boots on the ground
New economies of scale
Centralizing front- and back-office
Supervising maintenance and
housekeeping over unlimited areas
Reducing homeowner energy costs
(HVAC, pool/hot tub heat)
Eliminating homeowner complaints
about guests to run ac or heat
Potential to Displace Legacy VRMs
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More revenue to homeowners
 Lower commissions
 More bookings
Better value proposition (more
service)
Higher placement on 3rd Party
distribution sites
Unlimited homeowner stays
Sophisticated yield management
Developing More Efficient Technology
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Smart home technology
Mobile technology
Management Systems
Decision support for pricing
Vacation Rental Pros–Extended Boundaries
3 to 800 units in 8 years, raising rents 10% yearly
285 Miles
Venice/Siesta key
No office
45 properties
314Miles
Bonita Beach
No office
12 properties
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Founded in 2009, has grown
16000 percent in three years,
managing 1200 homes in seven
states. Online research suggests it
is well managed and expert in
innovative tech-based services.
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Seeking to expand its excellent hotel
brand into vacation rentals. It brings
state-of-the art data management,
reservation systems and marketing
to VRM acquisitions in key markets.
Operations:
TurnKey is a startup with 400 rental
homes in 9 featured cities and 16
listed markets. It leverages mobile
technology and leading edge
technology to deliver better pricing
and service at lower fees.
 $4.8 million in seed funding
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Lower fees (18% commission)
Focus on
Focus on data to rent more nights
30%-50% more revenue to
homeowners
Unlimited HO and guest usage
Low charge for simple labor ($20)
Marketing optimized for listing sites
good photos, description)
Outsource contract labor for
services-coordinated via mobile
technology
Homeowner pays service people
No set contract term (30 days)
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AirBnB AirBnB allows homeowners in
any city (or anywhere) to rent out a
single room, or to rent their residence
for a week or two. It helps
homeowners apply technology to
improve the experience.
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Analytics that make or break profitability
Ways to keep big enterprise competitors
from pushing you aside
Participation in third party distribution
channels without breaking the bank
Strategic alliances with local partners that
add product value
Staying nimble and providing relevant
content to motivate guests to find you
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It is difficult to manage rates and occupancy in Vacation
rentals because of our industry’s chronically low
occupancy rates (37% per PhoCusWright Survey 2008)
 Key: Year-to-date booking pace
 Analysis of your reservation data
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You can’t price or book well without monitoring your
competitors:
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Base prices
Specials page and promotions
Occupancy
Drill down for
▪ Home types
▪ price categories.
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Focus on the industry’s two key profit drivers:
 Inventory (your most profitable homes)
 Pricing (key to inventory retention and acquisition)
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Determine which services must be prioritized to
homeowners and guests & why (ROI analysis)
“Get Smart to keep pace” (smart home
technology)
Keep guest relationships personal and authentic
“Own the Local”
What’s most
• Understanding the value of a
important: inventory
rental home
or renters?
The value of the rental management company goes up or down by $207,440 on
the very day that such a home comes into the rental program or leaves it
Determining if investing in systems and
technology generates a ROI that filters
down to the bottom-line
Understanding and Applying ROI
Ask: “Does each expenditure generate this much new
booking revenue? Is market share increasing?”
Assume these are your Company numbers:
 Gross Revenue (rents & fees):
$4,166,666
 Company split (commission & fees):
$1,250,000
 Pre-tax profit:
$ 150,000
Calculate your profit as a percent of Gross Revenue? _____%
3.6
Divide $150,000 by $4,166,666:
Rents & Fees:
Co Revenue
Pre-tax profit
Profit as % of Rents & Fees
$
$
$
4,166,666
1,250,000
150,000
3.6%
30%
12%
Call Center Expense:
$
Divided by 3.6% =
$
Your marketing people
want to spend $10,000
on a call center.
10,000
277,778
How many dollars of
NEW bookings must
the call center generate
for you to break even?
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The big guy may have more money to fund:
Technology and marketing and staff
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BUT: Don’t fight on their terms (can’t win)
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Not nimble
Not lean
Not local
Has different priorities
In a mature market, the game is to steal competitors’ best
homes
 Key: more revenue; get more bookings to build inventory
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Categories
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Keyless locks:
 Security (1000’s of people with
key access)
 Vendor management: can track
labor charges (compare to time
in house)
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Enterprise systems designed from the
ground up as a hospitality tech
platform. Dashboards that track and
summarize; flexibility to add new
products; professional quality;
reliability required for Next-Gen
Business model
 House readiness/ inspection
 Integrating with mobile apps
Footrace with Homeowners
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Shut down HVAC and pool heat
Keep pipes from freezing
Low-cost real time security
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DIY systems developed and
promoted by industry giants Google,
Apple, Lowes and Home Depot ($50
billion market by 2020).
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Minimize 3rd party booking fees by proper maintenance of
your web site
 provide relevant content to motivate guests to find you
 Keep guests on you site once they arrive there
Listing Site Referrals Require different processes: adapt
List on free sites wherever possible
Patronize and encourage success fees vs. listing fees
List on many sites: AirBnB.com, Craigslist, TripAdvisor, Flipkey,
Look out for third-party sites who may bring conflicts with:
 Local regulations
 Your own policies
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Emphasize email signup—collect addresses.
Facebook, using Email addresses”
 Focus on collecting renter email addresses
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Get a smart SEO and Web Strategy Firm
(make sure you are their only client in your
market)
Send emails that are optimized for mobile
devices
Instagram
VayK Gear
Grocery Shopping
 Restaurants, attractions, events, golf,
fishing charters, etc.
 Create guest blogging opportunities or
referrals
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Make your website a higher financial priority than paid advertising
 (Typical conversion rates: 3-16%)
 Doubling your conversion rate generates more value than paid
advertising
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Apply the 80-20 rule before spending money on call-to-book
conversion
 Don’t spend to convert traffic you would have converted anyway
▪ 80% revenue between memorial day an labor day (95-100% booked)
Marketing strategies that bring your inventory to the attention of
renters who are being courted by competitors who have more
resources
 Friendly website with directories, blog, local information
 Social media
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 Mobile apps,
 Facebook
 Twitter
Don’t buy more until you use what you have
Take advantage of what the big guys are giving away
for free
 Market locally to retain/attract homeowners
 Market to the other guys’ renters
 Manage Data you already have:
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 Guest database
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Demographics
When they come
Accommodation type
Rent category ($1k, $2k, $k, etc.)
Don’t hang on to expensive legacy marketing
Don’t add vanity marketing
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Road traffic
Chamber, Tourism,
Visitor Bureau
Daily beach reports
Live web cam
What bait to use?
Best tackle shop?
Freshest seafood &
produce
Rainy Day events.
Web
Social Media
Web
Events
Calendars
Live Music
Festivals
Off-radar sites
Instagram
Pinterest
Facebook
Twitter
Blogs
Know what renters do
here
 Phone apps-Glad To Have
You
 Stories to tell
 Anecdotal info
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Partner with locals to
help renters:
 Club Seaside discounts
 Weekly drawings for
activities/events
 Planning services
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Big is not better
Small always has cost
and service advantages
 Focus on inventory &
pricing
 Market smart and “Own
the Local”
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BUT:
 Technology is
generating new VRM
business models
 Adapt and modify your
own business model
 Take pricing up to the
next level (your
competitors will)