Millennials and the changing face of the vacation rental industry
The vacation rental industry, alongside the travel industry in general, is booming. Travel has become a right rather than a privilege. The amount of money entering the vacation rental industry reflects a healthy interest in what has become the accommodation category of choice for many travellers.
We have always felt a strong need to explore and see the world, but why the interest in vacation rentals in particular?Affordability is certainly part of it, but it goes beyond that.
Millennials – who comprise the largest percentage of travellers today – don’t enjoy feeling like “intruders” when they travel. They want to immerse themselves in other cultures and behave, as much as possible, as locals. This can be hard to do from an isolated hotel room, which can lack the character and warmth of a vacation rental in the heart of the city.
With demand off the charts, you really can’t ignore the amount of revenue generated by vacation rentals over the past few years, but there’s still room to grow. The current state of capital funding in the industry reflects an understanding that Millennial travellers are looking for different experiences – not just for when they arrive at a destination, but throughout the entire booking process.
For example, the vacation rental sector may have come a long way in providing fast and efficient listing and booking systems, but some processes are still done manually and should be automated within the next few years. Look at what the airlines have done. They have pretty much removed the human element altogether, allowing for nearly 100% efficiency.
With the popularity of vacation and short-term property rentals on the rise, as an industry, putting our efforts into streamlining and perfecting our systems is a priority and will without a doubt yield massive rewards.
Distribution methods are also being reassessed by the big players in the industry. Until now, the majority of channels for short-term rentals have catered to specific markets. For example, Airbnb is the choice for Millenials, while Booking.com has a lot of the European market cornered. This segmentation has forced hosts and property management companies to list their rentals on several channels in order to reach the various demographics and fill their inventory.
However, what we are starting to see is that the major players on the OTA scene are attempting to become more global in their appeal and to serve the entire traveling community, rather than just the specific sectors that they have initially been aligned with. For example, Airbnb is working harder to serve families, business travelers, and luxury seekers (with its Airbnb Plus platform).
This shift will result in a narrowing of the number of distribution channels until it encompasses only a handful of major players that have true global appeal, supplemented by a variety of smaller listing channels that survive by maintaining their focus on individual niches.
The booking process is only half the battle. Traditional vacation rental property managers can look to the rise of Airbnb and the success of urban property managers to see the value of placing emphasis on the traveller experience. Short-term property managers have focused a lot of effort into catering to the various kinds of travellers and working extra hard to ensure that every guest that steps through their door has a positive and memorable experience.
They also have to recognize that the Millennial now represents the majority of the traveling community and must adapt their tactics in order to appeal to that demographic. Sure, families and other groups still need places to stay when they vacation, but the percentage of the market that Millennials comprise is only getting bigger and bigger, so it’s important to go where the numbers are.
As the industry continues to expand, there will of course be obstacles down the line and the biggest challenge we’re currently seeing is regulation. This is the reason that 80% of short-term rental bookings in Japan were recently canceled. Because the industry is relatively new, the relevant administrative bodies and authorities are struggling with how to respond on a logistical level to both the supply and demand for rentals . There is also a lot of pressure from lobbying forces because short-term rentals are disrupting the hospitality industry and its age-old institutions.
Regulations are an issue no matter what demographic or generation you host, and it will be interesting to see how things play out for each community as they work through these issues while the shape of the industry continues to shift.
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