The Shift to “Key-Level” – A Second Homeowners Guide to Vacation Rentals v 2.0
Any young, fast-growing industry tends to change rapidly, but Summit County’s vacation rentals were especially impacted due to some dynamics specific to our market. It will strike many of you as odd that we call Summit County’s rental market “young”, when it is among the oldest in the country. Vacation rentals (VR) used to be a tiny fraction of the size of the “cruise line” category of lodging, now it’s the reverse several times over! Some even think rentals are a threat to hotels, the lodging pie’s biggest slice. Summit County vacation rentals were always here, but the industry has now concluded its version 1.0 – version 2.0 hit rather hard in Summit County in September 2016.
This is the very reason that smart homeowners need an update on the industry. We have condensed only the most important information to 2.5 pages, and end with a recap of the 6 things we recommend you look for in a PM partner. This is an “agnostic” piece whose recommendations would apply to more rental managers than just the 3 iTrip Vacations franchisees in Summit County.
Understanding this one shift is all you really need to know. The “old” way of thinking is mired in the limitations of marketing hotels – one giant property with 400 homogeneous rooms – not a reality in any resort or major city market; unless you’re marketing a hotel! See the advantages of key-level marketing to your rental guests!
- Guests see only the pictures and copy for the exact unit they are renting.
- Past guest reviews are far easier to trust if they are tied to the exact property and the property manager for that unit. If the PM changes, all the reviews get wiped clean!
- Key-level sites (VRBO, Airbnb, HomeAway, TripAdvisor, Flipkey) don’t focus on marketing by any factor that might suppress bookings – this invites guests to explore options rather than find that place they stayed in 5 years ago. Why market by condo complex if doing so results in lost bookings? Why make the distinction between Breck and Blue River so visible if it results in lost bookings? This recent update to VRBO will result in higher income proformas on “outlying” areas! Airbnb has been doing that all along, but we are not a super-strong Airbnb market. Most AirBnB bookings come closer to check-in than VRBO ones, so the 15-20% of our bookings that come from AirBnB could definitely be considered incremental!
It’s been a long time since VRBO actually was vacation rentals by owner. It has also been a long time since it made great sense for second homeowners to choose their HOA to also be their rental manager. Bear with us through this history – it’s important.
When VRBO started here in Breck in 1995, only 5% of the US population was using the internet. It’s no coincidence VRBO started here: ski markets tend to have relatively high commissions versus other market types, so owners had a bigger incentive to do the work. In 2006, HomeAway bought VRBO.com, and of course kept the VRBO branded website because it was such a juggernaut. Then they did the unthinkable – they let property managers list properties on VRBO. That move effectively made the website name, Vacation Rental by Owner, a misnomer!! VRBO inventory grew from 2007-2016 in Summit County with individual owners, and forward-thinking rental companies. Because VRBO had so many more guests shopping on it than the PM’s using the wholesaler LeisureLink, those “VRBO” property managers were getting superior income results to many of the older firms who used LeisureLink as their source of guest bookings. LeisureLink was a “wholesaler” that provided guest bookings to property managers for 15%-20%. They had property managers on board with them that represented up to 30% of all the properties in Breck. LeisureLink got guests through their own sites (VacationRoost) and hotel sites like Expedia, Booking.com and others, mostly for complex-level marketing.
The hype and awareness of Airbnb did the important work of finishing what VRBO started: they helped most of us understand that vacation rentals are a far superior and less expensive product than hotels for traveling in groups. Nationally, the supply of vacation properties industry-wide has reportedly doubled, yet demand is still pacing ahead of supply! But it didn’t quite work out that way in Summit County since we were already such a large, established rental market. Airbnb’s entrance into our market has had the effect of dividing up an already finite pie. While it is still a great time for you to invest, your property manager now absolutely needs to market your property with Airbnb, and several other sites. If they don’t, we believe the recent market shifts will likely result in lower income than in past years for your Summit County property.
Historically, wholesalers are on shaky ground in any growing industry when more efficient alternatives emerge. LeisureLink (that wholesaler that provided guest bookings for many Breck property managers) had been looking for a buyer in 2016, but ran out of money and had to cease operations September 24, 2016. That massive event impacted a huge chunk of the properties in Breck (maybe more elsewhere in Summit) and caused the number of properties on VRBO in Breckenridge to go from 3,000 to 6,000 properties during fall of 2016. Some of those are duplicate listings for various reasons related to the dysfunction and turmoil in the industry. Some frustrated homeowners list their properties with multiple property managers to get the bookings they need, other wholesalers buy listings geared to the Canadian dollar. But a big chunk of them were from PMs that only 1 year ago got their properties listed on VRBO – by far the best site in this area! (very ironic since VRBO started here!)
While VRBO/HomeAway is this area’s best marketing vehicle, it lost much of its oomph if the property has low guest review counts, a mediocre location, photos or ad copy. If supply goes up on a “channel” as massively important as VRBO in Summit County, then price goes down, unfortunately. This is why properties now need to be listed everywhere, and need more than ever superb pictures, copy, and high guest review counts.
Also, no PM can speak directly with guests anymore before they book. All our booking partners use “redacted” messaging, where we don’t know guests’ emails or phone numbers until they book. We can only use their individual interfaces to answer questions before they book. It has brought about huge incremental workload to the booking process for all of us. Property managers now need to have people on board that are trained on all the different sites to effectively communicate with guests with the new “redacted” messaging. Between needing to be on all the best booking sites now, and the redacted messaging with guest, this business has just gotten a lot harder for PMs. Making sure your PM is up to the task is crucial! See #5 below.
True “VRBO” Owners – Before last September (2016) VRBO owners willing to spend a reasonable amount of time with dependable local relationships could do it on their own as long as the property owner was proactive with maintenance. But now, owners need to be on multiple web sites to make what their property is worth, plus deal with this redacted messaging from our booking sites. Single home owners will make more income with any PM that meets these criteria.
This is the perfect segue into:
Must-Haves for High-Quality Rental Property Management in Summit County, CO
- Guest booking capabilities on all major guest web sites (Airbnb, Vrbo/HomeAway, Booking.com, Expedia at least)
- Excellent guest review results, which influence ad placement (sort order) on guest sites
- Market pricing management tools, full market data & expertise
- Property care is not a disproportionately large profit center