Worldwide: Rentals United CEO James Burrows reveals the five strategic areas for the short-term rental sector to boost business success in 2021 and allow property managers to strategise for the year ahead.
The sudden halt of the travel industry in early 2020 brought significant challenges to all businesses and individuals around the world. As we weathered through the ups and downs, there were undoubtedly moments of despair peppered with glimpses of positive news and momentum.
As we enter 2021, we can be proud of our resilience and ability to be flexible and adaptive just like the nature of our industry itself. With the surprises of 2020 behind us, we can take what we have learned to look at trends that will better prepare us for a year of not just resilience and maintenance [boring], but of growth and expansion.
As CEO, I see five strategic areas where companies in the short-term rental sector need to focus in order to boost business success this year. The challenges of 2020 have highlighted the importance of a business to be able to harness the ability to diversify, be flexible and be intelligent.
- Diversifying your distribution
2021 is the year of the niche channel as property managers move to expand their visibility and focus on more diverse customer segments. We’ve learned that the property manager of today needs to be more varied and creative when it comes to their distribution needs. They can no longer rely on one or two channels to generate all their bookings and whilst price optimisation to maximise revenue is crucial, this must be matched through length of stay manipulation to maximise opportunities.
Understanding the type of demand that the ‘new’ traveller wants is essential. After strict lockdowns, travellers will seek open spaces and fresh air. Remote destinations are currently preferred, but cities will start to come back at the end of 2021 as vaccine programmes evolve. Until then, houses, cottages and mobile homes will continue to be the preferred options. Outdoor vacations will continue to increase to escape virus hotspots.
If a manager’s 2021 distribution strategy is done right, they can get their properties in front of the eyeballs of potential customers that their competitors haven’t even thought of. This will be especially important this year as domestic travel will still dominate over international travel. The vaccines won’t really impact globally until Q3 this year so preparation for domestic needs should still be high on the agenda.
- Flexibility in your length of stay
For many short-term rental managers this year, it’s time to think more broadly as a letting agent with inventory that crosses all lengths of stay, from short-, mid- and long-term. Their inventory will reflect the need to manage risk and maximise revenue. A percentage of their portfolio will also be allocated to each segment and with this, the need to understand the complexities of different business models.
Confidence in filling the calendars from short-term bookings has eroded but the pandemic has strengthened the mid-market, especially as remote working and flexible schooling has grown in popularity and people seek an alternative way of living.
On the opposite side and to capitalise on empty units, we’re experiencing an increase in demand for the more traditional real estate agent entering the short-term rental market looking to improve ROI for their clients. Empty properties mean new opportunities for these players and they are starting to realise there are new revenue streams outside of their traditional business model.
Both segments will increase supply and drive demand. There’s a concern that the impact on supply could also be negative in the short term as more less experienced suppliers enter the short-term rental market. Quality in both content and the service they provide could be jeopardised compared to the high standards already being set. Tech providers and consultants in the short-term rental market will play a strong role in helping the new players navigate these pitfalls.
All the big OTAs have also quickly increased their max stays to beyond 30 days+ and a number of mid-term booking websites have seen their bookings rocketed. Better control of length of stay pricing and minimum stays will be key for the future of today’s property manager.
- Invest in intelligence and revenue management
Revenue management and data intelligence will be crucial this year as it has been in the past, but with a twist. Covid has thrown a wrench in the legacy way of looking at data as historical demand data is no longer valid due to changes in travel trends.
Managers need to be more reactive than the past, putting more focus and emphasis on their pickups in the future and run more testing with rates. Property management companies need to invest in data warehouses and in tools to visualise their data / pickup better.
In fact, Rentals United is piloting its own Data Studio providing our customers a far deeper insight into market, competitor and content analysis. We recognise the value of our data extends far beyond for our own use, but really helps the industry navigate these dynamic times.
As we will see major lifting of travel restrictions by March 2021, we must factor in the increase of last-minute bookings. However, simultaneously, early bookers will start to increase in 2021 due to the vaccine programmes, free cancellation policies and airlines elimination of change fees. We must consider balancing these factors when revenue planning.
Furthermore, property managers will need to get creative with flexible cancellation policies, booking window discounts, channel promotions and alternative channels in order to define the new revenue management practices for setting rates in the future.
- More innovation
During a crisis, true pioneers stand out and I believe that the hallmark of the pandemic will be no different. Expect to see a new wave of very cool innovative products coming onto the market as companies have more time to spend on innovation and R&D [research and development]. Rentals United will be no exception!
We will see the emergence of truly integrated platforms, where users benefit from the synergy of combined expertise coming from multiple specialised companies within one interface. As a result, your favourite software will gain new functionalities or even product lines overnight.
Large OTAs will significantly increase their investments in the conversion game and with a large portion of their inventory coming from B2B partners like Rentals United, more conversion tools will become available via API.
Unified, easy-to-integrate, regularly updated channel management APIs will become more important for professional companies looking to grow. The importance of keeping up with the latest tools to rank higher will be paramount to their choice of channel manager.
- Expand through acquisition of larger-sized inventory with outdoor activities
The bigger the better. Demand to travel with family in 2021 will be paramount, so providing accommodation with two or more bedrooms will be valuable. Being able to combine this with outdoor activity nearby will create even more value to travellers. They still prioritise the outdoors for its seclusion, affordability and environment friendly angle.
Camping, glamping and caravan parks will also grow as large OTAs will also be seeking this accommodation segment and will diversify their offering into boats, clamping and campsites to broaden their offer and audience.
As vacation rentals will be preferred over hotels for another one to two years, large OTAs will aggressively look for more inventory. Managers with large inventories of rentals will have a good bargaining hand.
The crisis has taught us many things. Above all, to stay ahead, we must run our companies with agility, adaptability, sustainability and confidence. I certainly believe the market and vacation rentals in general will be stronger for it. With Airbnb’s successful IPO, the investment spotlight will be ever more present to identify the future golden nuggets of the industry. Expect to see more announcements of consolidation, roll-ups and funding. I’m positive and excited in how we will emerge and look forward to being a part in helping the industry grow to new levels.