It’s a vacation rental inventory gold rush! James Burrows, Rentals United

Spain: Rentals United CEO James Burrows addresses how OTAs are rushing to expand vacation rental inventory to meet increasing demand.

As the world comes to grips with the ‘new normal’, the travel industry has an opportunity to begin its recovery. The vacation rental world especially is having a faster speed of recovery or is even the only sector bouncing back, working off the momentum of the last few years. The ramifications of the Covid-19 pandemic have driven a shift in demand for vacation rentals. This is particularly indicated by the OTAs increased demand for vacation rental inventory of late.

Increase in vacation rental demand

Skift has found that consumer spending on alternative lodging was recovering more quickly than spending in hotels. Travellers are hankering for a holiday after months of lockdown as it appears. According to AirDNA, there was a 207 per cent increase in global bookings between 6 April and 8 June. With mobility being still limited and with remote working the norm now, travellers are opting for longer stays often with their families in more leisure destinations. The increase in demand for vacation rentals is also a health and safety concern. Travellers want to have their own spaces with the ability to distance themselves from other guests better. The common spaces in hotels expose travellers to other guests and limit the ability to socially distance.

Aye Helsig, regional director, Central Europe at Expedia’s German vacation rental brand FeWo-direkt, told DW: “Since vacations in a holiday home are basically comparable to private living and are therefore one of the safest forms of vacation, holiday accommodation is particularly in demand right now.”

Expedia Group’s has recently said that its increasing recovery is mostly attributable to the Vrbo brand, its brand asset that focuses solely on vacation rental inventory. While last year’s addition of 765,000 short-term properties to Expedia combined with a rebrand from HomeAway to Vrbo HomeAway took a toll on its numbers, an update last week from the group saw gross bookings at the group moderate to being down 45 per cent year-over-year in June. That is an improvement from being 85 per cent lower than the year-earlier baseline in April. Vrbo’s portfolio consists of mostly leisure accommodation, which has increasingly higher demand in the times of the pandemic, with travellers seeking out locations that are more rural, away from urban centres.

They also have a strong hold on drive-to destinations, the “go local” trend. There is a sharp uptick in nearby bookings, especially in beach and rural destinations. And furthermore, “beach” and “summer 2020” are the most common words in recent wish lists by Airbnb users. This trend has been highly attractive in the times where lockdowns are loosening and domestic travel is increasing in demand.

OTAs rushing for more vacation rental inventory

In light of the current global travel situation, OTAs are at a rush to increase their short-term rental inventory to meet the new increased demand of travellers. Rentals United, a channel manager that partners with all the big global OTAs, has seen an increased push by the OTAs to expand and combine marketing efforts for their short-term rental portfolio. And seeing lots of opportunities for property managers to market on more sites that were not easily attainable before.

Anette Tolstoff, head of partnerships at Rentals United, said: “We have been approached by both existing and new OTA partners that are seeing an increasing demand for vacation rentals. Partners that have been more hotel-oriented in the past now want to expand their offerings to include short-term rentals and longer stays.

“As guests want more flexibility and safety, partners see that the demand for houses and apartments increases. Partners who already offer vacation rentals and hotels confirm that short-term rentals are picking up very quickly,” she added.

Incorporating vacation rentals in the big OTA portfolio is certainly a bit more complex than hotels with the inclusion of APIs, onboarding and verification processes. But the demand is there and increasing. The organic change in consumer needs, sped up further by the Covid crisis, has shifted the nature of travel.

More inventory available

In parallel to this, more homeowners will want to rent out their second homes after the crisis to make some extra cash. This is a good opportunity for property management companies to add new properties to their offering. We can expect that new properties will be coming on the market this year with homeowners looking to ride the crisis with the lure of short-term rental yield. This is what happened after the 2008 crisis too.

HomeAway’s Adam Annen said: “The fallout from the financial crash of 2008 created a perfect storm for growth in the vacation home market. Many long-time second home owners initially didn’t expect to rent.

“The report found that 49 per cent had no intention to invite anyone aside from friends or family. But after the 2008 crash, those same people often found themselves in a bind, unable to afford the cost of a second home, yet facing a depressed real estate market where selling a vacation property would have meant taking a significant loss,” he added.

OTAs driving ahead

The demand for short-term rentals is not going to subside, so the OTAs are avidly looking for different sources of inventory to add to their offerings.

In one significant way, they are currently looking to channel managers like Rentals United for new sources of short-term rentals. Looking beyond Europe and North America, China’s Ctrip and Turkey’s Otelz have also been moving quickly into the short-term rental space. Ctrip is riding on the trend of Chinese travellers becoming more open-minded in what they are looking for. Traditionally, they preferred to stay in hotels, but as the traveller persona has evolved, short-term rental accommodation has come to play a more central role in their travel decisions.

Turkey is also rising to this opportunity, with Otelz’s CEO Bertan Aner saying: “In Otelz.com, we always aim to satisfy all needs of Gen Z, therefore we couldn’t remain indifferent about the increasing demand in privacy, more freedom, more space and desire to spend less.”

Conclusion

As the big OTAs shift their focus to vacation rentals particularly recently, it represents a significant shift in mindset from the traditional hotel-heavy market. Driven also by the effects of the pandemic, consumer behaviour towards travel has changed. This renewed focus from the OTAs to build up their portfolio of short-term rentals will help drive the short-term rental industry to faster recovery than other areas in travel, and perhaps even to meet their current earnings projections.

An entrepreneur with over 15 years’ experience within the travel industry, Burrows started off in the vacation rental industry with a global listing website which at one point was distributing over 10,000 properties. This led to the travel tech industry where he co-founded Rentals United, a leading channel manager for the vacation rental sector. He is a big advocate of using technology to make the complex more simple. Now residing in Barcelona, a European hub for many leading tech and vacation rental companies.