The challenge of scale in the short-term rental industry
How do you scale without becoming homogenised? As we consider the ongoing professionalisation of this industry, this balance between growth and individuality is more important than ever. There's a reason why people want to stay in your unique property, but there's also value in having process standardisation for both economies of scale and maintaining that consistent quality for the guest.
In the time that I have been working on the short-term rental offering at Booking.com, there's generally been a sense of the industry ‘moving out of the garage’. Four years ago, offering short-term rental properties at scale was a 'new' concept, born out of an established offline industry, which moved online to reach a wider audience. Today, there are over 115,000 vacation rental companies operating globally (according to Hostfully’s 2018 Market Study) and Booking.com sees an average of seven guests checking into a home, apartment or other unique place to stay every second.
Why does standardisation matter?
As the short-term rental industry has become increasingly professionalised the challenge of delivering the personal and unique experience offered by vacation rental segment coupled with necessary standardisation has become all the more pertinent. The industry evolved somewhat organically and there is now a large ecosystem of companies that have developed around it. New approaches to property management tools have been created, while technology has helped efficiencies and allowed access to many more distribution channels. But many of these emerged separately and you could argue that there is a growing need to bring these elements together and recognise the next phase of growth.
You could look at other industries to learn why disparate growth does not work. Take the rail industry for example: one of the biggest factors that slowed its initial expansion was the fact that different countries had different rail gauges (the space between the tracks). You’d be travelling through one country then arrive at the border and the train couldn’t continue because the rail size was different. Everyone had their own standard and had to build different options accordingly. Bringing us back closer to home, there is an opportunity for the short-term rental industry to establish its standards - especially when it comes to technology and connectivity between the different systems - and thus enable more efficient growth.
Technical, process and service standardisation
We understand that connecting multiple systems and distribution channels is hugely important in the management and distribution of a growing property portfolio. That is why we have invested in developing products that ensure a consistent experience; it shouldn’t matter if you are using the Extranet or going through a channel manager, property management system or other third party tool - features that will add value for your guests should be available whatever the interface the property manager chooses.
Another critical area we have worked on finessing is the ability to apply changes to your portfolio in bulk. Three years ago this was not possible and even one year ago this was very limited. Today it is much easier to perform such actions with Group Opportunity Centre in our Extranet. We are also now moving forward to see how we could be delivering personal recommendations at scale - so that property managers could, not only perform changes, but also know which ones to apply and why - this is pretty exciting. This frees up a lot of time from purely operational tasks for property managers and allows them to focus on delivering great hospitality experiences to their guests.
Standardisation is equally important when it comes to the guests’ experience. How can they compare the attributes of different properties and make an informed decision, much like they would do when considering a hotel? By introducing a global quality rating, the first of its kind in the industry, we’ve made strides in helping property managers promote their portfolio to the right guests.
Those that focus on quality, standards and effective distribution will be at an advantage
The fragmentation of the industry is likely to continue being a challenge creating a hyper competitive market. Anyone moving into this space now has to make sure that their product is really good, that it responds to the needs of the customer and that it adds value to the space. As with most expanding industries, further consolidation somewhat predictable. Companies that developed independently are realising that if we work more consistently together then we can actually help our guests travel from one place to another more smoothly. When it comes to property management companies in particular, I believe that those that focus on quality, standards and effective distribution will be at an advantage, while automation will help address overheads and solve some of the more labour intensive challenges.
I think in the travel industry at large there is also an opportunity to learn from each other. On the one hand, hotels have been generally pretty successful at making the most of their scale implementing standardised processes and features across a range of units. On the other hand we know that short-term rentals have a key advantage when it comes to delivering bespoke and unique services.Today, the majority of guests are not looking specifically for a hotel versus a vacation rental, they are looking for an experience that suits their needs and that could fall in either sector. Likewise, the same customer could be looking for different accommodation types in different moments. What is important is managing the expectations of a unique experience while being able to deliver in a structured manner.
- As the short-term rental industry has grown, the need for standardisation that can support further professionalisation is more important than ever
- Technical standardisation has been addressed with connectivity solutions created to allow property managers to manage distribution channels in a seamless manner
- Process standardisations support operational efficiencies, allowing property managers to make changes across their portfolios with ease
- Service standardisation, through the introduction of the global quality rating bring consistency to the industry and allow better management of guest expectations