Vacation Rental Industry is Fragmented and Has Opportunities for Consolidation

Rob Käll is a ‘technopreneur’, who in 2008 founded Bookt, a provider of search engine optimization, as well as marketing and other professional services to the global vacation rental industry. He has over 12 years of experience in developing and implementing real estate and property Web sites. He is knowledgeable about emerging Web technologies, especially as they are applied to the travel industry, as well as behavioral targeting and engagement, deciphering marketing trends into widgets and applications, and online distribution hubs beyond the GDS.Käll talks to MHN Online News Editor Anuradha Kher about trends in the vacation rentals industry, how it’s surviving the recession and the industry’s future.MHN: How is the vacation rental industry surviving the recession? Käll: It is doing reasonably well, especially compared to the rest of the travel and leisure industry. Many managers I speak to are saying that they are doing the same as last year, which is great considering the circumstances. Key vacation rental trends that we’re seeing right now are that booking windows have shortened (people are looking for last-minute deals) and that online bookings (something that was not very common a few years ago for vacation rentals specifically) is much more of a revenue driver. MHN: How can consumers’ vacation homes become a source of income, to help cover mortgage costs and avoid foreclosure?Käll: One way to rent out your property is through online vacation rental sites, such as (Vacation Rentals by Owner). To post individual property listing, these websites range from free to several hundred dollars per year. Some are more sophisticated than others, with more custom features so it is very important for a consumer to find out all the available resources and support provided by each before making a decision. But essentially, these sites will only provide an online display listing and contact form, so the maintenance and transactions in most cases will still be handled directly by the unit owners. Another option is a property management company, who will handle all of the day-to-day issues involved with using your second home as a vacation rental for a small management fee (often charged as a percentage of total rental income). Vacation rental property managers will handle marketing, check-ins, housekeeping and finding renters, showing the apartment, finalizing the lease and collecting payment for your unit. MHN: What are the real estate investment opportunities (both within the U.S. and internationally) in this industry? Käll: The vacation rental industry is already a $24 billion industry in the U.S. alone, and is according to PhoCusWright (a travel industry market research company) poised to grow rapidly in the next couple of years. Even so, only 10 percent of Americans have used a vacation rental. That means that industry has enormous growth potential. Unlike other travel industry segments, the industry is still very fragmented and many opportunities for consolidation and more efficient business models still exist. MHN: How is the downturn likely to impact the growth of this industry? Käll: On the one hand, it obviously has a negative effect because people concerned with discretionary spending are traveling less. On the other hand, when they do travel, they are looking for the best possible deal. Vacation rentals tend to offer value, especially if you travel with a whole family or a small group. Having access to multiple bedrooms in the same unit and being able to control your meal costs (by having an in-unit kitchen) are two of the most attractive aspects of staying in a vacation rental. MHN: What is the state of construction financing in the vacation rental industry? Käll: I am not as deeply tied in to the development community as I am to the VR managers, but obviously obtaining financing is difficult in all areas of real estate development right now. What I do know is that for the last few years, almost all resorts that have been built and received financing has had some kind of “ownership” component. Units are sold to investors who want a condo suite with resort-style amenities. Many of those owners then join the resort’s rental program where their unit essentially becomes a vacation rental. This is especially true right now, when the option of “flipping” the unit is no longer available. MHN: Are new projects coming online in the next few years?  Käll: Two exciting projects local to my hometown of Miami Beach, Fla. is the St. Regis Bal Harbour and Canyon Ranch Miami Beach. Both are luxury properties that mix residential units, resort rentals and world-class amenities. MHN: What are the creative ideas that owners and managers of vacation rental properties are adopting to survive through this down time? Käll: Owners and property managers are embracing the Internet and really utilizing the opportunities that exist online to market and sell their properties. Consumers are looking for travel deals, and to a very large extent they do it online. If your property is posted on a Website that is easy to use and simple to search and book a property on, you will have a much easier time getting it rented.   MHN: How has your business changed since the economic downturn?Käll: As any other business, we feel the effects of the downturn, and some potential customers are reluctant to invest any money right now. But since we’re focused on enhancing our customers’ bottom line and can prove the effectiveness of our systems (e.g. the number of online bookings they received through our booking engine) a lot of times people realize that having an effective online Website and booking engine is no longer optional, it’s required. Therefore, we have been able to grow our business throughout this period. Another positive is that as a rapidly expanding company, the current downturn makes it easier for us to attract and retain great staff for our technology and marketing services.