Everything You Need to Know About the Vacation Rental Industry | Part 2
Part 1 of this article gave an overview of the industry’s development. Such as technologies’ influence on vacation rentals, the use of the telegraph and internet that propelled vacation rentals’ popularity.
In Part 2, we provide the industry’s history through the following categories:
- Channel Launches & Mergers
- Regulatory Milestones
- Gross Booking Milestones
- Mainstream Events
- Community Events
Launches & Mergers
The internet launched online vacation rental channels. In 1995, the first channel launched was Vacation Rentals by Owner (VRBO).
More channels followed after the foundation of this platform. An increase in rental popularity and technological growth also expanded the industry. Here is a breakdown of the channel creation and industry mergers over the years:
- 1995 – VRBO is founded.
- 2005 – Cottage Blogger is founded.
- 2006 — Vacationrentals.com founded.
- June 2006 — HomeAway Launched.
- Nov 2006 — HomeAway buys VRBO.
- May 2007— HomeAway Acquires VacationRentals.com to run as an independent brand.
- Oct. 2007 — HomeAway acquires OwnersDirect.co.uk. Based in the U.K., this “increases HomeAway’s ability to provide property owners and managers access to the largest audience of travelers.”
- August 2008 — TripAdvisor buys a large stake in FlipKey.
- August 2008 — Airbnb founded. Airbnb popularizes the marketplace model of vacation rentals, emphasizing instant booking and online trust.
- June 2010 — TripAdvisor acquires UK-based Holiday Lettings.
- Feb 2011 — 9Flats.com is founded.
- March 2011 — Wimdu is founded.
- May 2011 — HomeAway acquires vacation rental site, Second Porch. Second Porch’s technology “accelerates the integration of social features across HomeAway’s network of sites.”
- 2012 — VRMB is founded.
- Oct. 2012 — Airbnb acquires Fondu app. The goal is to provide printed guides for renters. This will include “tips on what to see when visiting a city, based on what sellers have recommended in the area.”
- May 2013 — TripAdvisor acquires Spain-based Niumba with more than “120,000 properties in Spain and 230,000 overall.”
- May 2014 — TripAdvisor acquires “Massachusetts-based Vacation Home Rentals with another 14,000 properties worldwide.”
- June 2014 — Priceline acquires Buuteeq and Hotel Ninjas at $98 million. This continues their strategy to become a B2B hotel service provider.
- Oct 2014 — Futurestay launches its vacation rental dashboard. The Futurestay dashboard centralizes management, marketing and booking in one place.
- Jan 2015 — Tripping.com adds Migoa, a Spanish vacation rental site of 2,000+ destinations as its 25th partner.
- Sept 2015 — Expedia buys Orbitz Worldwide.
- Nov 2015 — Expedia buys HomeAway. This merger “Displaces Booking.com as the world’s largest lodging seller in terms of numbers of hotels, vacation rentals and apartments, and more. Expedia Inc. offers at least 1.3 million properties.”
- April 2016 — TripAdvisor acquires HouseTrip, a UK-based business with 300,000 properties.
- Sept 2016 — Expedia brings on a new CEO of HomeAway to shift focus to online bookings, instead of subscription fees, competing head-to-head against Airbnb.
- Feb 2017 — Airbnb finalizes its deal to buy social payments startup Tilt. Groups of friends can now split the cost of a rental.
- Feb 2017 — Airbnb purchases Luxury Retreats in its “biggest acquisition yet…as it takes steps toward becoming a full-service global travel company.”
- Feb 2017 — Priceline buys Momondo for $550 Million to expand Kayak’s brand in parts of Europe.
- May 2017 — HomeAway launches $1 million liability insurance
- July 2017 — Roomorama “ceases its operations and is likely to shut down [citing] increasing competition and regulatory headwinds.”
- August 2017 — “Expedia Inc. CEO Dara Khosrowshahi, who had shepherded the company through numerous acquisitions and into market leadership in the United States over a couple of decades, had agreed to become the Uber boss.”
- December 2017 — Futurestay launches Weebly App, plug the Futurestay app into your custom Weebly website.
- Dec 2017 – Futurestay launches Autopilot, the first smart connection to HomeAway & Booking.com.
The vacation rental industry’s evolving regulations is a popular topic. You may remember Airbnb’s restrictions throughout New York and California. From 2010-2011 in NYC, it was illegal to rent many rooms of your property out for less than 30 days, unless it was zoned as a hotel or hostel.
In 2016, NYC decided to pass a law that made it illegal to even list the advertisement of an unregistered host. What is the reasoning behind these regulations? NYC claimed that unregulated short-term rentals “compromise affordable housing efforts.” Financially, these rentals lost communities “uncollected hotel tax revenue.”
A similar short-term rental restriction took place in San Francisco. San Francisco implemented a new $1,000/day fine for unregistered Airbnb hosts. Their goal was to regulate and hold Airbnb accountable for the unregistered hosts and short-term rentals.
Airbnb sued, claiming this policy violates the Communications Decency Act. By December of 2016 Airbnb drops its lawsuit against NYC after agreeing illegal housing fines will apply to hosts and not the company itself. In 2017, Airbnb settles its lawsuit against San Francisco, agreeing to be more transparent with regulatory demands.
Short term rental regulation wasn’t limited to the United States. France and Germany enforced strict rental regulations.
April of 2016, Berlin bans landlords from renting out apartments to short-term visitors. Owners can rent rooms in their homes, as long as these rooms “don’t cover more than 50% of the property’s floor space. Landlords will also be able to apply for official permits. [They can] rent out entire apartments short-term from the local borough, with rent equal to the average sq meter of the local area. $100,000 fines to landlords who break the law.”
An update in September 2017, tells us that an apartment owner from a district in Berlin is given a short-term rental permit for his main dwelling. He is allowed to rent his apartment out for 182 days a year. This approval means a turnaround in the Berlin prohibition of the use of property.
Paris: Authorities literally “raid apartments in popular tourist areas, in an effort to regulate Airbnb hosts that rented their properties for more than 120 days/year.”
In San Francisco this year, rentals listed on Airbnb and VRBO were prohibited in residential or commercial (unless specified in zoning rules). As a result, Airbnb began regulating their hosts. In May 2017, they announced their plans to launch a host registration process. This will make it “easy to register their short-term rental with [San Francisco] and obtain a business license through Airbnb’s platform.” This registration will go into effect next year.
Gross Booking Milestones
As we saw with the number of rental channels and mergers, the vacation rental industry expands rapidly. In 2008, the U.S. vacation rental market reached $24.3 billion. Four years later, global vacation rental transactions totaled $85 billion.
Popular channels like HomeAway.com exceeded annual revenues in 2015 of “$500 million. [Their] total current market valuation is almost $3 billion.” For some channels, like booking.com, 70% of their properties were vacation rentals. Thus proving the popularity and growth of rental properties.
Airbnb, as another popular channel, continues to compete internationally. In 2015, Airbnb’s gross bookings, “could be close to or slightly above accommodation bookings for China’s Ctrip and Japan’s Rakuten. These booking volumes put Airbnb well ahead of all regional online accommodation sellers, including Germany’s HRS, the U.K.’s Travel Republic, and Ireland’s Hostelworld Group, among others.”
In August of 2016, Airbnb’s “private market valuation of $30 billion…made it more valuable than Expedia, TripAdvisor, and Ctrip.” By October 2016, Airbnb was the “third-largest online seller of accommodations worldwide. It is probably the fourth-largest online travel intermediary by gross bookings.”
The vacation rental market grew to $100 billion in 2016. By 2019 the global vacation rental market is projected to reach $169.7 billion.
Controversy in the industry has led to the implementation of vacation rental initiatives and protection. One example is from 2014. Airbnb didn’t cover $10,000 in damage when a woman’s rental floods her neighbor’s property. The backlash from this situation paves the way for Host Protection Insurance. The Host Protection Insurance program “provides primary liability coverage for up to $1,000,000 per occurrence in the event of a third-party claim of bodily injury or property damage related to an Airbnb stay.”
In 2016, Airbnb launches new anti-racism and discrimination policies, “such as voluntary anti-bias training for those who list their homes on the service. Or suspensions for those who violate its code of conduct.”
As we mentioned above, Airbnb has continued to provide for its hosts and renters. In Jan of 2015, Airbnb introduced $1 million host insurance coverage policy. Any rental owner that books with Airbnb receives the host insurance, at no additional cost.
Airbnb’s host insurance was a mainstream industry event. The channels’ participation with providing disaster relief bridged a national mainstream event with the community. In October of 2013, Airbnb’s Disaster Response Program launches. Airbnb provides, “3,000 listings for Hurricane Matthew victims between October 5th and October 12th, throughout Florida, Georgia and South Carolina.”
HomeAway and Airbnb continue to provide hurricane relief effort. With Hurricane Harvey and Irma, both channels encouraged their property owners to offer free accommodations to displaced individuals.
There are a variety of opportunities for vacation rental owners to learn from. Be this websites, materials, or conferences, rental owners can interact and network with other individuals in the industry. Here are the most recent avenues:
- The creation of VRMB Inner Circle in 2015. The Inner Circle provides learning materials, meetups, and a supportive community. They contain 685 members and 22,000+ posts.
- Heather & Mike Bayer of Cottage Blogger launch the Vacation Rental Success Summit in 2016. This summit supports and celebrates the independent vacation rental business.
- 2017 National VRMA Conference, “Provides resources for operations staff, marketing professionals, and vacation rental executives. This conference contains 50+ educational sessions and a Vendor Showcase of 70+ industry-leading vendors. The National Conference dives deeper into the “why” of vacation rental management, providing in-depth insight into business strategy, industry trends, and sales/marketing.”
The Vacation Rental Industry & You
You’ve read about the history of the vacation rental industry. From its growth into a billion dollar marketplace, to its advances in host management. The vacation rental industry has a booming future.
What parts of this timeline does your business experience? What are you most excited for in the industry’s future? Share your thoughts and comments below!
Futurestay pioneered the first operating system designed to empower rentalpreneurs with the connectivity and automation previously out of reach for everyday people running short-term rentals. Building on its promise to help rentalpreneurs succeed at any stage, Futurestay is so much more than a platform, offering anyone with an entrepreneurial spirit and a room to rent the chance to learn, earn and grow at every stage of their rentalpreneur journey.
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