Conducted in partnership with VMRA, Transparent’s 2019 North American PM Report provides an authoritative picture of the state of the vacation rental market in North America. With participation from over 300 PMs managing nearly 30K listings, the full report sheds light on the structure and growth of the market, and technology and operating practices utilized by different PMs.
Our findings highlighted several themes:
1. Urban and leisure (e.g. Seaside / Rural / Mountain) markets have very different characteristics, and the urban market has driven industry growth over the past decade. The Urban vacation rental market is a much newer proposition than vacation rentals in leisure markets, and in urban markets, PMs have been far more disruptive to incumbent hotels. With lower prices, access to far more neighborhoods, and greater value for money, urban vacation rental inventory has grown very quickly and become an attractive substitute for hotels. The difference between urban and leisure market PMs is illustrated in a number of demographic and operating characteristics. For example, urban PMs are younger (9 years vs. an average of 17 years for seaside and 14 years for rural/mountain), growing their inventory faster (51% vs 18% seaside and 25% rural/mountain), and they rely more heavily on third party channels for their distribution (their Direct Channel represents 21% of bookings vs. 47% for seaside or 39% for rural/mountain).
2. A number of results suggest that the outsized growth of urban PMs is coming to an end, a portentous indicator for the industry as a whole. As mentioned above, urban markets have been the most dynamic part of the industry. PMs in these markets have grown supply much faster than the leisure market peers. Urban markets are also where new PMs have formed. But these trends appear to be shifting. Urban PMs anticipate a dramatic deceleration in supply growth over the next twelve months, slowing from 51% to 27% next year (more aligned with the 22% supply growth of their leisure market counterparts). Likewise, the rate of new PM formation has slowed markedly; as the exhibit on page 20 shows, fewer PMs have been created over the past 5 years than in the period from 2010 – 2014.
3. Consolidation, especially in urban markets, is coming. Large PMs (100+ listings) have greater operational efficiency and more sophisticated operations than their smaller counterparts. Large PMs also have the greatest pricing sophistication, with more daily pricing updates (27% vs. 17% of all other) and data purchasing (82% vs. 63% of all other). They require fewer employees per property than their peers. And they have been more innovative with their commercial model, deploying fixed rent models with greater frequency. While they still comprise a small percentage of the industry, large PMs operate with greater efficiency, are investing in supply growth, and are poised to consolidate supply from less sophisticated PMs.
4. Competition in distribution is heating up and although it is a major source of worry for Property Managers, almost half of them don’t plan to increase their marketing investment. The Direct Channel brings 38% of the bookings in dollars for PMs overall, but only the largest PMs get more than half their revenues from this source. The leading two platforms combined drive almost half of the revenues across PMs and each of them already drive more revenue for small and Urban PMs than the Direct Channel. While PMs state that they plan to increase their Direct Channel share of revenues it will be interesting to see if they will be able to meet their expectations since half of PMs are planning to maintain or reduce their marketing investments in the coming year.
The North American Property Management business shows great opportunities and many challenges. One of the most pressing challenges is how new regulations will impact this business. As the industry matures, some regulation is inevitable. PMs seem to recognize this and most want to be good citizens (84% of them deem adhering to regulations to be important or very important). However, regulations are a major source of uncertainty and concern for property managers (more than 55% of them worry that new regulations will harm their businesses)
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