Looking Back and Proceeding Forward

2016 was a momentous year for the vacation rental industry. After acquiring HomeAway in 2015, Expedia saw the exodus of much of the executive team, including co-founder and CEO Brian Sharples, and very clearly pivoted to focus on professionally managed properties at the expense of HomeAway’s old bread and butter: Rent-by-owners (RBOs).

And since the Expedia acquisition fired the starting gun for industry consolidation at the end of 2015, 2016 saw that race heat up even more. On the online travel agency (OTA) side, TripAdvisor acquired one-time HomeAway and Airbnb competitor HouseTrip, while Wimdu and 9flats decided to join forces. On the management side, we saw the first big move by a hotel with AccorHotels’ $169 million acquisition of onefinestay, and then Vacasa, with even more money to spend thanks to its $35 million in new capital, crossed a tally of 30 companies acquired so far, with even more on the way.

But, of course, as there were successes with acquisitions, this year also saw some companies prove to be not so lucky. In the back half of the year, we saw a plethora of companies fall out of the ranks. The most notable, and perhaps surprising, was LeisureLink, who had announced $17 million in new capital earlier this year. Unfortunately, they were not alone as companies like Vacasol and Gloveler also joined the army of fallen vacation rental soldiers.

This year also saw an unending stream of news on the regulatory front. Cities, states and even the federal government have all been making noise as angry NIMBYs (“Not In My Backyard” proponents), hotel unions, and other vested interests and lobbyists have been pushing them to slow the alternative accommodation juggernaut.

On this front, there has been mixed success depending on whose side you are on. Yes, some cities like Anaheim have effectively killed a vibrant local industry, but courts are also beginning to say the laws are overstepping their bounds — and perhaps even violating the U.S. Constitution. Watch this space; it will be a hot one for years to come.

From a manager’s perspective, perhaps the most relevant and exciting trend has been the turning of the tide more broadly from RBO amateurism to an acknowledged preference for professionalism. It has been clear from a guest’s perspective that this preference always existed given the outsized proportion of spend accounted for by the professionally managed side of the industry; however, the shifting priorities of the big players are signaling that they too are now on board.

From former HomeAway CEO Brian Sharples’ statement at this year’s RezFest that the HomeAway algorithm gives a huge advantage to managers over RBOs, to Airbnb’s launching of its “Find A Superhost” page trying to encourage hosts to work with the more professional hosts and managers, we can now all see that though the war for guests’ hearts and minds may not yet be over and the winner is no longer in doubt.

Looking Forward

This brings us to the question of what the future holds, and how bright and rosy that future is for professional managers.

Next year will see this trend toward professionalism accelerate. In the short-term, we will see more and smaller entrants join the space. Investors are pouring money into our industry in hopes of backing the future Hyatt, Hilton, IHG, Accor or Marriott. The Vacasa and onefinestay deals might have been the biggest in 2016, but there were many more this year. Private equity groups and even investment bankers are doing due diligence on managers looking to raise money to fuel acquisitions, I am confident that 2017 will see even more, and larger, deals.

As new companies crop up, the bigger ones get bigger and others fall out, this “creative destruction” will start to take shape, and the industry’s winners will begin to emerge. Truthfully, 2017 will likely be too early to say who the winners will be for sure; that could still take another five years or more, but we will at least begin to get an idea.

One thing is for certain though: We already more than a month into 2017, and we can already tell that the year ahead will be anything but dull for those working in the vacation rental industry. Time to fasten your seatbelt.

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