Can Vacation Rental Owners Afford to Ignore Millennials?

Astrid LindstromLeave a Comment

Quinby Interview

Douglas Quinby is the Vice President of Research at Phocuswright, and he authored the first comprehensive report on the vacation rental industry three years ago. We were impressed with his insights then, and even more intrigued when he followed up that report with one of the most thought-provoking talks at the HomeAway Summit in Austin this year.

We asked him to expand on his insights regarding Millennial travelers.

He kicked off his Summit talk with a survey in which he asked owners about their primary motivation for renting their second (or third or fourth) homes. Overwhelmingly, the audience responded that their primary motivation was to make money: either to cover the costs of homeownership or simply to make a profit on their investment.

If your motivation as a homeowner is to make money, Quinby told us, he’d recommend taking a hard look at the people who currently compose nearly half of your potential buyers: Millennials.

Millennials (ages 18-34) are 25% of the population, but over 40% of travelers belong to this generation. Millennials love traveling, and they consider it far more essential to their lifestyle than the generations that came before them. They take longer trips than Boomers or Gen-Xers, and they spend a nearly equivalent amount of money per trip as older travelers: Millennials spend $3,217 per average trip, while older travelers spend an average of $3,381.

Millennials haven’t yet reached their full spending capacity, either. Currently they tend to book travel and lodging that is proportionate to their income, but they take longer trips and are more likely to travel internationally than older travelers. As Millennial incomes increase over the next 5-10 years, they’re likely to keep traveling profusely, but will start to look at more expensively priced accommodations with better amenities.

Owners, then, would do well to be sure that the experience of booking their properties appeals to Millennials. As this generation gets older and starts having families, they’re likely to retain loyalty – as all of us do – to the destination spots and rentals they enjoyed in their early travel days.

So what can owners do to appeal to Millennials? We followed up with Quinby to find out.

Evolve: How can owners appeal to the Millennial traveler? What changes should they be thinking about making to their business models?

Quinby: Younger travelers expect to be able to do everything on their phones. They’re going to want to book online, to be able to tour your property online, to message you and ask questions, and to do all the things that Millennials are already doing with their mobile devices.

Adapting to the digital era has been a real impediment for the traditional vacation rental world. For traditional homeowners, and traditional marketplaces like HomeAway, it’s been an enormous challenge.

Why do you think owners are so resistant to online booking, considering how many travelers expect it?

You as an owner can furrow your brow and cross your arms and stomp your feet and say you’re never going to do online booking, my guests must send me a paper check and a 12-page leasing agreement, but you have to recognize that HomeAway is going to favor those listings that are online bookable, and you’re going to be at a very serious disadvantage.

As long as you’ve got platforms like Airbnb, where you as the owner have no option but to accept a credit card, travelers will have the expectation that you can book online. HomeAway knows this, which is why it’s moving from a subscription model to an online bookable model.

You as an owner can furrow your brow and cross your arms and stomp your feet and say you’re never going to do online booking, my guests must send me a paper check and a 12-page leasing agreement, but you have to recognize that HomeAway is going to favor those listings that are online bookable, and you’re going to be at a very serious disadvantage.

That said, it’s incumbent on platforms like HomeAway to help the owner smooth out some of those rough edges. They need to figure out how to provide some reassurances for owners, like making sure the guest isn’t going to use this property for their spring break frat party. Or if it does happen: what kinds of protections can you create? They might look into insurance policies, or on-the-ground services and support to give that peace of mind to owners.

There’s some room for companies like Evolve to help owners get the peace of mind they need as they adapt to digitization, but the days of the licensing agreement and the paper check are numbered.

Do you think owners realize that online booking is an issue for younger, more tech-savvy travelers?

We’ll find out in our current study how many owners support online bookability, but quite frankly the market will move that number. Owners that don’t make their properties online bookable are going to see their bookings drop off. The market will change their behavior.

Five years ago, there was a big concern about allowing guests to post reviews about owners’ properties on HomeAway. The reason why is pretty obvious. If you’re an owner and you rent your home 16-17 weeks of the year, and 3 guests leave a review, and one of those reviews is negative, that really dings you. When a potential guest sees you have only three stars, that affects your business. So of course there was initial pushback from the owners on travelers leaving reviews.

Whenever you’ve got a marketplace with a conflict between what the demand side wants and what the supply side wants, the demand side always has the trump card. We saw it 5 years ago with reviews, and I think the same thing is already happening in online bookability.

But guess what happened. While a lot of owners didn’t want reviews, guess who loves them? Consumers.

Travelers love reviews, and they look at properties that have reviews. They look especially at properties that have the most reviews. Owners saw that increasingly travelers would make reservation requests for homes with more reviews, so they started to accept reviews and then to push their guests to post reviews. They went from being totally opposed to reviews to actively asking for them.

Whenever you’ve got a marketplace with a conflict between what the demand side wants and what the supply side wants, the demand side always has the trump card. We saw it 5 years ago with reviews, and I think the same thing is already happening in online bookability.

We’ve talked thus far about the differences in the way Millennials prefer to book properties. What’s different about their expectations of the property when they arrive for their stay?

One of the things that really stands out: the attributes that motivate the Millennial decision maker to book a property are a little bit different.

The traditional vacation rental is built around family travel, so typically it’s Mom who is making the decisions. She tends to decide on destination first – “I’m going to the Outer Banks, I’m going to Destin” – and then she looks at functional attributes of the property. “I need to be X number of yards from the beach, I need a washer-dryer.” It’s more of a functional decision after she decides where the family wants to go.

Older travelers are a bit more experienced and more focused on their families. They’re less concerned with cultural aspects or authenticity; they just want a vacation.

For the Millennial traveler – and I’m painting in broad brushstrokes – but there’s an important subset of the Millennial traveler who is a little more affluent, a little more tech savvy, and they really value authenticity of experience. The qualities they seek in a property aren’t feature-driven, they’re much more to do with aspiration. They want to connect with locals, to experience the things that locals do.

There’s an important subset of the Millennial traveler who is a little more affluent, a little more tech savvy, and they really value authenticity of experience. The qualities they seek in a property aren’t feature-driven, they’re much more to do with aspiration. They want to connect with locals, to experience the things that locals do.

I think that’s where vacation rental homeowners can really appeal to younger travelers: they can try to connect with the guest and offer personal recommendations. And I’m not talking about those dreadful laminated binders you see in the living rooms of some property management companies, with all the pictures of all the restaurants who have paid to have their photo in that booklet.

I’m talking about a personal set of recommendations. “Here are the places I like to go. These are the popular places, these are the famous places, but if you want a great Brooklyn-style pizza, we love this little place.” A hand-written note welcoming the guest – I think those are the types of things that can have an impact.

Honestly, all travelers will appreciate that personal approach. But Millennials in particular place a higher value on that authentic experience.

That’s good news for owners, I think. I know some are concerned that with all of the changes in the industry, they’ll be expected to provide a sort of cookie-cutter experience, but it sounds like that’s just the opposite of what Millennial travelers value. It sounds like they want their booking experience to follow standard online travel norms, but prefer the property itself to be personal and unique.

It’s not just they want the property to be unique, they want their travel experience to be unique. There’s an opportunity for both individual homeowners and property managers to try to do things to connect with that Millennial guest. I think a great example is providing personal recommendations of out-of-the-way places, or let’s say off the beaten path places that may be special in a particular destination, whether it’s things to do or restaurants or cafes.

I think also another really big piece to this that’s often overlooked is – and I think this is something that has been a key ingredient to the success of Airbnb in particular – the role of the host in the guest’s experience.

It’s not just they want the property to be unique, they want their travel experience to be unique.

The traditional vacation rental world, even if you are renting from an individual owners, more often than not the owner is nowhere to be found. They’re in their primary home, they’re doing their day job, maybe they’re using a PM or a company like Evolve, but there’s not really a sense of a connection between the homeowner and the guest. On Airbnb the host is the linchpin, and I think Airbnb figured this out very early, that’s there’s a real opportunity for the host to have an enormous impact on the guest experience with simple things like greeting them when the guests arrive, showing them around the home, asking if they need anything else, and allowing them to contact them anytime, whether it’s on the phone or by messaging, and providing those local recommendations.

Obviously there are limitations, because not all owners live near that second home, but owners should consider what they can do to give the guest some kind of personal interaction. It will set you apart from the rest of the market.

Douglas Quinby is the Vice President of Research at Phocuswright and the author of the first definitive report on the vacation rental industry as a whole. He’s working on Phocuswright’s second report on the vacation rental industry right now, and he’ll be at both the Orlando and Seattle HomeAway Summits to discuss his insights on vacation rental owners and travelers.

Want to provide your own personal approach to your vacation rental model while ensuring your property is marketed according to the high standards of today’s traveler? Evolve Vacation Rental Network offers professional marketing and booking services for owners while giving you full flexibility to run your vacation rental just the way you like it. Learn more about our services here.