United States of Distribution: How Vacation Rental Distribution in the US is Evolving

Within the short-term rental world, we hear many different reports of the successes and strengths of our various distribution options. So we thought we would dig a little deeper…

2019 VRMA US vacation rental survey respondents who considered distribution important increased their yearly revenue by 26% on average, while those who answered that they thought distribution unimportant averaged only a 7% increase. Selling inventory to the right person at the right price is a huge part of maximising revenue, and so leveraging the optimal combination of platforms and managing this channel mix is absolutely critical to the success of a short-term rental operation.

Using findings from our survey, we have looked at the reality of US distribution and how property managers’ choices and strategies are evolving, to help give you some strategic insight.

Shows the relative importance rating of distribution amongst PMs in different market types

First we asked American and Canadian property managers (PMs) to rate the importance of distribution to their strategy. A much greater proportion of urban PMs (48%) consider distribution to be important, compared with seaside and rural/mountain (34% and 33% respectively). Interestingly, we saw a proportional pattern in the average revenue increases for these location types, with urban managers seeing 25% growth next to seaside and rural/mountain at 17% and 16% respectively. 

So, how are US PMs choosing to distribute? Let’s take a look at the main channels of distribution, their market share, and how their popularity is evolving.

Not only did direct bookings come in as the most dominant source in the US, but they have also seen the biggest increase in market share. This is interesting next to European results which indicated only 26% direct reservations. Booking.com have seen the greatest absolute growth, while VRBO are the only channel to see their market share reduce.

http://www.vrma.org/page/2019-vacation-rental-industry-survey
Fig.3 This pie chart represents an interesting breakdown of where the ‘other’ bookings originate from. We can see that email is the most dominant source. 

Now we can drill down into how different PMs manage distribution.

In the above graph we can see how the proportions of different booking sources vary across different size operations. Perhaps unsurprisingly due to the presence and resources required, the bigger the PM, the more direct bookings they are able to command. On average, companies have seen their VRBO share drop by 3%, but larger ones only 1%. Airbnb are seeing most success with the smallest and also midsize PMs, while conversely, Booking.com are making gains with more substantial PMs likely due to being the lesser known and utilized quantity in the US.

Here we have a breakdown of the market share of the main distribution options by PM location type. The most significant finding here is that urban outfits are much more dependent on third party platforms – the online travel agents (OTAs). We suggest that this is due to the more established nature of seaside and rural/mountain operations in the US, which have long been a widespread and conventional US holidaying option, than their younger counterparts in urban destinations who lack that client base. Curiously, Urban PMs have seen a marginally increased proportion of VRBO bookings and decrease in Airbnb bookings alongside the upward trend in direct reservations that we would expect. On the other hand, both seaside and rural/mountain locations are drawing more reservations through Airbnb and Booking.com relative to VRBO. Seaside direct sources are stable at 47%, while rural/mountain direct bookings are climbing towards them.

When looking at geography, generally speaking, states with a lower proportion of urban-based or smaller PMs, such as North and South Carolina and Oregon, PMs attracted more direct reservations. Most locations followed the umbrella trends, with direct bookings increasing between 2018 and 2019, VRBO/HomeAway losing ground, Booking.com making slight gains and Airbnb averaging the same. 

However, few locations went against the grain. Colorado and Texas both experienced fewer direct bookings and saw an overall gain in third-party OTA reservations. Hawaii remains a stronghold for VRBO, despite them losing ground, but there is yet to be the major traction for direct bookings that we have come to expect from other largely non-urban markets. And finally, special mention goes to Canada, a massive winner in growth year on year, who enjoyed their direct channel reservations growing by a whopping 10%, with Airbnb and VRBO both losing 4% and Booking.com fairly stable.

Something must also be said for the variance in success for Airbnb and VRBO in different locations. This year Airbnb ranged from 9% market share in North Carolina, to a 33% share in Texas, while VRBO ranged between 9% in Canada and a commanding 41% market share in Hawaii. Again, this roughly correlates with the type and size of operation we’d expect to see in these locations, but the discrepancies are noteworthy.

What this means for American property manager strategy

What this data is really giving us insight into is the potency of each channel in each market, PM size group and location type.

For today’s PMs, having a current understanding of the relative supply and demand across the various distribution options is crucial. This means keeping a finger on the pulse of consumer choice and shopping habits, and data is the key to understanding where each channel is in its element: Which channel is most effective for my mountain market? Which option is best for my urban inventory in Canada? Using a market intelligence platform such as Transparent, pictured below, PMs are even able to look granularly at the relative popularity of different stock types on the different platforms and tailor their distribution strategy across their portfolio – what is the average rate or minimum stay or demand on a certain day for a 2 bed on Airbnb?

Another important question – which platforms are most employed by similar companies? Temper market data with appropriate choices for your internal operation. What are the costs, both in money and time, of utilizing a particular platform, and what is an appropriate investment for direct sources. Having a thorough and relevant understanding of the options available to you allows you to optimize your channel mix and, ultimately, your revenue.

If you want to learn more about our dashboards, you can visit seetransparent.com or schedule a personal demo with us.

For more information on the full Transparent/VRMA 2019 vacation rental survey, contact us at lucy@seetransparent.com or visit http://www.vrma.org/page/2019-vacation-rental-industry-survey