Many homeowners who rent out their properties are unaware of how this concept of ‘home-sharing’ came about, and the impact it has had on the entire tourism and accommodation industry. In the early years, home-sharing did not enjoy a good reputation as it was a very hit-and-miss operation where the properties left a lot to be desired, yet were usually cheap and convenient.
In the mid-2000s, when the first company (HomeAway) went online with its rental business, homeowners could advertise their properties through classified ads. While this was the first ‘marketplace’ for rental properties, it also came with several problems. Guests had to make bookings directly with hosts and when multiple platforms were used, calendars weren’t up-to-date and hosts often didn’t respond to requests.
In 2008, when Booking.com became the first online travel agency to integrate vacation rentals, properties often only contained the bare necessities with no kitchenware or other amenities. Some processes were still manual and a lack of end-to-end automation made the entire process complex and open to all kinds of misrepresentation.
When Airbnb entered the market about 12 years ago they targeted the urban market rather than the vacation rental market, and their growth since then will be recorded in the annals of history. This market represented a different type of customer and grew significantly until the company had a tremendous hold on the vacation rental market.
Airbnb’s impact on the short-term rental industry upset the marketplace entirely, as staying in an Airbnb was cheaper than staying in a hotel and allowed guests a much greater choice of accommodation and an opportunity to experience the local way of living. It offered a more personalised hospitality experience than traditional establishments could provide.
Whilst many alternative platforms exist today, Airbnb still has the largest number of global listings and their charges to hosts remain at the lower end of the market, in the region of 3 – 3.5%. The majority of other players are charging between 15% and 18%. (However, it is fair to say that Airbnb does not necessarily generate regular bookings just because their commission is the lowest.)
As the years have gone by, much higher levels of sophistication have come into play and homeowners and hosts have found numerous entrepreneurial ways in which to attract guests and to give them a memorable ‘come back again’ experience. A fine line is now drawn between a guesthouse and a traditional B&B and an Airbnb, and the subtle differences lie not only in the pricing but in the quality of amenities and personal touches.
Sadly, this has created a myriad of issues between the formalised accommodation sector (i.e. hotels and star-rated establishments) and the holiday rental sector, resulting in a level of competitive unpleasantness that raises the hackles of many in the formal sector.
Looking at the state of the industry today, it’s clear that hosts can generate a decent income provided they up their game. Whilst low-end rates will still attract the younger generation, high-end travellers expect a level of quality similar to that of a hotel.
It is of critical importance for hosts to understand that in season, guests booking for a longer rental period (10 – 20 nights at peak season rates) have a different expectation than out-of-season guests who might stay for 1 – 3 nights.
After conducting wide-ranging international research, a few trends spreading across the short-term rental market are worth noting:
- Airbnb’s are becoming more professionally managed
- Availability and bookability are more relevant than the number of listings on a portal
Many hosts are attracted to the portal that has the highest number of listings. This can be very misleading, as a significant percentage of properties are available only in peak season and not at any other time of the year. With reviews and high ratings being of key importance in search rankings and booking suitability, the more a property can be rented out and the more (good) reviews it receives, the better the chance of more consistent bookings.
- The market continues to focus on ‘local’
Travellers choose Airbnbs to experience a ‘local’ flavour during their stay. The local hosts who understand the market and tourist facilities are able to make guests’ stay that much smoother and more enjoyable. They can create a unique, personal experience that allows guests to embrace the culture of each city or country they visit.
In light of increasing competitiveness and a current oversupply of short-term rentals, owners are moving away from self-managing rentals and appointing professional hosts to manage the entire process for them. Part of the reason is that traditional hotel guests who have higher expectations are staying in top-end Airbnb’s and expecting the same level of professional management.