There are numerous booking sites available that helps any property owner to rent their space out to guests in new ways. If you already are a landlord renting out vacation property, the question is, what can these new sites such as Airbnb do for you, if anything? We discuss this question in this introductory article.
Status Quo: The Vacation Landlord
As a vacation property landlord, you are using existing proven channels to market and rent your property. There has been a lot of technological change over the last 30 years, however, one constant is that desirable vacation rental property will always be in demand. The hard part is acquiring the property at a reasonable cost. Once you own the property, the options available to rent your property are numerous and have been increasing over time.
When we started renting real estate, it was common to use real estate rental agencies. If you owned exceptional property or the most desirable real estate, these landlords could rent out their properties on their own if they chose. In the pre-internet world, newspapers and magazines could be used to get your property out there or a sign on the property.
In this prior age, it was common for guests to visit the location in person. To rent a property guests would literally line up out the door of the rental agencies on the weekends to pick and choose what property they wanted. Once a property was chosen, a deposit was placed (typically a check) and the agent would use a typewriter to fill out the contract. Yes, I remember typewriters still being used even though word processors and the internet existed for years. The rental cycle was typically very long and generally remains so today: a rental would be reserved and paid for 6 months or perhaps even as much as a year ahead of time.
This business of renting vacation real estate has been improved with technology over the years like every other business. Realtors now have online presence that takes much of the guest inquiry out of their hands. Realtors are technologically still behind. There are still some key advantages that Realtors have that are likely not to go away anytime soon. The main reason is that Realtors offer landlords an “onsite” manager at a reasonable cost and also don’t need a lot of marketing power to rent property during the in-season. As with any product or service, “content” matters. Those who own or manage the best property will always have a business regardless of technological innovation. This is the reason why good real estate still will rent out many months ahead of time because technology can’t change the favorable supply/demand dynamic of vacation real estate.
Sharing Economy: Enter Airbnb and Others
If you are a vacation landlord, you might want to know, what if anything can Airbnb do for me?
The first question to answer is, what exactly is Airbnb? The site name is an acronym for Air Bed and Breakfast. The site enables any person with a physical space to put that space out for rent. The term “space” is loosely defined and can be virtually anything, from a tent on your property to a full-featured mansion. The concept was fairly simple enough: a household could “host” a guest exactly like a traditional Bed and Breakfast (B&B) does. If you use Airbnb today, many hosts still offer B&B amenities (such as breakfast no less) to their guests.
The basis for the original business model was one that enabled owners to rent space that is located on a property that the owner uses as a residence. From a regulatory point of view, this is little different than letting your cousin stay over at your house for the weekend. Over time, there have been more types of hosts using the site, some of whom are existing landlords that rent entire apartments or duplex homes on a short term basis. It wasn’t long before landlords with vacation real estate started to investigate it and try it out.
How is Airbnb Different?
Airbnb can offer you the opportunity to rent your properties in ways that you might not expect and certainly were not possible before. The way to think of this is not the obvious conclusion: becoming a B&B host to guests in the off season for your vacation property (although you can do that if you like). Airbnb itself has moved away from this limited concept and is expanding its reach. Today, you can rent spaces just like hotels rooms and also find rooms that are suitable for business travelers.
There are numerous sites that offer the ability to duplicate your existing vacation rental listings. This has been around for quite a while and many of these sites offer the same packaging that the local real estate agent offers. Airbnb can also do that to if you like, but as a marketing channel it is much more is more flexible in the kinds of guests that are available. It enables you to rent out your vacation real estate for many other purposes.
First, Airbnb offers you the capability to get more marketing power for your spaces, especially in the off season when demand is naturally lower. During your in-season you don’t need much marketing power because the property sells itself. It is in the off-season where Airbnb can help you. The main way it does this is by matching the supply/demand dynamic between hosts and guests both in cost and length of stay.
The way to look at this new technology is to get to heart of what it provides that is different than existing marketing channels. Ask a different open ended question: what guests would want to rent my property (and why) if there were no barriers to discovery and purchase? This is really what the technology offers; it reduces or eliminates barriers or market friction that previously made rental commerce difficult or sometimes impossible. When the barriers are low, you will find that guests will want to rent your property for non-traditional purposes.
It has always been possible to rent rooms or homes if guests wanted something outside of hotel rooms or vacation rentals, though it has required more effort to find appropriate accommodations and to get the necessary information about them. The traditional channels of hotels and vacation resorts are captive markets, most guests are already comfortable with what they are getting due to standardization. They generally already know the vacation destination or are comfortable with typical hotel accommodations. It’s the transparency plus full featured transaction processing that makes these channels work. A vacation can be disappointing for many reasons, but it is less likely to be caused by a poor choice of hotel room.
Airbnb offers vacation landlords the tools to re-purpose your vacation real estate that puts you on par with the professional companies that run hotels and resorts. The guests you will attract will often be similar to your existing guests but very likely you will attract new business that you may not have known was possible. Every situation is different; you need to have an open mind and experiment to find out who these guests are.
