How Expedia is thinking about growth in vacation rentals

The vacation rental industry looks set to continue capitalizing on trends established during the pandemic, most importantly perhaps to be part of the consideration from the get-go alongside hotels.

Established players as well as newcomers are refining their platforms to attract new and retain existing accommodation partners, while travelers continue to seek the flexibility that rentals offer and funding continues to flow into the sector.

In recent weeks MadeComfy and Renters are just two startups that attracted investment.

Inventory supply continues to be a challenge for some, with Vacasa, for example, acknowledging its "elevated levels of homeowner churn" during its recent earnings call.

Regulations, especially around popular cities, could also hamper the sector's growth.

During last month's Short Stay Summit, PhocusWire spoke to Tim Rosolio, vice president for vacation rental partner success at Expedia Group - parent company of Vrbo - about inventory pressure, technology gaps and the "next norm."

We're seeing quite a few vacation rental startups and funding going into those startups. How are you continuing to feed the beast when it comes to supply? 

We're seeing the best supply acquisition growth we have ever seen in the history of the company. I think the reason why is we had such a drastic and exciting peak of demand that occurred over the past two years. People wanted space and still wanted to travel, and there were more and more people that understood there was this opportunity to own a second home. Even though we have returned to some more pre-pandemic levels of demand, the narrative surrounding supply is still being fueled.

Would you say your experience is being mirrored across the industry?

I think it's an industry trend. I think we have been particularly good at it, for what we're good at, which is complex family travel. What they're interested in getting is three- to four-bedroom homes largely in leisure destinations. That's where our focus has been and where we're really outpacing the competition.

Would you describe the pressure on vacation rental inventory as a tailwind or a headwind?

I think it depends on destinations. There are only so many properties next to the beach or the ski mountain, and as such what we're trying to do is make sure we're getting as much supply as possible. Then we also expand the offering to other destinations. There are lots of great lakes, lots of great towns throughout Europe, and we're seeing people want to do "haycations," a rural-type stay etc. There are certain markets where we've traditionally been strong, and we're trying to expand that while still really focusing on places that families want to go.

Do you then have to go and market the breadth of your product so that people aren't just looking for beach and ski properties?

I think that's part of it. Over time, especially coming out of the pandemic, we started seeing people try new types of destinations, and through our creative we made sure we included different types of stays.

During the pandemic we could go all in on the idea of long stays, but with people returning to work or school, you're seeing a little bit quick weekend trips rather than that annual beach blowout.

Does the fact a lot of you are chasing the same inventory and there's limited supply put homeowners and property managers in a particularly strong position when they come to negotiate with you?

Probably what's best for partners, what's best for inventory, is to be able to get their properties filled with the highest quality demand possible. What we've generally found in these leisure destinations is that on our channel our value proposition isn't necessarily about negotiating power, it's about us being able to say we have the customers that spend the most, book the earliest and will respect their property. And I think that when they compare that to what they find on other channels, they're going to find we're going to fill that value proposition for them best. It's not a negotiation necessarily about rates or compensation, it's about our ability to provide the travelers they want.

Is it also about what you can furnish them with in terms of technology, and how you're going to show their rates and their content?

There are two things partners want. The first is to get homes filled with the best travelers, and the second is that they want it to be really easy. That's where the technology comes into play. The Boost program is a good example where if they are already on a competing platform and come to us with a good history on those other platforms, we will make sure that, hell or high water, they see demand from our platform as well.

Are there things you plan to do with the data or other fixtures and features you can add to the program?

I think there are two opportunities. The first is that there's only so much room on the shelf of the store, and we can't boost everyone. I'd like to become a lot smarter about identifying what truly is the best inventory that I want to get off to the fastest start. The second one is around merchandising because it's not as simple as boosting them, but how do we provide the right badges, how do we help travelers understand that even though this partner is new to our platform, it is someone they should trust. Additionally, beyond sort, there's opportunity to focus them in marketing campaigns and emails. There are a variety of ways we can do stronger merchandising and strong identification of the best properties. 

What headwinds do you see - regulatory, inventory supply, other?

I would not say regulatory is a full-blown headwind but an opportunity for the industry to appropriately work with regulators to make sure that we have balanced regulation. Full-blown vacation rental bans are not good for our industry, but there are really good examples of places that, whether through zoning or night caps, we've been able to reach a point that we're still providing economic benefit while alleviating concerns from regulators around affordable housing or nuisance.

In your earlier panel session, you talked about previous differentiators becoming the norm. So what is the next norm?

I think one of the really big next norms is going to be the expectation of more flexible cancellation policies. This is an industry that has been from an offline place of totally non-refunding and especially during the pandemic people really appreciated that flexibility, and what we find is that flexibility drives more bookings for the partner and more affinity from travelers, and it's a net good thing for the industry.

How will it look? It could look like a fintech play or just be really simple?

I think the simple way you talk about it is a potential option, but there's probably something in here around rates and partners having the ability to have refundable or non-refundable rates so there is an economic tie to that flexibility. Then, potentially with insurance products, there's probably something we could do there as well.

What technology gaps are there for consumers?

For consumers, a big part of what we would like to do is a shopping experience that is much more flexible. So this would be the ability to really understand what are the various options they have if all they know is that they want to go to the beach. Another trend might be this loyalty play. When I was someone who traveled to hotels all the time, the last thing I wanted to do was burn points on a hotel, and we're going to be the first people to go to market with the ability to burn points on vacation rental. And I think it's going to be totally transformative for the business.

In the panel you talked about it being a revolution not just in loyalty but for the business. Why revolution?

I think it will be revolutionary because by offering a loyalty program, we'll have more customers that become logged-in members with Expedia Group, and by becoming logged-in members we'll have more data and information about them and have the ability to actually target them with experiences they want the most based upon their prior history. You can combine their logged-in experience along with what they do on the app, that enables us to provide things that are incredibly personalized.

What are vacation rental suppliers wanting in terms of technology?

Suppliers want the ability to target the travelers they want with a variety of levers: e.g. refundable or non-refundable cancellation policies or a member-only deal on Expedia Group, which will give them the travelers they know book multiple times a year. It might be something like a package offer, because they might say someone that books an airline flight and attaches that to their vacation experience is probably going to spend more money and is much less likely to cancel. I think there's opportunity to use the tools we are going to come out with to really target the best travelers.

Can you comment on market consolidation?

We're in interesting times for market consolidation. It hit its peak when demand was at its peak, and that drove some really interesting "valucations" that were a great opportunity for a small and local property manager to cash out. I think there still will be some of it because of the nature of really large property managers, who have the ability to operate at a greater degree of scale. They have more technology in place, and as such are going to be on the lookout for good opportunities for more supply.

How important is vetting traveler identification going to be?  

It's something we continue to look at, but I think a lot of things surrounding trust and nuisance issues are less problems for us and our platform largely because we're more family oriented. They're not as much of a burning topic, but it is something we eventually plan on building. The more that we can say these are good travelers, the more it enables partners to make good decisions about who stays in their homes. And if in fact that's the case, hopefully it will decrease bad incidents that sometimes regulators have discussions about.

During the panel Matt Loney of Xplorie talked about fragmentation in the guest journey. Is it improving?

Fragmentation in the journey is getting better as companies develop integrations into their trusted brands. So, for example, an activity provider could sell inventory through a property manager or [online travel agency] with a branded solution rather than something that feels bespoke and ancillary.

You also spoke about delivering a vacation type rather than a destination. What did you mean?

You as a consumer might say, "I know it's beach, and I know it's Spain, but I just want the best piece of inventory I can find across a variety of those micro destinations." Maybe Ibiza is sold out, but Mallorca isn't, so how do we show you that amazing property that's available in Mallorca rather than having you run up against a brick wall of only checking these specific dates for Ibiza and not being impressed with the inventory that you see? 

How does that affect the customer journey on the platform?

There are opportunities to experiment with all of it. The first one we're going to roll out is more dateless search. Probably another thing we're going to look at is somewhere earlier in the consideration set where someone will say "I just know I want beach in July and I live in Europe," and that will provide a variety of options. It's modifying what traditionally was a pretty rigid search and shopping experience.