Further consolidation likely in the Vacation Rentals industry

In recent times there has been an explosion in the number of sites advertising vacation rentals, with new sites opening up almost on a weekly basis. These sites hope to be able to capitalize on the growth in the number of people seeking to rent their vacation property “by owner” on the internet. They charge a modest annual fee to the owner (usually about $100), with a view to signing up thousands of owners to create an apparently lucrative stream of income.

But can the market support this explosion in the number of vacation rentals sites?

Leading vacation rentals industry analysts, Compare Owner Holiday Rentals, (http://www.compareownerholidayrentals.com ) recently completed an analysis of the Vacation Rentals industry, to determine how the industry is likely to develop. Among the conclusions they reached is that the vacation rentals industry is heading for a period of consolidation.

“Although is it very easy to set up a vacation rentals site”, said Kevin Graham, Managing Director of Compare Owner Holiday Rentals (COHR), “Turning it in a profitable business is much harder than most people think”.

Most new vacation rentals sites start off by offering free trials to owners, varying from 6 months up to 3 years, in order to build up the number of listings on their vacation rentals site. The hope is that, once established, the vacation rental site will generate enough bookings from renters to persuade the owners to eventually turn these free trials into paid subscriptions.

“However, attracting renters to visit your site is getting increasingly harder”, says Graham “And marketing costs can be much higher than anticipated.”

Using the classic model developed by Michael Porter, COHR looked at the fundamentals of the vacation rentals industry to evaluate the inherent attractiveness of running a vacation rentals site. Four out of the five factors evaluated (including the low barriers to entry) indicate that profitability is likely to be low, with the only mitigating factor being that the overall market for vacation rentals is growing.

In such an environment, it is likely that over time, the vacation rentals industry will consolidate. Indeed recently, there has already been some consolidation among the established sites. Last year, the WVR Group purchased several of the larger vacation rentals sites, including Cyberrentals, A1vacations, Greatrentals and Holiday-Rentals.com, positioning itself for an industry leadership battle with VRBO, the original and largest vacation rentals site.

Large vacation rental sites can use their critical mass and economies of scale to generate a competitive advantage over the smaller sites. They have the resources to invest in marketing and technology to attract both owners and renters.

Hence, to be successful, smaller and newer vacation rentals sites will need to differentiate themselves from the larger vacation rentals sites.

“Smaller vacation rentals sites will need to find their own niche, possibly based on geography or demographics, in order to be profitable”, concludes Graham.

Compare Owner Holiday Rentals ( http://www.compareownerholidayrentals.com ) provides a guide to choosing the best vacation rentals and holiday rentals websites.