The rise of vacation rental giants such as HomeAway, VRBO, and Airbnb, has taken the industry to new heights, currently reaching an estimated value of $85 billion.
With nearly 60% of Americans planning to book a privately owned home or apartment rather than seek hotel accommodation in 2015, and with 87% more likely to choose a vacation rental due to easy online access to relevant information (source: TripAdvisor Press Center ), the market is experiencing a period of unprecedented massive growth.
The surge in supply and demand is also strengthening the real estate industry as an increasing number of vacation homes are being purchased. In 2014 alone, 1.13 million vacation properties were bought, almost double compared to the year before, and 89% of their owners planned to rent the property within the following 12 months.
These statistics show that people are not only open to alternatives when it comes to travel accommodation but they are also actively reshaping the entire industry by entering the supply chain.
Tourists’ expectations are also rising since the vacation rental choice is more about the travel experience as a whole than it is about the lodging. Travelers are enticed by generous living spaces, affordable rates and superior amenities such as kitchen, private pool, washing machine and Wi-Fi access, while they are also looking for the familiar comfort of an at-home experience.
This is the reason why Airbnb and HomeAway are currently focusing on pairing their booking services with a suite of concierge-like features designed to facilitate transportation, grocery shopping, and leisure activities with the touch of a button.
With the rapid development of the Internet of Things, homes will get smarter and more responsive to their occupants’ needs, further customizing each vacation rental experience and opening the way for a multitude of future opportunities.
As exciting as it’s predicted to get, there are also challenges waiting to be addressed. These are ranging from rental licensing and permits to tax regulations, liability issues, and insurance policies.
The disruptive business models of such listing sites are calling for a close scrutiny of both the vacation rental industry and the present corresponding regulations since the lack of specific peer-to-peer rental policies are putting both the host and the guest in a vulnerable position.
Most insurance companies won’t cover property or common property damage caused by short-term rental guests, especially if the property was let or sublet without notifying the insurers about the changes in living conditions.
To cover this gap, Airbnb has created its own Host Protection Insurance (AirBnB Host Protection ) which offers coverage of up to $1,000,000 per incident for Airbnb hosts and, if applicable, their landlords but this currently addresses the US only, which is a fraction of the site’s 1,000,000+ listings.
There’s also the question of what happens if something breaks or there’s a problem like, for example broken water pipes or appliance malfunctions. The solution, in this case, may not be as convoluted as an insurance claim and can be delivered by a contracting third party that is properly equipped to handle plumbing or appliance emergencies.
Fixed by Assurant, for example, provides a quick and simple fix to any issues related to broken appliances. By purchasing a fixed protection plan that covers the cost of the repair work along with an extended warranty of a 1-year period, the client gains access to a wide network of vetted service providers without a waiting period or additional charges.
Could this serve as an inspirations for future start-ups in the vacation rental industry? Perhaps.
Sooner or later we will find out.