vacation rental economics
DESCRIPTION
An in depth look at vacation rental economics through the perspective of Porter's Competitive StrategyTRANSCRIPT
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Vacation Rental Economics
How to Benefit From the Changing Trends in the Consumer Vacation Market
November 2009
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Overview*
❖ introduction
❖ industry competitive structure
❖ macro industry analysis
❖ competitive advantage
❖ value chain analysis
*based on the work of Michael Porter, “Competitive Strategy: Techniques for Analyzing Industries and Competitors”
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Introduction
❖ $25+ billion market
❖ 8% of total travel market
❖ increasing demand from market of vacation rental consumers
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Motivation
❖ de-leveraging
❖ the new entrepreneurism
❖ pre-purchase of retirement home
❖ leveraging assets
❖ the power of OPM (other peoples money)
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Competitive Forces
Rivals
New Entrants
Substitutes
Renters Suppliers
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Industry Rivals❖ most vacation rentals operate independent of their
local substitutes or direct competitors
❖ highly fragmented market with no nationally recognized brand
❖ total number of vacation rentals is small compared to substitutes
❖ each vacation rental offers a singularly unique value proposition to a micro market of vacation rental consumers
The Power of Industry Rivals is Low
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Power of Renters
❖ the renter market is highly fragmented with each renter looking for a unique value proposition
❖ demand from vacation rental consumers is increasing rapidly while the growth in the supply of vacation homes remains slow
The Power of Renters is Low
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New Entrants
❖ purchasing a vacation home requires down payment, and additional capital to furnish
❖ adequate supply of vacation homes for purchase
❖ increase in home owner/condominium rules that prohibit renting
The Threat from New Entrants is Mixed
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Industry Suppliers
❖ only commodity products and services required to run a vacation home
❖ many marketing channels available with the Internet the least expensive and the broadest reach
❖ many banks competing to offer financing at competitive rates
The Power of Industry Suppliers is Low
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Other Alternatives
❖ many different lodging options for the vacation traveler
❖ chain and boutique hotels, resort destinations, bed & breakfast
❖ vacation rental homes offer significant value over alternatives
❖ vacation home pricing is usually not effected by local alternatives
The Threat from Alternatives is Low
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Macro Forces
Political
Economic
Social
Technological
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Political
❖ federal and local tax policy
❖ travel industry political lobby
❖ state and local regulations
❖ condo/home owner associations
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Economic
❖ economic growth
❖ consumer de-leveraging
❖ interest rates
❖ inflation
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Social
❖ trend away from mainstream
❖ acceptance of long tail market model
❖ online social networking
❖ reliance on peer review
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Technological
❖ empowerment
❖ management
❖ marketing
❖ brand development
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Competitive Advantage
ResourcesCapabilities
Competencies
Strategic AdvantageCost or
Product Differentiation
Value Creation(Value Chain)
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The Rent by Owner Competitive Strategy
Cost Leadership Differentiation
FocusCost and Differentiation
Low Cost Uniqueness
Broad
Narrow
Strategic AdvantageM
arke
t Sco
pe
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Focus Strategy
❖ concentrate on narrow market segment to achieve product differentiation
❖ tailored customer experience to a market that vacation home owners know very well
❖ achieve high customer loyalty
❖ reduce operating costs when managed by vacation home owner
Vacation Rentals Compete Strongly on Differentiation and cost
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Value Chain
Marketing Sales OperationsCustomer
RelationshipManagement
Maintenance/Improvements
Financial
Legal
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Internet Marketing❖ inbound activities - web presence/destination
❖ website
❖ listing sites
❖ social media; blogs, videos, social networks
❖ outbound activities - reaching out
❖ email marketing
❖ tweets
Getting Quality Referrals
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Sales
❖ converting referrals to customers
❖ developing trust
❖ setting expectations
❖ cross selling/value added selling
Where the Rubber Meets the road
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Operations
❖ collecting payments
❖ scheduling guests
❖ preparing for guest arrival
❖ access management
❖ guest complaint resolution
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Guest Relationship Management
❖ guest feedback/review
❖ email list management
❖ newsletter
❖ special offer solicitation
Repeat Customers/Regulars areKey to Successful Business
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Support Activities
❖ vacation rental upkeep, improvements and maintenance
❖ legal - liability protection
❖ financial management - tax payments and preparations