US $750.00

Vacation Rental Marketplace: Poised for Change

January 2009
US $750 CA $757 £495 €554

Large, complex, fragmented, long understudied and definitely underestimated, the U.S. vacation rental market is poised for change.

Vacation rentals represent a more than $24 billion opportunity in the U.S. – that’s more than one fifth of all hotel room revenue and 8% of the total U.S. travel market. And vacation rental consumers are a market to covet. They’re well-off, well-educated, and they travel – a lot. Nine in 10 take at least four leisure trips a year.

The online segment is growing in both transactions and advertising, as some players large and small move quickly to tap this fast-growing opportunity. But not everyone is moving so fast. The majority of bookings are done the old-fashioned way, at a time when nearly $100 billion in leisure travel will be booked online in 2008. Many property managers and vacation homeowners have yet to leverage the emerging business models, technologies and services that are spurring change.

PhoCusWright’s Vacation Rental Marketplace: Poised for Change presents landmark research and analysis on this dynamic industry, including total and online market size and forecasts, and key trend and opportunity analysis for vacation rental managers, homeowners and distributors.

PhoCusWright’s Vacation Rental Marketplace: Poised for Change delivers important information to understand the “vacation rental guest” (who are they, what they want, how they behave and why), vacation homeowners, and property management companies. Leverage this critical information to adjust – or drive – your strategy to harness this growing opportunity. The report contains:

Market Size

Total Vacation Rental Market

Supply: vacation rental units and available unit nights located in the U.S.
Demand: nights occupied of those units
Value: rental revenue generated from those units

Size by region and vacation style (beach and ocean vs. mountain, ski, etc.)
Online market size
Forecasts through 2010

The size and dynamics of rental-by-owner and professionally managed vacation rentals

Size and characteristics of each segment, including key challenges and opportunities facing both

Consumer Trends

Demographics and travel profile of U.S. travelers (vacation rental guests)
How many are there? How do they view vacation rentals?
Key consumer drivers and barriers to consumer adoption
How do they shop and book vacation rentals?

Technology Trends

Key technology barriers and opportunities

Online market analysis, featuring Web analytics from Compete Inc.

Unique visitor traffic
Shopping, conversion and referral dynamics

Summation and Recommendations

The key factors driving and inhibiting opportunity in the vacation rental market
Key recommendations for companies competing in the space

Purchase PhoCusWright’s Vacation Rental Marketplace: Poised for Change today to help your company move forward in this growing (and largely untapped) market.

Table of Contents Methodology

TABLE OF CONTENTS ^top

1. Introduction & Overview
What is a Vacation Rental?
About This Study
Methodology
Key Findings
Key Terms & Definitions
2. Vacation Rentals: An Industry Background
Leisure Hotel Market in the Crosshairs
3. Size of the Market
Supply, Demand & Value
Management Method, Region & Vacation Style
Online Market & Forecasts
4. The Players: Renters, Owners, & Managers
The Vacation Rental Guest
The Non-Vacation Rental Guest
The Vacation Homeowner
Vacation Rental Management Companies
VRMCs & the Rise of RBO
5. Distribution & the Online Vacation Rental Market
Sizing: Traffic & Transactions
Supplier Web Sites vs. Intermediaries
Traditional Travel Agencies & Tour Operators
Distribution Outlook: VRMCs
Distribution Outlook: RBO
6. Opportunities & Recommendations
Operational Flexibility to Compete in an Online (and Hotel-Centric) World
Technology: Barriers to Distribution and Online Penetration
7. Sponsor Company Information

LIST OF TABLES
Figure 1 Research Overview and 360-Degree View of the U.S. Vacation Rental Market Space
Figure 2 Market Sizing Methods
Figure 3 Characteristics of the Vacation Rental Sector
Figure 4 Vacation Rental Reaches a Major Tipping Point
Figure 5 Comparing Hotels to Vacation Rentals
Figure 6 Size of Vacation Rental Supply and Demand, 2007
Figure 7 Vacation Rentals and the Total U.S. Travel Market, 2007
Figure 8 Vacation Rental Market Size by Management Method, 2007
Figure 9 Top State Markets by Percent of Consumer Trips, 2007
Figure 10 Market Size by Vacation Style, 2007
Figure 11 Total Vacation Rental Market and Online Share, 2007-2010 (US$M and Percent Change)
Figure 12 Guest Satisfaction and Intention to Rent Again and Recommend
Figure 13 Common Reasons Why Consumers Don’t Consider Vacation Rentals
Figure 14 Why Vacation Rental Guests Did Not Consider a Vacation Rental for Their Last Leisure Stay in a Hotel
Figure 15 VRMC Use of Key Lodging Technologies
Figure 16 A Sampling of Internet Sites Serving the Vacation Rental Sector
Figure 17 Online Penetration of Vacation Rental, Leisure Hotel Sales and Total Travel Market, 2007
Figure 18 Types of Web Sites Used by Vacation Rental Guests Who Research Online
Figure 19 Online Vacation Rental Booking Transactions: VRMCs and Intermediaries
Figure 20 Sources of Leads for RBO Homeowners

METHODOLOGY ^top

To ensure the study captured all stakeholder perspectives, PhoCusWright employed a 360-degree approach (see Figure 1), conducting a mix of surveys and in-depth interviews with consumers, vacation rental management companies (VRMCs), homeowners, technology providers, and travel intermediaries (vacation rental Web sites, online travel agencies, traditional travel agencies and wholesalers). PhoCusWright also partnered with leading Web analytics firm Compete Inc. to conduct Web site traffic and pattern analysis.

Surveys
PhoCusWright conducted four extensive surveys, including two consumer surveys and one survey each of vacation homeowners and VRMCs. The online survey tool used for all surveys was zTelligence from MarketTools. Details on each survey are presented below.

Consumer Survey 1

Population: consumers who used vacation rental properties as a renter within the past two years (defined as “Vacation Rental Guests,” or VRGs)
Rental properties include homes, condos, villas, cottages, timeshares (as used by renter, not owner)
Source: GMI (Global Market Insite Inc.), a leading online panel company, used to target 1,000 survey respondents; GMI provided 1,060 qualified responses between June 24-July 5, 2008
The collected sample reflects the general U.S. adult Internet-using population who stayed in a vacation rental over the past two years

Consumer Survey 2

Population: consumers who used the Internet to search for at least one leisure trip in the past 12 months (conducted in conjunction with The PhoCusWright Consumer Technology Survey Second Edition)
Purpose was to identify incidence of vacation rental consideration and booking among the general online travel population and identify barriers to consideration and booking among “non-vacation-rental guests”
Source: GMI (Global Market Insite Inc.), a leading online panel company, targeted 800 survey respondents VRMCs
Population: vacation rental management companies
Surveys were distributed by Vacation Rental Managers Association (VRMA), LeisureLink and Zonder during the period of June 18-Aug. 5, 2008
PhoCusWright collected 113 qualified VRMC responses Homeowners
Population: owners of at least one vacation rental unit (where the unit is not a primary residence and is rented out to paying guests); timeshares and/or fractional ownerships were excluded
Surveys were fielded with three vacation rental homeowner populations:

GMI provided 308 qualified homeowners from a national, unbiased sample during June 24-June 30, 2008
VRMA members who took a complementary property manager survey were encouraged to invite client homeowners, of whom 66 responded during the period of June 17-July 21, 2008
351 qualified homeowner members of HomeAway, a leading network of vacation rental Web sites, took the survey July 26-Aug. 4, 2008

Market Sizing
PhoCusWright designed a multifaceted approach to market sizing by supply, occupancy and revenue. All sizing data were derived from at least two distinct sources and methods (see Figure 2).

There are three components to vacation rental sizing:

Supply: vacation rental units and available unit nights located in the U.S.
Demand: nights occupied of those units
Value: rental revenue generated from those units

PhoCusWright generated sizing estimates from surveys, company interviews and a comprehensive review of company reports and available third-party data sources, including the U.S. Census, the National Association of Realtors, Ernst & Young and others.

Where possible, this report presents segmentation of the market by several key areas:

Unit type (home versus condo)
Vacation style (beach/ocean, mountain, golf, ski, etc.)
Management method (VRMC versus RBO)
Booking method (online/offline)

Compete Inc. Web Analytics

PhoCusWright and Compete jointly evaluated more than 140 Web sites in the vacation rental marketplace and identified the largest 25 sites to create an online vacation rental category. The 25 sites were selected based upon:

Suitability within PhoCusWright’s definition of vacation rental (e.g., sites and site traffic pertaining to timeshares, vacation ownership, etc. were excluded)
Unique visitor traffic (as identified through Compete’s analytics)
Inclusion of online travel agencies only where they had a discernible vacation rental search and booking pathway

Compete conducted analysis of this segment through its proprietary data methodology:

Two million active panelists aggregated from 10+ unique data sources (proprietary panels, plus ISP and ASP partnerships)
Usage, demographic and geographic weighting to match RDD (random direct dial) survey
Extrapolation, to be representative of U.S. Internet population
Triangulation across sources to identify and rebalance for bias