Sustainability and Quality: The New Barriers to Entry in Vacation Rental Management

Sustainability and Quality: The New Barriers to Entry in Vacation Rental Management


The vacation rental (VR) industry is undergoing a renaissance as the COVID-19 pandemic transitions out of its position of global dominance. Our industry has received an enormous amount of press in the past few years—some good and some bad—all of it culminating in increased awareness of what our industry offers. 

The term “renaissance” is used deliberately here. Some refer to our industry as “new” or “young,” but the reality is that this industry has been well-established for decades in resort communities around the world. Perhaps this perspective of our industry results from the new tools and technology available that have breathed new life into VR companies. The studious application of research and technology to our industry has given rise to possibilities that did not seem likely even 10 years ago, creating a situation reminiscent of the scientific and creative awakening that we associate with the Renaissance in Europe roughly 500 years ago. Now, as then, the question is this: how will these advances change the landscape, and how will our companies need to adapt to survive and remain relevant? 

Recall the attention that was brought to the VR industry during the coronavirus pandemic; the new awareness brought new customers who carried their travel dollars with them. As with any boom, it didn’t take long before enterprising individuals showed up to facilitate the spending of those dollars. 

Now, with this influx of traveler dollars into the vacation rental market, new opportunities are popping up. Industry visionaries have been spotting trends in the changing landscape for several years, including the following: 

  1. Technology is enabling smaller companies to perform at higher levels. Subsequently, pressure and competition are increasing in every market—because smaller companies now have the same access to category-defining technology that was previously reserved for the companies with enough funds for enterprise infrastructure. 
  2. A new wave of vacation rental managers is emerging who have only ever known the tech-enabled landscape; they will not be hindered by the “this is how we’ve always done it” mentality. 

With new companies trying to become established–and established companies trying to adapt and stay in the game–there is a common thread that will likely prove to be the distinction between evolving through today’s renaissance and being exterminated by it. 

Perhaps surprisingly, it is not likely to be the adoption of flashy new technology that proves to be the distinguishing factor in who makes it to the next plane of sustainability in the vacation rental industry. No doubt, moving forward without a solid tech stack to support organizational operations will become more and more difficult as demands and expectations from guests and owners increase. Instead, the solid organization and fundamental soundness of the business is even more foundational in determining long-term sustainability. 

Technology can be rapidly developed, deployed, iterated, and then phased out. This swift cycle should make business owners wary rather than confident. It also means that for technology to improve the quality or efficiency of an aspect of a business, it must have a solid foundation upon which to stand. Companies that comprise an amalgamation of different tech tools may grow quickly, but without a solid plan underneath, they will either collapse under their own weight or become grievously wounded by unanticipated changes to one of their tech tools. 

Similarly, a company that has strong tribal knowledge without a solid foundation will always be at risk of experiencing major setbacks if that tribal knowledge (e.g., a key employee) departs from the company for one reason or another. 

The solution to both growing a solid startup and to ensuring a long legacy of an existing company are the same: establish and maintain stable business fundamentals. 


Case in Point: Startup 

Statistics hold that most startups fail within the first several years of operation. There is a lot of risk involved in startups. It is not difficult to imagine the endless obstacles that new companies may face, from insufficient funding to barriers to entry to scaling in a healthy way. 

Knowing that the odds are against a startup reaching the five-year mark, the best way to increase the likelihood of success would be to form a plan focused on creating foundations that will support the business throughout its various stages. At every turn, a business that has already worked through the scenario at hand and has planned for managing similar challenges will have a better chance of overcoming that obstacle. 

Eventually, the practice of scanning the horizon for possible hazards and preparing itself for the unexpected will be baked into the DNA of the new company, allowing it to become more nimble in its ability to combat issues as they arise. 


Case in Point: Established Company

Established companies in the VR industry likely evolved and achieved success prior to the current influx of technology and attention. As a result, they had more solutions to figure out on their own, because best practice guides weren’t always available. Many of these companies developed cultures of continuous improvement and shored up the weak spots in their foundations, always progressing toward the next plane of growth, profitability, and sustainability. Other companies in this cohort were always able to just “work it out” with temporary fixes and were never forced to improve.

The latter type are the companies that are at the greatest risk now. Without shoring up their foundations and business fundamentals, they are critically vulnerable to being taken out by future shifts in the industry. The shift that tips the scales may come in the form of legislation that they can’t pivot to get in compliance with. Perhaps technology will pass them by, and they’ll miss a critical wave in changing guest or homeowner expectations. Or maybe the components of a “we’ve always done it this way” attitude will form a recipe for disaster.

By making a deliberate choice to leverage past successes and areas of excellence, these companies can take advantage of a prime opportunity to become healthier, leaner, and more profitable than ever, likely bringing a higher level of quality to guests, owners, and employees alike.


Anecdote: A Small, Tech-Based Company 

There is a married couple in a mountain state who, in the times before COVID-19, made a great start toward becoming a successful and sustainable company by listing their properties on Airbnb. They were able to grow from individuals with no experience to a power team that managed over 30 curated properties in just a few years. 

Unfortunately, the Airbnb app was so comfortable and easy to use that it lulled them into believing a great falsehood: that the single platform, acting as a payment management system, guest communication portal, and their sole source of lead generation would be all that they would ever need to succeed. After all, they were superhosts, so what could go wrong, right? 

Enter the global COVID-19 pandemic—and Airbnb’s subsequent heavy-handed extenuating circumstances policies. As a VRM Intel Magazine reader, you know the story. Airbnb’s policies voided cancellation policies for millions of properties across the world, including the entire 30+ unit fleet managed by this couple. Almost overnight, their profitable business was transformed into a money-losing venture. 

Worse, because they were locked into management contracts, our couple was chained to their cement blocks as the floodwaters rose. To salvage their livelihood, they approached several players in the VR community and asked for referrals for anyone who might be interested in buying their company—and relieving their suffering. Because the entire business was built on only one OTA platform, they weren’t even able to get a single potential buyer referral because there was essentially no foundation to their company. Sure, the scaffolding was there—it looked from the outside like the business was built to last—but when the winds started blowing, the sheet metal came off, and the lack of foundation was laid bare for all to see. This couple was ultimately left without options or an exit plan. 


Anecdote: An Established Company 

A company grew up on one of the Hawaiian Islands in the mid- 1990s with a strong local presence. Many locals worked for the company, which had been started by a husband-and-wife team as a second career for each. They did things the old-fashioned way: property listings were contained in a three-ring binder, their office space was located in the busy downtown tourist district, and most of their practices and processes were stored in their minds and in the memories of their staff with their repeat guest lists in an address book. Because most of the business was orchestrated and run through the two owners, with only so many hours in a day, the company grew until it hit a point of stagnation when the couple could not manage any additional properties without things spinning out of control. 

Over the following years, they made short-lived efforts to grow, by stretching either their staff or themselves too thin; one way or another, each attempt resulted in the loss of properties until they were back at their sweet spot. Because most day-to-day tasks were performed manually and without solidified processes, the company’s capacity for providing value grew weaker and weaker. Eventually, as the long nights and frequent guest complaints took their toll, the couple started to burn out. 

Determined to develop an exit plan, they engaged in several discussions with other companies about selling their business. A combination of not having enough organization to prove the worth of the company and an unwillingness to cede control resulted in the fizzling of each deal; they decided to hold on to the company. Over time, property owners sold their homes and left the program, and the odd property was moved to a different management company. In the end, this couple only managed a handful of properties, and their exit plan evolved into turning the lights off after the last person walked out of the last building. 

What could have been a profitable venture stagnated and then slowly burned out, like a single candle in a cold and dark night. 

The two stories above tell very different tales—one company burned bright and hot before becoming a supernova, and the other got off to a good start but slowly faded away when it became starved of fuel. 

Neither company ever took the time to develop a plan for starting, building, and sustaining quality. Planning is not flashy; it can be quite boring and is usually unglamorous. However, when the proper plan is forged and executed, sustainability can be built into the DNA of a new company or can reinvigorate a mature company. 


A Road Map to Sustainability 

The basic principles to implement when building a sustainable business foundation are a series of iterative steps rather than stops along a path. Although entire volumes have been written around these processes, to simplify, the formula for success is known as the “Plan-Do-Check-Adjust” (PDCA) process. 

The PDCA model has been well-documented in business circles as a reliable methodology for continuous improvement that can be applied to nearly any characteristic or process that requires improvement. The genius of this routine is that it promotes objective and quantifiable observations, rational planning, and execution, and it then carves out a period of review. Let’s walk through a breakdown of each part of the cycle. 



This phase involves checking for gaps in a company’s current assumptions and business plan that may expose the company to unnecessary risk. After the gaps have been uncovered, a plan is created to address them. 


This step calls for the execution of the plans made in the preceding step. Sometimes these plans are simple and straightforward, but it is not unusual for them to be complex and highly involved. More intricate plans may require the use of advanced management methods to keep initiatives on track. Tools that have been custom-tailored for this purpose are readily available and easy to use. 


Once the plan has been implemented, this step encompasses the collection and evaluation of the results of the company’s efforts. Although there is a small possibility that the plans implemented in the “Do” stage will completely solve the problems at hand, it is much more likely that there will be aspects of the execution that need significant improvement. In fact, every company has areas with room for improvement. 


The last step of the cycle is when the original plan is adjusted using the benefit of hindsight, or insight, gleaned from the attempts made throughout the cycle. With available data and information about what worked and what didn’t, a more advanced plan can be implemented during the next iteration of the cycle—likely yielding more favorable results. 


A Conclusion on Continuous Improvement 

Because the PDCA process is utilized throughout an organization, eventually the boundary of diminishing returns will be reached. A boundary of diminishing returns is the point at which a process has been iterated enough times that all of the easy solutions have been implemented and each successive improvement will cost more than the value it provides. This is the point at which the next iteration or improvement plan will not be worth the time, effort, or money required. This is a time when it makes sense to find another solution, which creates another process. 

Ultimately, time and evolution will likely lead back to the original starting point, which has likely not been reevaluated in quite some time and is again ripe with the need for a fresh approach. And so the cycle goes, on and on. 

To ascend to the next plane of sustainability and profitability in the vacation rental space, all companies—big and established or small and hungry—will need to take action to ensure that their foundations are properly established to achieve their specific goals and capabilities. These foundations require continuous monitoring as competition applies pressure and exposes foundational cracks. The competitive pressure can be leveraged to highlight the need for quality improvements, in which case the company will continue to become stronger and more balanced. 

In contrast, the company can choose to cover the exposed cracks and sweep them under the rug or hide them with glossy paint and ignore them, resulting in a foundation ready to implode at any time, with or without warning. 

When determining whether to shore up your foundations, ask yourself this: do you want your company to be around in five years, or not? 



Leave a Reply

Your email address will not be published.