Simon is a true thought leader of the short-term rental industry. Prior to setting up his boutique consulting firm AJL Consulting, he held several key positions in the hospitality and short-term rental industry, including CEO of Interhome from 2005 until 2014 and president of Phocuswright until late 2017. Additionally, Lehmann has been involved in strategic planning with many of the leading and up-and-coming players in the vacation rental sector.
He is passionate about identifying new talent and mentoring founders of industry startups and has invested in many of them, as a Board Member of BookingPal, advisor to Rented.com, Transparent, Properly, HelloHere and Travelnews.ch. He is also a former board member of Vacasa and HomeAway.
Here’s Simon’s take on the key industry trends we should be looking out for in 2020.
The drive towards standardisation
As the short-term rental industry continues to mature and hospitality models converge, raising standards becomes even more essential on both the supply side and in terms of property management. We’ve all known for a long time that collectively we need to ‘up our game’ to align with changing guest expectations.
Now we see that the distribution side of the industry is leading the way in standardisation, notably Marriott with its Homes & Villas brand, and also Booking.com with introducing star ratings amongst other features. The first challenge, of course, lies in our strength of being an individualised (ie not commoditised) product. Our second challenge is convincing owners that they need to continually invest in their assets.
For that reason, we see also masterlease products and fixed rent models evolving fast, so control over the product can be taken over in its entirety.
Mergers & Acquisitions – a changing business
The challenge for enterprise property managers looking to scale up has always been working out how to grow in an industry that is essentially hyper localised. We’ve yet to see real success in this area, with the 20 biggest property managers globally managing less than 1.3% of the supply.
2020 will see further inorganic growth by the ‘heavyweights’ with buy-outs, mergers and further investment but also with the development of new business models and changes in the service offerings from managers which make better operational sense. For a property manager looking for an exit, now is a good time to consider it…
On the tech side, which is growing faster than the manager side, we will see further consolidation with vertical integration as the main driver so that the strongest parties can leverage their customer bases and maximise revenue streams.
The adoption of operational tech
A big driver for the short-term rental industry in 2020 will be the increased adoption of technology by professional property managers to automate operations.
Many managers now use software to drive distribution and management, however far, far fewer managers currently use tech solutions for the operational elements of their business. Building synergies around yield/revenue management, property automation, keyless entry, workstreams, and safety and security; to create increased efficiency through operations, will be front and centre in the minds of professional managers this coming year.
A focus on profitability, not potential
The WeWork effect is contaminating the short-term rental industry, despite the fact that the contexts are different. However, the fallout is that investors (and those with a vested interest) will place far more focus on profitability and sustainable unit economics rather than on how much this or that a company can raise.
The days of raising on ‘potential’ are over. The hard truth is that having sheer scale is no guarantee that a business is, or ever will be, in profit. We will see less aggressive funding rounds, more consolidation of VC backed startups especially in the urban markets and we will see a number of operators and tech companies disappear entirely.
From manager to tech provider – merging sectors
Over the last few years, promising property managers with large-scale ambitions have built their own tech stacks. We are now seeing many of these operators facing the real challenge of scaling due to the issues of hyper localisation and maintaining standards.
These property managers are now pivoting by becoming more like tech providers which will lead to the rise of a new model: where owners (small-scale hosts) are the ‘boots on the ground’ with larger property managers handling marketing and distribution for them.
At the same time, we will see more and more struggling channel managers going into rent-by-owner acquisition. The same thing is also happening in the master lease model of business, with property managers realising that the more profitable business, for them, is in providing the specialist channels and tech leaving the actual building owners to manage their assets.