Consolidation in the VR Industry – Why I Choose Not to Sell

Portland, OR vacation rental giant, Vacasa’s purchase of Wyndham Vacation Rentals for $162 Million finalizes this month (November 2019). The news already caused quite the commotion earlier this summer! For those monitoring Vacation Rental industry chatter, the sale of Wyndham Vacation Rentals North American arm was expected following their recent sale of their European interests. Airbnb was the rumored likely buyer and Vacasa CEO, Eric Breon hinted that Vacasa faced stiff competition in its purchase plans for Wyndham. So it came as no surprise to see the news of the sale. However…

The vacation rental industry is evolving at an incredible pace. Consolidation is a natural expectation of that evolution. Vacasa has long exhibited its growth plan of acquiring other vacation rental businesses to add market share and multi-destination presence. What surprised me here is:

  1. It was Vacasa purchasing Wyndham and not Airbnb. Vacasa didn’t seem to be heading in that direction. Yet.
  2. $162 Million! Wow! That’s a serious bag of cash and a formidable round of funding! How did Vacasa keep that quiet? It now seems likely that Vacasa is positioning for IPO.

So, that being said, what’s my opinion on this?

Good for Vacasa! Good luck to them! I’m happy for the very smart folks at Vacasa. The vacation rental industry is transforming. Fast. There is room for all approaches. There are many flavors of management companies and management approaches. There continues to be a good fit for all. However…

Many view technology as the greatest challenge facing a fast changing industry. I don’t share that viewpoint. I think that keeping a human, personal touch with local, on the ground market specific knowledge is the greatest challenge facing the vacation rental industry as it evolves. Knowledge of real estate market specifics, geography, local attractions, demographics of Guests and where the Guests originate from, the specifics of Guest Services and Property Management Services within the community at the property level, and so on. That is a huge challenge for a multi-destination company based outside of a region its operating in.

Beach house rentals in Rehoboth

Raising such massive investment whether or not a company ends up going public has its own challenges only sharpened by going public. Investors and shareholders want to see a (quick) return on their investment. This places phenomenal pressure on a company to accept outside investment money. What then the goal of the company? Sell and allow investors to cash out, or continue to build the company and pay back investors more slowly with higher risk of the unknown future changes facing the wider industry over time? Typically after going public, investors rush to cash out their investment ASAP. No one wants to be left holding the keys if the whole valuation collapses in the face of a typical street valuation based on actual earnings per share and not a valuation based on how big the company is and how much investment money they’ve managed to raise.

Time will tell of course and if the intention of the Vacasa Owners and Management team is to build and sell the company, well, every business owner does well to consider an exit plan at the outset and build it into their business plan. That doesn’t make them the enemy. The real concern for these large companies that have acquired so much managed property inventory in the rush to go public? Well, if it all goes south post IPO and they crash and burn, what then the effect on our much loved vacation rental industry? Stay the course independents! Keep on doing what you do on the ground. It’s the best chance for surviving the consolidation races.

Rehoboth Beach Rentals

For me and my company, Seachange Vacation Rentals, well, my answer each time Vacasa has called me to ask to purchase my business is, no. At the five-year mark, Seachange Vacation Rentals has experienced, fast, albeit disciplined organic growth and I consider us to be barely getting started in achieving the aim I set at the outset. I started my company for two reasons:

  1. I saw a niche that the other companies were ignoring in their own rush to add any inventory, anywhere, any price, any management fee. That niche? Focus. In a very fragmented DE Beaches Vacation Rental Market, these companies are trying to be all things to all people and in the process overlooking the needs of Guests that are driving the real changes happening in the vacation rental industry. As VR Property Owners, Guests drive our bottom line, not how much of a fee a management company charges. Seachange puts that focus on that bottom line and manages each property as a revenue center for the Property Owner. That’s our value add that the other guys are overlooking: how to maximize the bottom line return on the Property Owner’s investment. We’re so focused on doing that we don’t care about what management fee the competition is charging. We set our management fee fairly based on the value add we bring the Property Owner and Guest.
  2. I sincerely want to be actively involved in raising the professional standards of the muddled vacation rental industry at the Delaware Beaches and in the process bring it out of its entrenched legacy roots. Modernize it for the needs of contemporary Guests and deliver for Property Owners.

You see I chose to create a new vacation rental agency at the already crowded Delaware Beaches vacation rental marketplace because I sincerely saw this specific niche for focus that was not being served, and in a wider sense I wanted to make a difference. There are many VR companies at the Delaware Beaches and a good fit for all. However I perceived that the VR industry in Delaware was languishing in outdated business models and not evolving in line with the needs of the contemporary VR market. Supply of VR property inventory is at an all time high. Contemporary Guest needs have transitioned into demanding high end, hotel amenity experiences in unique private home settings. Only the strongest, most adapted, nicest, well-positioned properties, Property Owners, and ‘Property Managers’ will survive. I put ‘Property Managers’ in air quotes since that is not what I consider us to be. We’re ‘Asset Managers’ – marketing and managing the investment asset of the beach house for our Property Owners, and managing the financial investment and expectation/trust that our Guests place in us to manage their vacation experience.

Of course there’s lots more details of how we do this if you look under the hood of our business, but in a nutshell, that’s what we do differently. At the five year mark I really think we’re having an affect on our DE Beaches VR market. Our competition is starting to use our terminology. That’s as flattering as it’s scary. Measure success not so much by what people say, but does what they do match what they say they do? Seachange is not a good fit for every type of Owner out there. Some Owners do not want to be told what and how to do. Some Owners do not want to incur the start up costs truly associated with operating in the contemporary vacation rental market. Some Owners want to give direction and not accept it. For that kind of Owner I suggest self managing. Some Owners want to co-list with multiple agencies. Let’s all avoid steering that ship show! Lastly, unbelievably (for me), some Property Owners don’t want to make more money – put another way, don’t want to maximize the return on their investment. Again, not a good fit!

You’ll hear much about, “Positioning” from me. No doubt you have already! You see, starting a new business in a marketplace already busy with companies serving the same clients may seem a fool’s errand. Only, however, only if you’re confused about your position in that market. Three Positioning questions for any company:

  1. Who are we? Meaning: what do we do?
  2. What problem do we exist to answer? Meaning: why do we exist? What problem do we solve that is not being solved already by the competition?
  3. Who do we serve? Meaning: who is our target audience, or client? Trying to be all things to all people is a fool’s errand. What segment of the population is our real client? From there, how do we reach them?
Oscar statues on dresser at a Seachange Vacation Rentals property

I’ll come back to positioning in future messages. For the meantime in this article, am I selling to Vacasa or anyone? No! There’s plenty of life and room in the vacation rental industry for independently owned and operated vacation rental ‘Asset Management’ companies!

I read that there’re three stages of a company: startup; stabilization; and exponential growth. Some companies never make it out of the first two stages. Some companies choose not to opt for exponential growth. Seachange is out of our startup stage. We beat the odds for a new business facing stiff competition. We’re stabilizing, using proven systems developed over five years and positioning well for slow, organic, disciplined growth.

Again, Seachange is not a good fit for all. We may, however just be a great fit for you. Our business model delivers. It works. It fills a niche and we’re just getting started! Thank you for your time. Thank you for your business. We’re in a great industry full of life for scrappy independents! Show me the money Jerry!

Own a beach home at the Delaware Beaches that you want to rent out for vacationing Guests? Not currently listed with a Vacation Rental Management Agency? You can reach Seachange Vacation Rentals here…