Cheap Tickets To Vegas - Vacation Rentals by Owner Sites: Are they Profitable?

Right, and you can generate an annual income of $100k with almost no running costs, each paying $100 per year, 000 owners to sign up, it may seem like making money from a "vacation rentals by owner" site is easy: all you have to do is get 1, on the face of it? There are literally hundreds of Vacation Rentals by Owner sites and it seems new ones are appearing every week.

Time and effort marketing your "vacation rental by owner" site, which only come as a result of spending money, you will need to generate enquiries and bookings, if you expect to keep them, and secondly, getting vacation rentals owners to pay for a listing on your site is not that easy, for a start. It's not that simple, well.

Compare Owner Holiday Rentals (http://www.compareownerholidayrentals.com) recently decided to take an analytical look at the business of running a "Vacation Rental by Owner" site.

We have used this model to analyse the attractiveness of the business of running a "vacation rentals by owner" site. You can predict how profitable a particular industry is likely to be in the long term, some of you may be familiar with Michael Porter's famous framework for analysing the attractiveness of an industry: based upon Porter's model.

These are: Of an industry, and hence the relative profitability, porter's model says that there are 5 factors which influence the level of competitive rivalry.

The threat of entry by new competitors. 1.

The intensity of rivalry among existing competitors. 2.

Pressure from substitute products. 3.

The bargaining power of buyers. 4.

The bargaining power of suppliers. 5.

Let's take each of these in turn and see how they can be applied to the business of running a "Vacation Rentals by Owner" site. These factors can either have a positive or negative effect on the long term profitability of an industry.

These low "barriers to entry" and the presence of so many new competitors are a negative for the profitability of the industry. With the only cost being their time and some hosting charges, the main reason for this is that the "barriers to entry" are so low: anyone with some IT skills can quickly build and publish a site. There are new competitors entering the "vacation rentals by owner" business on an almost weekly basis, the Threat of Entry by New Competitors: As already indicated. 1.

The level of rivalry is a negative for the industry profitability, again. The indications are that they are finding it hard to hold their market share, although some of the established "vacation rental by owner" sites have tried to hold the line on pricing and special offers. Many of the new "vacation rental by owner" sites offer the first 6 or 12 months free of charge. Reduced prices: all of these are indications of the increasing level of rivalry among the existing sites, free listings, the Intensity of Rivalry among Existing Competitors: Free trials. 2.

The industry is growing and this is a positive for the industry profitability, the pressure from substitutes is relatively low, hence. Using the commercial "Vacation Rentals by Owner" sites is very much more effective than using a personal site, although there are exceptions, also. Even the rental agencies now heavily use "Vacation Rentals by Owner" sites for marketing their properties; all the evidence suggests that more owners are using the internet for advertising their vacations rentals. Particularly with the advent of Google Ads), particularly in Europe) and marketing via the Owner's own website (which seems to be increasing, using rentals agencies (still highly used, this includes newspaper / magazine advertising (a medium in declining usage), hence. We will restrict ourselves to other ways that vacation rentals owners can choose to market their properties, pressure from Substitute Products: By "substitute "products. 3.

The bargaining power of buyers (owners) is a negative for the industry profitability, hence. Many new sites that start off by offering free trials fail to turn these into paying customers because they have not been able to attract renters in sufficient numbers to generate rental bookings. "Vacation rental by Owner" sites that fail to produce results are not able to persuade owners to renew. Bookings) that they have received, based upon the results (enquiries, most owner's review their advertising on an annual basis. The cost of switching to a different "vacation rental by owner" site is relatively low, also. Buyers (owners) have a lot of power when deciding where to list their properties, including free trials and special offers, the Bargaining Power of Buyers: Largely because there are so many options. 4.

The bargaining power of suppliers is increasingly a negative for the industry profitability, although previously neutral, hence. This eats into margins and is affecting the profitability of the business. "Vacation Rentals by Owner" sites are experiencing the need to invest more in targeted marketing and advertising in order to attract renters to their sites, hence. Getting good results on search engines such as Google is getting harder and harder, as more and more "vacation rental by owner" sites come online. Let's focus on marketing/ advertising, since hosting is relatively unimportant. But not that cheap), the main services that site owners buy are "hosting" ( which is cheap and plentiful) and marketing/ advertising ( which is plentiful, the Bargaining Power of Suppliers : In the context of running a "Vacation Rentals by Owner" site. 5.

Does that mean that this industry is so unattractive that it is impossible to make money running a "Vacation Rentals by Owner" site, with 4 out of 5 factors being negative, so?

Stay in the market for a couple of years and then fold, start off by offering extended free trials, although new ones will probably continue to enter the market, smaller "me-too" vacation rentals by owner sites are unlikely to be able to be profitable enough to stay around for the long term, in particular. Although undoubtedly it is getting tougher, not necessarily.

There are probably two ways you can build and maintain a profitable business in this industry, however.

Expect further consolidation to happen in the coming years. Cyberrentals and Holiday-Rentals amongst others) are the two 800 pound gorillas in the industry, greatrentals, (which owns a1vacations, vRBO and the WVR Group, currently. It's likely that some of the better smaller "vacation rental by owner" sites will get absorbed into such larger entities, as evidenced by the recent acquisitions that the WVR Group have made. These sites will have the critical mass of owners and visitors to be economically viable. Some large "vacation rental by owner" sites will achieve sufficient scale (possibly through acquisition) to use their size to generate competitive advantage, firstly.

As an alternative to the model which relies upon the owner to manage everything themselves, from booking through handling changeover, many small regional sites offer full vacation rental management services, indeed. Possibly offering add-on services that differentiate them from the larger "vacation rental by owner" sites, petfriendlytravel focusing on renters with pets). Expect to see an increase in the number of specialist sites ( e.g, hence. These smaller sites will be able to attract vacation rental owners and renters, by focusing marketing efforts on a targeted group. Possibly focusing on a particular geography or demographic to build competitive advantage, it will need to carve out a profitable niche, to do this. It is also possible for a smaller "vacation rental by owner" site to be successful, however.

Conclusions:

That offer some unique differentiating factor to be attractive to a more targeted group of owners and renters, niche sites, and the smaller, it is likely that "vacation rentals by owner" sites will split into two camps: the large sites with the critical mass to cost-effectively market thousands of properties, although the overall market will grow as people continue to move away from traditional package holidays and embrace holidays using vacation rentals. It is inevitable that the business of running a "vacation rental by owner" web site will change in the coming years.