Truly on Vacation
The evolving world of luxury vacation rentals is changing the way many think of getting away.
By Camilla McLaughlin
What do an approximately $16 million Beverly Hills estate and a two-bedroom condo on Florida’s Emerald Coast have in common? Both are available for rent. Welcome to the world of high-end rentals, where almost any property from a celebrity’s former home to a historic estate can be had for a price.
Mention vacation rentals and most of us envision a cottage at the beach or a house right next to a favorite ski run often found via the friends-of-friends network. “You had to know someone who knew someone who knew a luxury homeowner who wanted to rent their house. Now the notion of renting a private house has become so mainstream that people expect the ability to book online, to see the availability of calendars and in the end not have all this back and forth with travel agents and brokers and middlemen. I think the industry is heading to becoming more in line with hotels,” says Henry Parry-Okeden, co-founder of InvitedHome, one of several new companies focused make the rental experience comparable to a five-star hotel.
Parry-Okeden’s goal is to build a brand in the rental industry that will be synonymous with luxury and service. He likes to point out that assuring a consistent experience so “guests would not have to gamble with their vacations” was Conrad Hilton’s initial objective. Interestingly, among companies such as InvitedHome, renters or tenants are referred to as guests, just one indication of how the industry is moving closer to the mindset of a hotelier.
And for a growing number of consumers, renting a single-family home or an upscale condo rather than a hotel room or suite is becoming a preference. “Technology and mobile has played a big part in providing travelers with a seamless experience, including concierge-type services that rival hotels. But ultimately, it is the whole-home experience that travelers cherish most, receiving twice the space and more privacy for typically half the cost of comparable hotel rooms,” says Jeff Hurst, chief strategy officer for HomeAway, one of several innovative companies that consolidated the vacation rental industry and brought it to an online marketplace.
An added boost is coming from the growing number of younger consumers, particularly in the upscale market. “Millennials are rejecting the cookie-cutter standard experiences of luxury hotels. More are favoring authentic types of experiences, and we see the differentiator being the home as a platform for experience,” shares Brian Corbett, chief experience officer for Inspirato, a membership club that relies on leased homes.
“As it has become easier to manage a vacation property online, we’ve seen more and more luxury homeowners list directly with us. However, using a property manager remains a popular option. Companies such as Luxury Retreats specialize in managing luxury rentals and also list their inventory with HomeAway,” says Hurst. InvitedHome also lists properties on HomeAway, but includes a range of services both on- and off-site.
“Consumers, not just Millennials, but consumers across the board, are sharing just about everything, and vacation rentals are really a component of the sharing economy,” says Corbett. Not only are owners of all age groups happier to share their homes, but consumers in general are also “happy to share other people’s homes and sleep in other people’s beds,” all things that were once considered taboo or at least uncommon, observes Corbett.
Ten years ago, the vacation rental industry was very fragmented, and awareness among consumers was incredibly low. Today, HomeAway offers more than 1 million properties in nearly 200 countries. “There is truly something for everyone at every price point,” says Hurst.
In 2014, one in four travelers rented private accommodations for a leisure trip. The number of U.S. travelers who rented a whole home or apartment more than doubled, growing from 10 percent in 2012 to 22 percent in 2014, with the biggest gains coming from more affluent consumers, according to the travel industry researchers at Phocuswright.
“Going forward from 2014 to 2017, the expected compounded annual growth rate for luxury vacation rentals is almost 9 percent, whereas hotels are forecast to be about 4 percent. It’s a large and growing segment,” says Corbett.
Airbnb and VRBO generate headlines and are credited with familiarizing consumers with the idea of renting online to strangers, but for the upscale market, the real catalyst has been a change in consumer attitudes. Authenticity and being able to participate in the lifestyle of a location is important, as is the opportunity to share time with family and friends.
Today’s affluent traveler wants to collect memories and experiences. “People are just seeking a deeper connection with loved ones and friends. When on vacation they want to be able to reconnect, and having your own private living room and own private pool allows you to connect more deeply,” says Corbett.
Even those who own vacation homes want to be able to travel to many locations and experience various types of properties. “Every vacation is different,” says Corbett. “One week you might want a cozy cottage where you can walk to the beach and the next you might be entertaining clients and want a place that will blow their minds.”
Among all age brackets there is a new element of practicality. Not too long ago, having a vacation home that sat empty 50 weeks a year was considered a status symbol. “It used to be cool, but it’s not cool anymore,” says Corbett.
“I think that consumers have gotten a lot savvier,” says Kevin Morgan, vice president of acquisitions and finance at JMA Ventures, a development firm focusing on real estate and leisure lifestyle assets. “Coming out of the downturn, people were very skittish. Second home ownership was frowned upon. People were kind of gearing down and looking at their own finances. Now, they’re starting to open up.” At the same time, he says, affluent consumers are also asking, “Do I really need to have a home 365 days a year, with constant maintenance, upkeep, et cetera, when I’m only using it 35 nights or 40 nights a year?”
Retooling at the Pronghorn Club, a resort in Bend, Oregon, includes a number of new vacation homes that are proving particularly attractive to younger consumers. “We are seeing younger buyers and they have a bit more concern about the financial future,” says Michael Kosmin, project manager for The Resort Group. New offerings at the Pronghorn Club are a little smaller than in the past. They offer full, rather than fractional, ownership with the option of placing the homes in the resort inventory of weekly and nightly rentals. Being managed by the resort offers owners and renters a huge measure of confidence for both owners and guests.
For luxury, one of the biggest concerns for both owners and guests is not knowing if the property or the guests will actually be as described. Regarding rentals, Parry-Okeden acknowledges there are local companies that do a great job and deliver the same level of service, but he says “it’s just the unknown unless you have dealt with them before.” He says the largest handicap facing the industry is that unknown.
“From a homeowner’s perspective, the biggest concern is not how much money they will make but how well you will look after their house,” Parry-Okeden says. “When you get into higher home values, priorities shift from income potential to care and value presentation. We screen our guests more vigorously than anyone in the industry. We won’t rent to anyone under 30 and we actually turn away a ton of potential guests, which,” he adds, “doesn’t hurt homeowners since his company’s marketing generates so much demand.” Rather than a property manager, InvitedHome sees itself as an asset manager.
“People are comfortable sharing, but they want to know who will be there and that they will take care of the home as well as the owner would,” says Corbett.
Inspirato offers homes that they lease for a multi-year term. Because Inspirato is a club, their homes are only available to members, which in itself is a higher level of scrutiny. The initiation fee for club members begins at $5,000 and there are also annual or monthly fees.
A majority of the owners of club homes are members, and having a home in the club’s portfolio has some hidden benefits. according to Corbett. Having their home maintained by the club’s onsite property managers frees up owners to actually enjoy their vacation. “They still get to use it when they want, but when they show up, instead of spending the first three days getting snow off the roof or chasing mice out of the house, they are on vacation. That peace is mind is such a luxury.”
Standards for homes are quite high depending on the company. “We turn away more homes than come into our program because we want to create a Four Seasons-like brand, says Parry-Okeden.
Kitchens are well equipped and Corbett says the sleep experience is important to Inspirato. We supply our own bed linens and bath linens in each home and make sure the technology is great. We also trick out the kitchen.”
Most of the companies that cater to high-end rentals include a range of services and a concierge, while others like InvitedHome and Inspirato have teams onsite.
Another newcomer, onefinestay, focuses on urban settings. Before a home is accepted into the program, onefinestay does its own inspection to ensure quality. It also photographs everything in the home, which gives owners more security. Before each stay, a team goes in to replace linens and make sure the house is in tiptop shape. After a guest leaves, owners’ linens are returned and the home is inspected. Along with London, where it began, onefinestay has upscale properties in New York, Paris and Los Angeles.
Most of these companies have hundreds of homes in some of the best settings around the globe, but what they really offer is an assurance that goes to the heart of a vacation: when you show up you can begin to have fun right away without worrying about the quality or condition of the linens, or whether you will be able to fix Thanksgiving dinner in the kitchen, or even what happens if the shower stops working. Instead, owner, renter or guest… you are on vacation.