Organic farmers in rural Guatemala have been on a roller coaster ride for the last 15 years.
They started off below poverty levels.
But when the organic food craze began to take hold, the farmers began successfully selling their organic produce to supermarket chains around the world.
Pretty much every farmer that cultivated organic fruits and vegetables (especially cacao and coffee) could sell it at a premium to these supermarkets and as a result, they all did very well for themselves.
It was good to be a small farmer in Guatemala during this period.
But amidst this boom, the megastore chains – popular with consumers for low prices, variety, convenience – started demanding a more consistent supply without any ups and downs…
And that’s what the mom and pop farmers lacked.
They lacked the expertise (and money) to invest in modern greenhouses, drip irrigation, and pest control that would have helped them feed the growing demand.
The rural farmers simply didn’t have the capacity.
And as time went on, the small farmers’ weak attempts to sell to major supermarkets demonstrated how the odds were increasingly stacked against them.
In the end, most small farmers in the region got left behind (back to poverty), whereas the medium-sized and larger growers (the ones with more money and marketing panache) went on to benefit immensely.
Times Are Good For Vacation Rental Owners
The vacation rental industry has been good to owners over the past few years:
> Owners have hotel lobbyists shaking in their boots [AirBnB].
> Owners have travel trends shifting in their favor [TripAdvisor].
> Owners are bringing in $56,000 in annual rental income using one inexpensive advertising means alone [HomeAway].
But there’s another player lurking in the shadows of the vacation rental industry that benefits from all these dynamics too…
In fact, this player is not only benefitting…
It is leveraging the momentum in a far bigger scope and with much bigger ramifications than a single or multiple-property owner could ever imagine.
You guessed it: that lurking monster is the property manager.
7 Reasons To Fear The Property Manager
Below are my 7 concerns why vacation rental owners may be like the small organic farmers of Guatemala, and why their property manager counterparts could represent the larger growers poised to truly benefit from — and in some cases sink their competitors during — these fruitful times:
1. Property Managers Scale, Quick
Whereas success as a vacation rental owner may likely plateau at full occupancy, the property manager’s business is scalable.
Instead of the complexities of buying real estate and getting mortgages, property managers merely form relationships: they acquire clients.
Once the infrastructure is in place, adding properties by the handful is the name of the game in property management. PMs are rewarded by listing sites with bulk discounts (the more listings they buy, the cheaper each one gets).
Every owner knows the feeling when her listing category has been inundated with PM listings.
As it relates to sheer supply, this volume should be a very real concern for owners.
2. Property Managers Are Professional
Most owners have other (“real”) jobs, whereas most property managers do this for a living.
I like to point at the simple litmus test of a business card as it represents the formality of having a business. 7 out of 10 owners I come across do not have business cards representing their vacation rental. 9 out of 10 property managers do.
In fact, property managers tend to be more business-like in all facets of their business than their owner counterparts:
From providing official receipts to using CRM systems to following proper email etiquette, property managers run businesses, whereas too many times owners are running lemonade stands.
3. Property Managers See Increased Return On Marketing Investments
When an owner receives an inquiry she cannot accommodate, she is forced to send it to a friend or worse, ignore it completely.
My buddy Jon Murray over at MyVR.com pointed to this as a major strength of property managers:
“They have the potential to convert each inquiry across their network of properties.”
Considering their ability to shuffle bookings and offer a greater variety of similar (or different) alternatives, Jon says, “property managers can likely achieve a much higher conversion rate on any given marketing spend.”
4. Property Managers Have Low Overhead
Imagine an owner managing his or her vacation rental without a looming mortgage to think about, and you’ve imagined a property manager.
All that really constitutes a property management company is someone caring for the financial and physical well being of multiple properties.
This represents relatively little risk.
With such low overhead, property management agencies can pop up over night (and they are!). They can grow at record speeds. They can undercut you in price. And they can do so with relatively few obstacles.
5. Property Managers Have Bigger Marketing Budgets
In much the same way that it’s nearly impossible to compete with the marketing budget of the nearby chain hotel, an owner’s marketing strength typically pails in comparison to that of property managers.
This means PMs can spend more money, get more exposure, and potentially eclipse any given individual owner’s brand. Simply with brute force.
Kirby Winfield over at Dwellable believes that this brute force can be a game-changer particularly when responding to inquiries:
“Small managers and homeowners lose out on thousands of bookings a month from our app because they simply do not respond quickly enough,” he said.
“The big property management firms jump on new leads immediately, drive them to call centers and book them at high rates. Many times, owners and small shops just can’t get on the ball in time.”
6. The Best Property Managers Act Just Like Owners
A 2013 survey I conducted showed that 67% of vacation rental travelers prefer an on-site property manager to a perfectly accessible owner.
This is a startling percentage.
And it’s even more startling if you consider that the remaining 33% of folks who cited reasons like trust, responsiveness, and proximity (as the reason they preferred dealing directly with the owner) could probably be persuaded by an excellent manager who is super trustworthy, responsive, and close by.
Owners should fear property managers who transcend traditional service barriers and act on behalf of the owner themselves. These PMs, I believe, have cornered the best of both worlds.
7. Property Managers Fill A Niche
As much as owners may hate property managers, there’s no ignoring that PMs actually fill a tremendous niche in the vacation rental world.
Andrew over at VacationFutures helped me articulate just why that niche is so darn good…
“Most vacation rental owners work difficult, time consuming, and high paying jobs (that is how they afforded the second home). And as a result, their time is valuable, and they do not have as much time to put to renting out the home.”
“This can lead to them taking time away from things they should otherwise be doing (like spending time with their family) or cause them to not put enough time into managing the property to get the most from it.”
“These people are ideally suited to have a professional property manager handle that workload.”
So, What’s A Helpless Vacation Rental Owner To Do?
I wouldn’t be your “fearless vacation rental leader” if I didn’t have some ideas up my sleeve as to how owners can combat (or maybe learn to co-habitate with) the force that is property managers.
There ARE ways that you can leverage your position as owner and make tons of money!
Referring back to the case of the Guatemalan farmers, plenty of development experts invented ideas to give them a fighting chance:
> Enforcement of laws meant to curtail monopolies and oligopolies (including mergers of major supermarket chains)
> Improved security and cleanliness at small-time farmer open-air markets
> Infusions of government credit and technical expertise
Heck, they even created their own association of small farmers led by a shrewd and enterprising businessman to represent their cause.
Solutions: 5 Ways To Combat Property Managers In Your Region
But we’re not going to rely on others. Below are my 5 beliefs that give owners the best and most realistic chance possible to succeed, regardless of what the property manager is doing down the road (if you have any additional ideas or feelings about this theme, please share them in the comments section below):
1) Conquer Your Niche
One of my favorite success examples in the Guatemalan farmers saga is this co-op that focuses exclusively on pricey “mini” vegetables (mini carrots, mini zucchinis, baby corn) for export: stuff that the big factories can’t really entertain.
Their plant sparkles and each box of produce is marked with a bar code traceable to the family that grew it.
That is the kind of specialized niche I’m talking about!
Work now to really conquer your own manageable little niche and no one can take it away from you.
2) Do All The Little Things
Be professional, respond to inquiries quickly, get yourself some business cards…etc. None of these are asking too much of vacation rental owners: because if you want to go after the same guests as hotels and property managers (your nightly rate will affirm this assumption), you’ve gotta act the part.
3) Use Your Story Wisely
Every single owner has some great story behind how they acquired their rental.
Maybe they fell in love with the region or perhaps it was handed down to them from their grandparents.
Use the one thing that property managers can NOT claim – an inspiring journey that led you to become the courageous owner of a second property – to steal the hearts of potential guests.
4) Build Guest Loyalty At All Costs
Unlike property managers, most owners aren’t looking to make millions with their rental.
Rather, they just want to book their property year round to low-maintenance travelers at the highest rate possible/fair.
That means that the scope of work is much smaller: simply focus on retaining your former guests, encouraging them to come back year after year, and you’ve filled the cup!
5) Be Smart & Analytical
In the same way that underdogs all around the world compete with bigger and more powerful competition, owners in today’s vacation rental environment must be smart, analytical, and creative with their marketing.
There’s a reason I spoke at the HomeAway Summit under the title “Getting Analytical.”
It’s because owners need to be very aware of precisely how much they spend (both time and money), where it’s being spent, and EXACTLY how much return they are getting on that investment.
If you are not scientific about these metrics, your carelessness may cost you in the end.
And since you were kind enough to share my work using the social media buttons, I wanted to publish one last BONUS:
6) BONUS: Embrace Technology
Nowadays, there is so much technology out there to help the “one-man-show” business.
Whether you’re using ResortLock to automatically open doors, ReservationKey to manage bookings and send automatic emails out to guests, or an app like Glad To Have You to communicate with guests in-house…
Owners should understand that it’s not impossible to run your vacation rental business remotely from the comfort of a computer screen.
But it is imperative that you think progressively as it relates to technology and the tools/services out there.
To conclude (and I appreciate you reading all the way to the bottom):
As you can see from my 5 solutions, the rise of property managers is not the end-all be-all.
But PMs do provide a very healthy and challenging form of competition.
In my opinion, PMs will be just the influence needed to sink only the owners who are not on their game…to filter out those who are not professional or serious or both.
The other owners — those who are aware of all these dynamics and who actively aim to optimize their marketing work — can feasibly carve out their own successful and profitable little niche…whatever or wherever that may be.
What do you think?