The coming challenge. Govt controls
Just a quick refresher on the pending troubles relating to legislation, licensing and government focus on the STR market. Whichever way you look at this, housing and residential rental shortages are the most significant focus. We won't dive deep, but here are some links that show the ongoing challenge:
France (and the whole EU). (or in the French original) While 4.1 million people are unhoused or poorly housed, the proliferation of these rentals is further exacerbating the housing crisis,” reads the website created for this initiative. “We are unanimous” on the consequences of short-term rentals throughout the country, Iñaki Echaniz, the Socialist MP behind the project, told EURACTIV France. Each country will have its take on this, and each political party and we will see variations on a theme, but already there are building blocks, and country approaches that all may not favour. Portugal is the country everyone is watching.
Greece: For the first time in Greece, short-term rental operators sat down at the same table with the country’s Independent Authority for Public Revenue (AADE) to discuss best practices and market conditions during the Delphi Economic Forum 2023 last month.
AADE President George Pitsilis said, “The results prove that the legal framework introduced is working successfully. Legislation and memorandums of cooperation we have signed with the platforms have enabled us to identify those who believe they can generate income from short-term rentals without declaring it,” This was about tax. Still, you need to know who to tax, so registration is necessary.
The UK is currently in a consultation period and hopefully will avoid the Scottish debacle on licensing. There is a group of associations lobbying and "advising" the Govt. on how what would be a sensible approach. This is an extract from the PASCUK newsletter we recommend registering for as soon as possible.
We have laid out the headline policies below. This is the final version and will form the basis of the Guidance that we will be producing to respond to the Consultation, and we expect to have completed this by Tuesday next week, when it will be available on the website.
The Policy below is identical to the one adopted by the Tourism Alliance. Your Chair was asked to Chair a Working Group of Members of the Tourism Alliance to develop headline policies. This was signed off last week and will form the basis of Tourism Alliance Webinars.
The key Membership Associations agreeing to these policies are UKH, ASAP, B&B Association, British Destinations, Tourism Alliance, Premier Cottages and many more.
Conclusion of base policies regarding the Statutory Registration Consultation.
All paid accommodation has to register.
The Statutory Registration Scheme must be all-England
The registration cycle should be annual.
The property’s valid registration numbers must be present on all advertising platforms.
The Registration Fee should be around £100 per property.
This would achieve the long-standing policy objective of a ‘level playing field’ for all businesses and, at the same time, finally provide the key data on this vibrant, diverse sector.
The USA seems to be independently decided by state or town and city, with many challenges and results and too many to mention here. A win for Nantucket, however, on zoning regulation. However, new rules in San Diego took effect that limits the number of rentals in most parts of the city to 1% of housing stock and requires property owners to receive a permit. It's a lot more complicated than that, however.
Airbnb has its approach to restrictions and its income stream by returning to its roots, focusing on rooms again; it was its founding success from which the storms arose. Airbnb has made a raft of changes/improvements recently, but the trend is toward clarity in pricing, focusing on budget-conscious travellers and affordability. Rooms presumably dodge the housing challenges. If you want to read the usual great analysis on Airbnb, head off to the Rentalscaleup website
Money and Investment
Taking some of the last ten days' press into account and combining comments and thoughts, this narrative seems to be the consensus:
Despite challenging conditions such as a decline in venture capital, inflation and interest rate issues, some vacation rental startups have attracted funding. Recent funding announcements by Whimstay, Sextant Stays, Kindred and Holiday Swap evidence the continued interest. Investors' approach seems more tempered toward growth with a semblance of profit but a more in-depth approach to the actual market developments. This would illustrate the overheated tech sector is under scrutiny and may see more roll-ups of PMS software, such as LMPM by Inhabt IQ, to add to their existing portfolio of UK and US businesses.
Another is StaySense, a startup that converts destination websites into booking channels for the short-term vacation rental and hospitality industry. Guesty, one of the world's leading property management platforms for the short-term vacation rental and hospitality industry, just acquired StaySense. In addition to expanding its direct booking capabilities, Guesty is expanding into the US market. The message with direct booking a "keyword" in PMS sales is clear but very challenging in action. Expect more small tech sales and roll-ups, as the marketing and dev costs are eye-watering!
Don't think that because a company raises money, it's successful. HomeTo Go out of Germany is an example. For the full-year 2022, it registered €76.7 million of onsite bookings — 54% of all booking revenue but posted a €20m loss. The costs of acquisition and the competition is fierce. Airbnb, Bookings Holdings, Trip.com and Expedia had around $34 billion in cash and equivalents on the books at the end of 2022. These businesses also have loyalty, longevity and brand.
SuperManagers & M&A
We have seen a raft of small company acquisitions in the US and UK over the last few years, creating companies such as Sykes Cottages, Cottages.com (Awaze) or Vacasa (USA) and, more recently, Vtrips USA) on the growth curve. Perhaps the temperament and temperature are changing as sellers expect too much, buyers seek organic growth and new asset classes, and the whole M&A process is very involved, even for small businesses.
With many destinations still of interest, especially southern Europe, there appears to be a serious desire to accrue inventory in one way or another. We suspect micro-ex hosts or ex co-host Airbnbers selling contracts may be the next gold rush. However, any acquisition process is daunting, and identifying funded partners or interested sellers is not easy. Most managers are small, localised, often administratively challenged businesses (circa 50-80 properties). We can expect to see an M&A and contract sales marketplace soon in this space.
2023 will be a pivotal year for long-established businesses post Covid as the business levels flatten out geographically. Cheap EU flights will be less available as demand exceeds supply, but sun and increasing city travel are increasing. We may see some of the colder climes previously domestically prosperous due to Covid now considering an exit at the end of the summer. The multiples are less likely to be that attractive, however.
Technology Highlight
We are pretty confident that this company is one to watch for the future. We all know that PMS systems are generally good at booking management and very poor at operational management, hence the need for system connectivity—a chicken and egg situation regarding new tech growth and source of truth access.
EasyAir looks to cover the whole spectrum of operational controls and reporting. We haven't looked under the bonnet in detail yet, but on first inspection, it looks awesome. If you're in the market, growing and struggling with this part of business, and want to create efficiencies, slick operational control, plus improved owner satisfaction, this one looks like a serious contender and is cost-effective.
Get a demo today, and let's see the benefits.
The Coronation
You can bet Airbnb made a mint out of the Coronation (The DailyMail jumped in here), but like the Monarchy or not, they draw tourists, meaning short-term rentals. God Save the King! Photo courtesy of Townandcountrymag.com
ViturSummit this week.
If anyone is in Malaga at Vitur this week, look me up!