Why Short-Term Rentals Should be Long on Loyalty
How vacation rentals can leverage the power of instant gratification rewards programs to increase conversions, drive revenue and keep guests coming back
It wasn’t that long ago that Airbnb took the world of hospitality by storm. What began with two guys renting out air mattresses in their San Francisco apartment to conference attendees in an attempt to make rent later became the darling of Silicon Valley success stories. In 2020, just 12 years after its first iteration, the company was valued at just over $100 billion in the biggest U.S. initial public offering (IPO) of the year. In an article published in Forbes, author Dina Gerdeman wrote, “Airbnb is revolutionizing the lodging market by keeping hotel rates in check and making additional rooms available in the country's hottest travel spots during peak periods when hotel rooms often sell out, and rates skyrocket, a new study shows.” The Airbnb effect was simple but undeniably attractive to eager travelers: when hotels were fully booked, Airbnb expanded the capacity for rooms. Moreover, these rentals offered young and culture-curious travelers a new take on the traditional guest experience – one that was decidedly more intimate and unique.
Airbnb’s home rental platform may not have been the disruptor that anyone saw coming, but the disrupter transformed travel as we once knew it, ushering in a new era most aptly called the sharing economy. However, the shockwave of Airbnb’s industry impact was stalled shortly after its IPO, as the COVID-19 pandemic brought the hospitality industry at large to a grinding halt. With no travelers to serve, airlines, hotels, and Airbnb rentals entered a period of a significant downturn, aligned with their desire to see travel surge back to life as soon as possible.
Having finally entered a period of post-pandemic recovery, industry experts are now surveying the industry landscape under a new lens. Which format will reign supreme on the other side of the pandemic – traditional hospitality, hotels, or Airbnb? Perhaps the better question is, how has the market changed over the last two years, and how can vacation rentals capitalize on those changes to influence booking behavior, delight travelers, and inspire guest loyalty?
If You Change the Way People Work, You Also Change the Way They travel
In case you missed it, the pandemic reshaped work around the globe as organizations across industries were forced to embrace remote work. Even now, in the wake of the pandemic, many of those organizations will move forward with a remote or hybrid work model, allowing their employees a level of freedom that was previously uncommon in the corporate world.
To this effect, McKinsey’s recent American Opportunity Survey revealed that 58 percent of Americans have reported having the opportunity to work from home at least one day a week. “Thirty-five percent of respondents report having the option to work from home five days a week. What makes these numbers particularly notable is that respondents work in all kinds of jobs, in every part of the country and sector of the economy, including traditionally labeled “blue collar” jobs that might be expected to demand on-site labor as well as “white collar” professions,” reads the report. “Another of the survey’s revelations: when people have the chance to work flexibly, 87 percent of them take it. This dynamic is widespread across demographics, occupations, and geographies. The flexible working world was born of a frenzied reaction to a sudden crisis but has remained a desirable job feature for millions. This represents a tectonic shift in where, when, and how Americans want to work and are working.”
This shift to a work-from-home (or anywhere) model is important because it directly impacts travel behavior. In the past, travelers were limited to their designated vacation time when considering domestic or international trips. But today? They can technically work from anywhere, and as a result, the short-term rental (STR) market is seeing an impressive surge in demand. According to data from Airbnb, demand for stays of weeks or months is on the rise. This is great news for STR providers, as it frees them from the traditional ebb and flow of seasonal demand. At the same time, daily rates increase in response to remote-work travelers’ preference for larger, more comfortable accommodations in popular markets.
Moreover, more hosts are entering the market in an attempt to not only jump on this emerging trend but combat rising inflation. In the United States, where inflation increased by 9.1 percent in June 2022, the number of new Airbnb hosts grew by more than 50 percent in Q2 20223, compared to Q2 2021 – and this same trend was observed around the world. The writing is on the wall – if you change how people work, you also change how they travel, and hospitality brands should look to lean into the STR segment to capitalize on this recent growth.
STR Guests Can Be Loyal, Too
Typically, hospitality loyalty programs focus on traditional travel behavior, specifically, leisure vacations and business travel. But what about short-term rentals? If these guests offer a high revenue value and are in the market for frequent travel (even during off-peak times), don’t they deserve access to the same (if not better) loyalty incentives as other travel segments? While the traditional, volume-based hotel loyalty model, which allows guests to accumulate points for each stay, may not be the best fit for STR guests, rewards-based loyalty is perfectly positioned to delight STR guests.
Moving away from the points-based model, modern rewards solutions like Laasie look instead to leverage the power of instant gratification by offering guests instant, hyper-personalized rewards. Each time a traveler performs a desired behavior, whether a booking decision, simply interacting with the property, or even providing feedback, they will be granted access to a marketplace of rewards partners — local, national, and global — across shopping, dining, and activities. Using an AI-powered rewards platform, STR providers can enjoy increased booking conversion (43 percent on average) via a low-cost channel and build one-to-one relationships while rewarding guests for every interaction and driving repeat transactions via relevant, effective marketing offers and personalized rewards.
The best part? Using a data-backed loyalty program tailored to the habits and preferences, STR providers can easily grow guest lifetime value, positioning them as a sought-after accommodation for future short-term stays. Not to mention, loyal guests often serve as ambassadors of the properties they know and love, especially when they’re incentivized to share their experience and book again. Short-term rentals are an integral (and lucrative) segment of the post-pandemic hospitality landscape, and it’s time they leverage a rewards program to differentiate themselves from competitor properties while giving their guests every reason to book with them again in the future.
Ellis Connolly
Chief Revenue Officer
Laasie