Tech Fragmentation in Vacation Rentals: VRMA Recap

Description

The short-term rental industry, driven by its entrepreneurial spirit, overflows with software and tools, solving hospitality operators’ challenges. However, the integration of these tools often falls short, leading to redundancy in solutions and a mismatch in operator needs. Instead of streamlining processes, this technological fragmentation often complicates matters further.

In our session, we delved into the current landscape of hospitality technology, highlighting the integration challenges businesses face. This fragmentation impacts guest experience and profitability across different company sizes.The speakers discussed solutions to these challenges. They offered guidance for operators to navigate and streamline their operations.

Learning Outcomes for Vacation Rental Operators

• Understand the technology landscape and identify the specific issue they may have in their own business
• Create a framework for addressing and navigating the technology fragmentation in a practical way today to improve business operation.

Speakers

JOHN AN, CEO, TechTape – Moderator 

John’s company TechTape aims to streamline operations for vacation rental businesses by enhancing existing systems and integrating cost-effective, user-friendly solutions. John is also a short-term rental operator, and understands first-hand the complexities of disjointed hospitality tech. He’s also recognized as an expert in revenue management.

PIERRE-CAMILLE HAMANA, CEO, Hospitable.com

With over 80,000 connected listings on the platform, Hospitable never wanted to become a PMS. Automation is what the company is known for. The best service they offer is guest experience products that automate all communication with guests and facilitate direct bookings. The company is mostly focused on property owners.

FRANCOIS GOUELO, CEO & CoFounder, Enso Connect

Francois offers a distinctive perspective on addressing fragmentation in hospitality technology. He champions the “connect VS rip and replace” strategy, empowering operators to select tools that align with their unique business requirements. These tools can then be effortlessly integrated into a custom tech stack, designed specifically for individual hospitality businesses. This vision is the foundation of Enso Connect.

LUCA ZAMBELLO, CEO, Jurny

Luca has a track record of expanding a short-term rental management business to 300 units across five cities. However, at some point technology became a challenge. He spent considerable time integrating various solutions to scale operations. This led him to create his own product, differing from industry norms – Jurny. Today, he is eager to chat with the STR community about tech fragmentation and potential solutions.

Background

The short-term rental market in the United States boasts a staggering value of $90B, and globally, it reaches an impressive $172B. This industry is not only thriving but is also characterized by its entrepreneurial spirit. This dynamism has given rise to a plethora of technology solutions, each aiming to address the unique challenges faced by operators. However, this surge in innovation has also led to a highly fragmented landscape. With over 500 property management software (PMS) options available worldwide, there’s a maze of products, many of which have overlapping features. The primary challenge is that these solutions often operate in silos, lacking seamless integration with one another.

Different approaches to the hospitality tech fragmentation problem

Jurny’s approach 

There are two main issues. Firstly, there’s an overload of solutions, many of which serve similar purposes but with slight variations. This is problematic. Secondly, when we began our journey as property managers and founded Jurny, we noticed that these solutions weren’t designed to integrate seamlessly. In reality, property managers don’t just need one tool like a pricing software, guest verification system, channel manager, or a PMS. They need all these tools to function cohesively, sharing and relaying information. But the industry hasn’t been set up this way.

We’ve seen various approaches to address this, but our strategy was unique. We reached out to partners with the purpose of selecting one partner per category. We believed that property managers first needed to decide on their tech stack and then integrate these solutions for optimal performance. Drawing from our decade-long experience in the industry, we chose partners and urged them, without being too forceful, to adapt their APIs for two-way communication. This allowed us to consolidate everything into a single dashboard. Essentially, a unified ecosystem did not exist, until now. And even now, it’s not universally available due to various software providers’ limitations.

Another issue is that many systems are outdated. When the industry was in its infancy, there weren’t many solutions. Many of the existing Property Management Systems (PMSs) are over a decade old. They were built for a different era, and the industry has since evolved, leading to the current fragmentation as a result.

Enso Connect’s approach 

A controversial perspective I hold is that the main issue with fragmentation is that we view it as a problem. Tech companies offer a range of services, from guest verification to upsells and guest applications. This expansion is driven by various tech players, leading to interconnected marketplaces. However, the challenge arises when businesses have to manage multiple logins, vendors, and understand the interdependencies of various tools, especially as they grow.

Many systems claim to be all-in-one solutions, which can be misleading. It’s essential to recognize that different departments use different tools. For instance, my tech team doesn’t use the same tools as my sales team. The challenge for property managers is centralizing information from these diverse departments.

Tech Tape’s approach 

Each management company’s operations are unique because there is no formal education on operating a short-term rental business. So, a tool that may be perfect for one operator can be terrible for another operator. The fragmentation is positive in that there are a lot of different options for each unique operator to select from. However, most are not integrated and do not talk to each other.  The core issue in the near-term horizon is that these tools don’t communicate seamlessly. As a result, either the work has to be completed manually, or the same data exists in multiple places, causing inefficiencies. From a property manager’s perspective, the goal is to ensure these tools can interact in a coherent workflow. The endgame is to avoid having the same data scattered across different platforms, which complicates operations. For the long-term perspective, our industry needs more infrastructure-type solutions that unifies core functionality so that we don’t continuously reinvent the wheel.

Hospitable’s approach 

Communication is crucial. To give some perspective, in our company, we have 127 software contacts for a team of 57. These numbers surprised me. Like many companies, we struggle with managing customer data. What’s unique about our industry is how OTAs have set up a system where the main customer data source integrates primarily with property management software. These softwares then connect with numerous third-party service providers.

A couple of years ago, we might have thought there was a leading solution. But there’s still no clear frontrunner. This results in repetitive work and constant reinvention for both operators and software providers. The industry lacks a system that encourages easy data sharing to maximize its value. This is unlike any other sector I’ve seen. Industries like healthcare or finance might have data restrictions, but vacation rental isn’t that heavily regulated. 

Airbnb Direct Integration: The Story   

From the very beginning the goal of Enso Connect was to digitize the guest experience. One of the first questions was about Airbnb partnership. Realizing the importance of this partnership to access reservation data, the co-founders tried to collaborate with Airbnb. However, their API, which is essential for accessing such data, was restricted.

The workaround was found on Reddit—a working API key. For two months, they accessed Airbnb’s data, thinking this was their breakthrough. But soon, Airbnb’s security team blocked it. Francois approached Airbnb’s Toronto office in person, hoping to resolve the issue. They asked the startup to return when they had more properties. That was a catch-22: how could they get more properties without Airbnb access?

The solution was to connect through Property Management Systems, the only platforms Airbnb recognized. To clarify, OTAs like Airbnb typically allow only one system to connect to their platform. This limitation means that even if you have innovative tools to enhance your business, integration is challenging. Thankfully, Airbnb has recently allowed integration with Enso Connect, along with other companies on this panel. However, there’s still much work needed to streamline data flow in the industry, from booking channels to third-party integrations.

Did PMS stop innovating?

Luca shared his view that many Property Management Systems (PMS) have fallen short of their responsibilities. Throughout my tenure as a property manager, he has switched between five different PMS. Most large-scale operators, managing anywhere from a few units to 400-500, have changed their PMS at least three times and are still unsatisfied with their current system.

Luca believes many PMS, especially the older, legacy ones, have ceased to innovate. They should be centralizing and managing data, demanding comprehensive information from their partners. This is their primary role.The successful PMS of the future will recognize and address this. Otherwise, solutions like Enso Connect will either have to connect directly with platforms like Airbnb, missing out on other opportunities, or collaborate with entities that truly understand this challenge.

What Slows Down Innovation in the Hospitality Industry?

Companies like Enso Connect often rely on Property Management Software (PMS) APIs to access essential data. For startups like Enso, their primary goal is to access this data to provide value to their customers. However, their main focus isn’t necessarily to feed data back to enhance the user experience of the original PMS. As a result, PMS users don’t get a comprehensive, centralized data source, which the PMS should ideally provide.

In recent years, many PMSs have struggled to innovate. They’re burdened by numerous existing integrations, making it challenging to adopt new technologies. For instance, while there are advancements in areas like smart locks and OpenAI’s ChatGPT implementation, many PMS lag in incorporating these. This delay often stems from their desire to maintain their current integrations and monetize new features, which can hinder collaboration and innovation.

The Universal API VS Distributed Solution  

While discussing tech issues might seem irrelevant to property managers, it directly impacts you. When choosing vendors and solutions, we’re constrained by the data we can sync from channels and OTAs. A rising trend is the emergence of API-first companies that aim to enhance tool interconnectivity. But a challenge remains: where is all this data centralized?

Most often, it’s in the PMS. Few resort to platforms like Google Drive, Notion, or Excel sheets as their primary data source. I encourage property managers to view their operations both as a tech and hospitality venture. The tech landscape might get more chaotic before it simplifies. Instead of waiting for a single entity to create a universal API, which could stifle innovation, a distributed solution seems more viable. This approach promotes diverse innovations rather than confining them to one standard.

4 Ways to Defragment the Hospitality Industry: Pros and Cons 

We see five main ways of how the hospitality industry starts to defragment. These ways are: consolidation via acquisition, integrations via marketplaces, white-labels and semi-custom builds. 

Consolidation via Acquisition

We are talking about larger companies acquiring smaller operators, consolidating the tech landscape. While the primary reason might be to integrate that technology internally, sometimes it’s to eliminate competition or acquire their customer base. This consolidation can lead to a unified platform, but it might also limit the available tech solutions for business operations.

Integrations via Marketplaces

Currently, our industry is buzzing with the trend of marketplaces. Various companies are collaborating to create these platforms where property managers can select from multiple software options, be it for pricing, accounting, communication, upsells, etc.. While this provides choice, a downside is that the Property Management System (PMS) is a gatekeeper. PMS controls which software gets listed, limiting the options available to users.

White label 

White labeling involves a company’s internal decision on partnerships and product alignment, echoing what Luca mentioned. To clarify, none of us here are focused on acquisitions but rather on different kinds of integration.

Semi-Custom Builds 

Another current approach, though not a long-term solution, involves semi-custom builds. This method links multiple tools that don’t naturally communicate, creating workflows that allow them to function together. This way, you can choose the tools you prefer without the PMS limiting your options.

Which way of defragmentation is the best? Expert views  

Luca admits he’s biased, as his company leans heavily towards white labeling. As a property manager himself, his goal was simplification. Achieving scalability often requires simplification first, which is ironically complex. His company, Jurny, provides a great example for this. They’ve streamlined the user experience, but the underlying processes are intricate. Ultimately, they prioritize the user experience. Luca believes that 80% of the market will eventually adopt this approach, though others might disagree.

Francois notes that companies are acquired for various reasons, from financial struggles to strategic decisions. He observes that many private equity moves in the vacation rental sector seem more profit-driven than focused on genuine innovation. 

When property managers evaluate tech solutions, Francois believes it’s crucial to understand their primary needs. Often, he sees operators adopting various tech solutions without considering how they fit into their business’s infrastructure. He points to the success of platforms like Hubspot and predicts a rise in Zapier-like functionalities in the vacation rental industry. Given the unique needs of each property management company, owner, and guest, he feels that one-size-fits-all solution often falls short.

Francois finds the idea of integrating advanced technology, white labeling, and offering a marketplace compelling. The industry is inherently fragmented, mirroring the diverse operations of property managers. Hence, the tech stack should be adaptable to cater to these unique hospitality requirements. Rather than endorsing a single approach, Francois feels a combination of strategies will define the industry’s future digital landscape.

Luca has spent countless hours researching the best providers, only to find that many in the industry avoid taking responsibility when issues arise. This lack of accountability frustrates him, as he feels the industry has shielded itself instead of addressing core problems. In his view, the main issue with marketplaces and many PMSs is the lack of ownership and responsibility.

Pierre-Camille pointed out the risks of over-consolidation, using Amazon’s dominance in the book market as an example. He noted the potential risks of the entire vacation industry relying on a single platform. He believes the vacation management software market shouldn’t be dominated by one major player, especially given the diverse needs of different market segments.

Drawing a parallel between Slack and Discord, he highlighted how similar products can cater to different user bases. He lamented the industry’s focus on acquiring listings rather than enhancing user experience.

Discussing integration challenges, Pierre-Camil highlighted the gross margin pressures of maintaining multiple integrations. He shared their venture into white labeling, aiming to provide property owners with a direct premium connection. Direct listings come with challenges, like chargebacks and guest issues. To address this, they bundled integrations, offering a package similar to a private OTA. This package handles various aspects like tax compliance and payment processing, at a lower cost for the user.

Pierre-Camil emphasized the importance of a unified guest experience and operational efficiency. He questioned if an all-in-one solution, despite its appeal, might divert software providers from key goals. 

API connectors and more: summary  

• Luca and Francois have different views but are aiming to solve the same problem in property management.
• Property managers face various challenges daily, from revenue to operations.
• There’s no one-size-fits-all software for property managers. Instead, the issue is that many solutions don’t integrate well with each other.
• Luca emphasizes the need for someone to take responsibility and ensure sustainable solutions.
• The speaker mentions an API connector called “Seam” used by various companies to integrate smart devices.
• The future seems to be leaning towards more API-based solutions, as seen with companies in Y Combinator.
• Francois believes that collaboration is key to solving fragmentation in the industry. This means working together instead of competing.
• AI is highlighted as a significant technological advancement. Centralized systems are essential for effective AI implementation.
• A challenge in the industry is the lack of standardization, especially with APIs. Different terminologies and standards make integration difficult.
• Francois believes that while white labeling can add value, the real value lies in the data a company collects.
• Luca advises property managers to be cautious when choosing software. They should identify their key problems and choose solutions that address those specific issues.

The conversation revolves around the challenges and opportunities in property management, especially concerning technology and software solutions. The emphasis is on collaboration, integration, and the value of data.