Heads In Beds Show - What Porter's 5 Forces Can Teach Us About The Vacation Rental Industry's Change Happening In 2025

Episode Date: January 29, 2025

In this episode Conrad and Paul use Porter's Five Forces to explain what challenges the vacation rental industry is facing in 2025, weak spots, opportunities and a lot more.Enjoy!⭐️ Links & Show NotesPaul Manzey Conrad O'ConnellConrad's Book: Mastering Vacation Rental MarketingConrad's Course: Mastering Vacation Rental Marketing 101🔗 Connect With BuildUp BookingsWebsiteFacebook PageInstagram🚀 About BuildUp BookingsBuildUp Bookings is a team of creative, problem solvers made to drive you more traffic, direct bookings and results for your accommodations brand. Reach out to us for help on search, social and email marketing for your vacation rental brand.

Welcome to the Head to Med Show presented by Buildup Bookings. We teach you how to get more vacation properties, earn more revenue per property, master marketing, and increase your occupancy. Take your vacation rental marketing game to the next level by listening in. I'm your co-host Conrad. And I'm your co-host Paul. All right, Paul, good morning. Top of the morning to you. How's it going? level by listening in. I'm your co-host Conrad. I'm your co-host Paul. All right, Paul. Good morning. Top of the morning to you. How's it going? What's going on?

Well, for those of you who are going to see the video clips of this, you can understand that I'm I've got the stocking cap on I've got a couple layers on. Conrad knows it's the high today is minus 15. Fiorio feels about 27. Help. Help is what I need right now. I need an engaging conversation, which I'm excited to have with you here.

And I think that's going to warm up my heart and my spirit and all that good stuff. And how are you doing, sir? Let's talk about something that's warm and not this right now. Well, I have two funny stories to start us off with here that are not related to the core topic, as we often tend to not start with the core topic. The first is when the funniest vacation rental damage stories I've ever heard. Sorry, it is a cool story was was a property manager up in I forget the market.

I think it was Park City or something like that. I heard this like overhand like a VRMA conference or something like that. And they said I had the strangest damage situation this year. And everyone's like, all right, like I'll bite. Like, what was the strangest damage situation you ever had? Because most of the time it's like spilled wine on the couch. You know, I damaged this, I damaged that golf clubs into the drywall. You know, usually it's stuff that's pretty normal.

And she goes, I had a guest that ran on a firewood and was cold and wanted to use the fire to eat the home, even though we had working heat. So took a chair, took the chair, disassembled it, placed the chair into the fireplace and burned the chair, like for warmth, like it was obviously a wooden chair. And I was like sitting in awe of like how kind of stupid that person in a way kind of brilliant. And the manager was like, I was really like angry more

so than normal, because like this obviously wasn't an accident. It was like most damage is an accident. We're like, oh no, I didn't mean to do that. I didn't break the TV. This was like a willful, like thoughtful measure choice of like, oh no, I'm at a firewood. I don't want to do anything. So I'm just gonna take this chair and like chuck it in the fireplace basically. I guess like you took it apart somehow. And just that story stuck my head for so many years

because I'm like, how could someone be so angry? And then the funniest part of story, she contacts the guest and she's basically like, what the heck? And the guest is like, yeah I'm sorry, bill me whatever you feel like is fair for it It was like no It's like none the wiser like not even bothered in the slightest about the fact that he was gonna have to pay all this Money for the chair and she's like, yeah I guess like you kind of screwed over the next guest to though, right?

Like even if I take all the money and go buy a chair, I'm at the ship it from somewhere else You know, it's gonna take a while and I just like this is what this is how I feel like doing this for a while I'm just hearing stories from my clients. Whenever you deal with general public, one of every 1000 people is just like the corkiest, weirdest, oddest person you've ever met. And so when you're talking about how cold you are, I was gonna make a joke about like, are you gonna chuck your chair and like into your fireplace? And I'm gonna fit the fireplace to keep warm because I've heard that's

in in in Park City. We've both worked in that market enough to know there's a lot of crazy stuff that happens in that market. That's just all there is to it. Most people booking a place there probably have enough money where they're just like, yeah, I'm sorry, I'll buy you a whole new, I'll buy you a whole new table chair. Like they just, they're so welcome to take care. Yeah. That's it.

It's silly. It's silly money in there. So yeah, I believe that that absolutely happened there. Oh, this was told in so much detail. It has to be true. Like there's no way someone would make up the, you know, the level of detail this person had when she was telling me the story. And I just will take shake my head. Like that's the most ridiculous thing I've ever heard.

But also I believe it. Yeah, that's, that's one. The other thing, just quick sports now is that I thought that, you know, it would be sad and, you know, sad dolphin noises, if you will, about the Vikings, of course losing, you know, we haven't recorded since then. That was a bit of a bummer. And then of course, I watched the Lions lose this weekend. And when I thought the Vikings fans were sad and miserable and hated their life, then I saw all the Lions fans reactions on social media. And I feel really bad for those people because they they thought they they got it pulled away from them. It was like, Oh, oh, piece of candy. Oh, you think you're going to get it. And then it gets ripped out of the last minute. And you know what? That's heartbreaking.

I don't care if you're rooting for the Lions. I know you aren't obviously, but like, you know, if you, if just looking as a neutral third party objective, you know, fan who was just watching this at this point, it really broke my heart to see the Lions fans as sad as they were over the weekend, because they really thought they had something this year. And they kind of did for a while.

It was weird to see all of the references back to the commanders, the Reds, Washington football team over their last NFC championship appearance was 91 when they went to the Super Bowl in the Metrodome. We got one or two Super Bowls here. And so it's like, it was kind of, I mean, it felt like there was some culminating of some things maybe that went into that. So but it's it's it's sports keep us keep us on our toes and give us something fun to

watch for the weekends here. So yeah, could you imagine Bill's commanders like one of those fans? I mean, it's not gonna happen. I don't think but one of those fan bases is going to be like, Oh my gosh, we're finally gonna win. There's a guarantee that one fan base is not at the time of their life in February. Obviously, the idea that commander splitting seems pretty unlikely to me. But like, hey, as we learned this weekend, anything

is possible. Anything is possible. Anything is as Kevin Gardner famously said on the court, I didn't think it's possible. All right. All good. Well, all right, some white hard stuff there. But we got a fun outline today. So this was as I often tend to do a Twitter, sort of a Twitter idea that I was scrolling, I guess, sorry, X idea, I just feel still weird saying I can't click with that. I'll get it eventually. It'll take me a long time. It's like the whole webmaster tools, Google search console that took me years to like get get terminology down in the right direction.

So give me time, we'll get there eventually, folks. Anyways, I was reading about Porter's five forces, which I hadn't heard this since college. And whatever I was thinking back, actually, almost momentarily for like my college experience when we're putting together this outline. And I was thinking like they actually taught me a lot of really good things in college. I had this brief period after college where I was like, that was useless. That was a waste of time. The trouble was that they were teaching me like first principles thinking that I wasn't ready for it.

Like I wasn't actually ready to think in that way. I was just like, yeah, like I just want like a job to like pay me money and, start my marketing career. I just wanted when I was 20, I wanted like tactics, like just tell me how to run the ad so that it'll get clicks and get things working. So that was like my brain back then. My brain now like needs actually, ironically, funny enough to college education more than my brain at 18. But they kind of do that backwards. So I'm gonna say like, you should like work first and then go to college after but I digress. They're different, totally different concepts. So for those that don't know, Porter's Five Forces is a business analysis framework

developed by Michael E. Porter, so a noted author and skilled, let's say business person in that respect, where it breaks down five forces of market and describes how they're gonna impact the, I guess, like growth and effectiveness of that industry or of that market in the coming period of time. So it could be this more of a long-term thing,

and these are the five forces. So I'll run through them quickly, and then maybe we could break, kind of trade them off here and talk about these five forces specifically to the vacation industry. Because we're at this kind of inflection point right now. There's been a lot of stuff that's changing right now. Obviously, the cost is going away.

The Sago-Vacasa merger is ongoing at the time we record this. No reason to think that's not gonna happen at some point this year. And it's kind of like some things that we thought were gonna be true in our space year. And it's kind of like some things that we thought were going to be true in our space a few years ago are kind of dead and dying and new things are coming, you know, in their place.

And it's kind of interesting to see like, what's going to happen? Like how all this shake up? What's going to like, what do we think is going to happen in the future? And I think this five forces framework does a decent job of like, letting you know what to look for, you know, it's it can't predict what's going to happen in the future. Of course, nothing can. But it's an interesting way to think about what are the dynamics and how are things going to shift around as we get going. So I'll run through them quickly.

Number one, threat of new entrants. In other words, how easy is it for new competitors to enter an industry and disrupt existing businesses? Obviously, a lot of talk about there. Put a pin in that one, we'll come back. Number two, bargaining power of suppliers. An interesting way here, as suppliers in this case, I kind of think of, I kind of reframe this in our outline here as inventory. Like case, I kind of think of, I kind of reframe this in our outline here as inventory, like the homeowners are kind of the suppliers, if you will, for the most part of our industry. Again, there's other suppliers in a way,

but we'll come back to that in a second. Bargaining power of buyers, customers, in this case, I'll think of that primarily as guests. Why would a guest book or not book a vacation rental and why, and we'll go through that. What is the threat of substitute products or services? So how easy is it for someone to switch out and not stay in the vacation rental, you know, and do something else? Obviously, there's a lot we can talk about there. And then number five, final force

that Porter talks about is rivalry amongst existing competitors. So how competitive is the space? How hard is it to sort of, you know, get in and, you know, kind of stake your claim into the space? So those are kind of five forces. Let's go one by one. Do you want to take the first one here? Threat of new entrance. How does the vocational industry sit today in your mind of threat of new entrance entering into the place, the marketplace? Well, I mean, it is.

We've got it labeled here as moderate to high. Really, it's just so easy to list your property on Airbnb, on Verbo, on booking.com. I mean, I think that's, I referenced it in a LinkedIn post. You know, I think it's one of the biggest barriers that Google faces in not being able to expand further. And I think actually if they lowered their barrier to entry, that they would be a bigger threat of the new entry there. So the clear ones are Airbnb, Verbo, and Book booking.com, those distribution channels.

There's always someone who can add to your competition in your market there. I think that's something that as long as someone has a second home and it doesn't even necessarily need to be their second home, they can be a new entrant into the space. I mean, if anybody needed any further example of that, look at COVID. I mean, the inventory in all of these primary markets increased to such an, not unsustainable level, but we're bordering on it in some levels where the revenue just isn't there. I mean, the choices are just so prevalent

that it's just difficult to differentiate yourself. And I think, obviously the popularity of those platforms increase that threat. You want to decrease that threat. We do what we talk about so frequent here is build that strong brand reputation. I mean, it takes time and effort, but that's how you differentiate yourself. And that's how you, you're not going to quell the threat of new entrances, but at least you're going to set yourself up to have some type of bedrock framework

that you're not going to fall when one new entry comes in, when two new entrants come in. If 10 new entrants come in, your market is going to be tough. But I think that is, that's something that obviously local regulations also have some bearing on the new entrance there. But what do you think about when you think of new entrants into the space and how that can affect impact professional property managers? I think you touched on it very well. I think you really hit a quite a large point at the end, maybe that is a little golden nugget for the listener to think about, which is that how easy

for is it people in your market to enter into the space, right? So the classic example I think we all love to give is Orlando, Florida, right? There's 25, 35,000 vacation rentals, you know, within a few mile radius of the Disney parks, right? Same here in the Myrtle Beach area, right? There's, you know, 20, 30, 40,000 different, you know, vacation properties in a short period. Many of them sort of somewhat undifferentiated, right? Anyone can go in and buy a condo, a house here. The rules are very permissive. They allow pretty much anyone to go ahead and start their quote unquote old, you know, short term rental business, vacation rental business, Airbnb business, whatever you might want to call it. So I do think that if you think if you think about each of these items, by the way, as we go through them today, as what's

the opposite of that? What's the inversion of that? It would be it's hard for new people to enter the market. And that's why like if I was ever investing into properties, which I haven't done so yet, but it's something that I definitely would consider doing in the future, I would look for markets where like someone were to say to me, oh my gosh, it's impossible to get a permit. I'm like, awesome, that is exactly where I want to go and figure out how we do that, right? Like we have a client at Key West where it's like very, very challenging. In fact, I think there's like a fixed number of permits. Perfect. Love that. You know, we had a client previously in like the wine country area of California, you know, Sonoma and stuff like that. Oh, there's, it's basically

impossible to get, you know, illegal operations here. Awesome. I love that. Right. So it's like, these are the things where if you're an investor, you might want to lean into it. But also, if you're thinking about just your own market, wherever you're listening in from, that's what you might have to consider, you know, how hard is it for new people to come in this space? And I think that applies broadly, like how competitive is the Orlando market, but then it can also apply to like your type of inventory. I think that's also something that we probably don't spend much enough time on. Right. So if you manage condos, most condos have a relatively fixed expectation to as far as pricing, like you can make one condo way nicer than another,

and you'll be able to charge more for it. But you could easily spend like double the money but not get double the revenue. So I think that's also part of it, too. If I can go buy a condo to compete with you in your market, and I'm putting my listing up there on the OTA platform, just like you're putting all your listings up there in the OTA platforms, I make mine quote unquote, good enough in your market, and I'm putting my listing up there on the OTA platform, just like you're putting all your listings up there in the OTA platforms, I make mine quote unquote, good enough, you know, and I'm charging 150 a night, and then yours is 250 a night and you

made it perfect. Like, is there enough demand to really satisfy that? Maybe, maybe not, you know, depends a lot of factors, obviously. So yeah, I think if I grade this, you know, for us, I think this is a high threat to our industry, because it doesn't really take much for people to, you know, decide to get going in the short term rental space. Of course, there was the, you know, I feel like this flame is kind of pretty much extinguished at this point, but there was certainly a flame for a while of you don't need to even own any properties, right? You can do an arbitrage, you can go do a rental and stuff

like that and get started, which of course was kind of a, you know, comical thing that everyone in the industry knew it was kind of a, you know, a ticking time bomb. And I think most of those bombs have kind of quietly gone off or just shuttered or gone away. But yeah, there's still a lot of people, you know, I'm sure that are in those leases and trying to figure out how to make them work. Heck, one of those public company called Sonder, but I mean, that kind of kind of down. Anyways, yeah, it's real. Let's be honest, right? It's relatively easy that new entrants can come into the space. And you know, compete within your inventory, right? I think you had to look to your market to determine what areas or what properties maybe would be

a little bit more challenging to operate in or what makes your properties more unique. Maybe you're in a market like Myrtle Beach, but you have all the largest properties. You have 10 bedroom homes, 15 bedroom homes. You have stuff on the oceanfront. These are things that make the moat to your business a little bit wider versus I've got 50 condos

and so does everybody else at Destin and Myrtle Beach and Orlando in a lot of markets. So I think that makes it a little bit more challenging. All right. So that's kind of that side of it. You know, how does that, how does that sit? Let's go over to number two. I'll kind of start with this one and you can layer into your thoughts on this as well. So again, importer five forces, it's bargaining power of suppliers, but we kind of reframe this a little bit to really be more the property owners. Now, again, in theory, there is multiple suppliers in the vacation rental industry. In fact, we just did on the art of Hospitality podcast recently, we talked about how few companies own a lot of the

tech stack nowadays, right? There's large private equity companies or there's large venture capital, firms that own a lot of the tech stack nowadays. So you almost have a little bit of supplier risk there. If you can only choose to use one pricing tool or you can only choose to use one PMS tool, then maybe you have to be careful and thoughtful about who you pick from a supplier perspective. But broadly, I think at the end of the day, the suppliers in my mind is really the people who are providing the actual properties for folks to stay in, right? The actual inventory comes from supply and what bargaining power do they have. So if you're a vacational management company, as most of our listeners are, I think your supplier is what's the relationship like with

your homeowners, right? And how solid is that? And what sort of footing is that relationship on too? I think that matters quite a bit because because I think I would grade this more like, there's a moderate risk here. I don't think it's a significant risk if you're a property manager. Because if you're doing a great job, your homeowners are going to want to stick with you. Now, that being said, you know, your homeowners are being assaulted for marketing, you know, marketing professionals and marketing platforms, you know, cough, inventory, for example, that are out there trying to, you know, take, take your inventory and get it assigned somewhere else. And that's a, you know, it's a concerned, you know, like inventory, for example, that are out there trying to, you know, take your inventory and get it assigned somewhere else. And that's a, you know, it's a concerned, you know, it's an ongoing effort that every single, you know, you know, owner marketing, owner solution, marketing solution agency out there is focused on, which obviously that's their business. That's what they should be focused on. But at the end of the day, I think that my sort of belief on this is that if you're doing a great job managing a homeowner's property, they're

going to be pretty loyal to you. And it takes something like relationship breaking for that inventory to want to go away. Right. So it's like most clients that we work with have pretty sticky inventory, if other things are true, like if they're getting great guest reviews, if they're driving a lot of direct bookings, like if they're doing good job managing the platforms, like, I don't see a lot of clients who have churned due to non performance. Now I see clients that have churned

often due to like real estate transactions, right? Like, oh, this has happened to a client of mine locally here, actually, he's lost, like, he said a few dozen homes over in the past few years due to people like moving into their house that they were previously renting. So it's like, oh, awesome, I'm retiring. I don't want to be in Minnesota. It's negative 15 today, I'm gonna go down to my house in Florida, which I think we're joking, because that's what Paul's parents are doing right now. But if that was the vacation rental and they were renting it out and then they said, I'm going to go move into it, what can that property manager do? Right? They can go, okay, Mr. Manzi, like it's your house. You can do with it what you want. But of course,

you might lose that inventory. So anyways, I think that absolutely property owners have you know, some amount of leverage and they can potentially switch property managers if they want to. But I think it's something that they're not going to make a habit of, right? Like if someone were to do that a few times in a few years, that would be pretty surprising to me. Most people are gonna stick with you for some period of time. I know Brooke has talked in the past about the fact that he builds models up the fact that a property should stay

with you for 10 years. That's like ideal. I think that is ideal. I would love that. I don't know if that's often the case back when I look at some of our clients, can I point to some homes they've had for a really long time? I don't know if it's always the case.

So maybe you should build it off more like four years or five years might be a more realistic, you know, length of relationship. But you know, everybody's different. Every company is different. So yeah, that's kind of that's kind of my take on it, which is that this is a threat to you. But I don't think it's your biggest threat. Because if you're doing a good job, then your inventory is going to stick around. And I think you have to be working obviously on your, you know, marketing and branding

and all these efforts, maybe you should talk with Paul to about the inventory side to be attracting new inventory to deal with the natural amount of churn that's gonna occur just because of normal real estate transactions and things like that. But what's your take on this? I kind of put this a little bit lower on the scale. Do you agree?

Do you see it as more of a threat? What's your thoughts? I think it is very market specific. And like, I mean, you're talking about the factors increasing supplier power. The two bullet points are high demand in certain areas and owners of unique and luxury properties. We've talked about this on the social media side of things as well with Instagram.

I mean, there are Instagram-worthy properties. Guess what? That owner has a little more value to all the professional property managers in their area. They're on everybody's top 50 list, top 20 list. So I think that that's something that some of these investor owners who have purchased their property with a very specific purpose, I can see them having a little more power, but I think you're right.

In delivering just the overall guest satisfaction and owner satisfaction, I think this is a lower owner leverage point because it's not as painful as a property manager going and switching a PMS software. But there is, there's something to be said for, I don't want the upset of trying to get my bookings moved over, trying to do this or trying to do that. There's timing things. If it's a popular home, you've got bookings that you're going to have to move over from thing to thing. If you're going from system to system, PMS to PMS, there's a lot of complexity that can go into it. And that's going to stop your revenue stream for even a week, a month, something like that.

Nobody's gonna wanna do it. Or very few are going to wanna do it, again, unless I think there are other factors that are going to play a stronger role in them, and in the property owners truly having the power there. So yeah, I would agree moderate, maybe low side, depending on your market. If you're in a more desirable market

with some of those market caps, South Lake Tahoe or Finger Lakes or something like that, yeah, then that owner probably has a little more power there. So just a matter of unique nature and what markets you're in. And I'm sure the whole bunch of things we're not even adding to the list there. Yeah, I would say if you're going through this thought process on the

supplier side, again, think about each of your suppliers, right? So I'm thinking within a vacational management business, I know this is not my area of expertise, but I've heard clients talk about this at length, you know, their relationship with their laundry provider or the cleaning provider. And if you had one relationship, like you only this one company does all my laundry services, only this one company does all of my cleaning services. And again, I mean, what we just see, we saw this tick tock fake ban over the weekend, right? Things, one relationship for your entire operational sort of process to be relying on one relationship feels really risky to me. I have a client who says like, I pretty much never give anyone more than 40%. Like, so he's got kind of

three different companies that does laundry, they do cleaning. He's got some in house, I think. And then he's got, you know, an army of contractors, as most everybody does once their operations get big. And that makes complete sense to me. But again, if you only have one relationship to let's let's not even go through a doomsday scenario where they just shut down their doors and say, Okay, we're not going to do your laundry anymore. Or we're not going to clean your properties anymore. Let's think about the the Porter's five

force to his bargaining power supplier. So the supplier could just say, Okay, we were charging you 85 bucks a clean, we're now charging you $100 a clean. Well, think about that, right? Like it's not enough to like sink you, but it's certainly enough to like chip away at your margins, like in a road, your profitability significantly. If you were charging $100 for cleaning

and you were making a little bit of margin on it and just trying to like, you know, kind of break even that relationship, that's one thing. But all of a sudden, again, if they go from like $80 to $125 per clean, and then you're now having to pay that extra cost out, you have to go back and look at all these bookings, maybe recharge more cleaning fees, but you could be in a bad spot, right? Whereas if you add five relationships, you could say, I understand you need a charge, we need a charge. I'm going to go to this bid this work

out to four other providers of cleaning services to make sure I'm getting all I can be getting from a business standpoint. So it's not just the obviously the relationship you have with your homeowners, I would argue is the most important, right? But at the end of the day, you're gonna have suppliers with different you know, areas of your business, you're gonna work probably with a marketing agency, you're gonna have someone on your marketing team, right? If you only have that one relationship, and you never go and bid it out, that's probably not a good idea there. You know, like I'm saying things that are

you know, potentially gonna cause me some pain, but I believe that you know, you should go, you know, potentially get a bit out on once a year once every other year and say, Hey, I'm happy things are going well. But maybe it's worth looking at that relationship and seeing if it could be better. So the bargaining power you have ultimately comes down to leverage and leverage means options. That's kind of what I've learned, you know, in my career and negotiating things like salaries and payments and things like that. So yeah, all right, let's flip the point page a little bit here.

bargaining power of buyers, you want to kind of touch on this one? And I can maybe add some extra context as well. Yeah, yeah. I mean, I think there's a little bit of carryover here between the bargaining power of the buyers and the threat of substitute products, but let's face it, travelers are in a pretty high leverage point here. It's not, I mean, look at, obviously we want direct, let's go Airbnb, let's go Verbo, let's go booking.com. Those are options, okay?

Google hotels, Google travel is an option. Okay, that's just our accommodation types, in our vertical, the vacation rentals, the Airbnb, stuff like that. Now let's take into consideration hotels, timeshares, bed and breakfast, inns, lodges, all the things I wrote about back at resortsandlodges.com. Every single unique accommodation point, yurts, all of this stuff, this is what we have to deal with. So I think it's really important to understand what their leverage point is. Is it the cost? Is it the type of accommodation that they're getting? I think there's a different bargaining points on the buyer side with these

travelers that just, it makes it very difficult to really take any of that leverage back. I mean, it is you're not going to grow your inventory specifically to hit specific travelers. You're not going to necessarily change the platforms you're on or property types in order to accommodate to them. So what you have to do is deliver on that great experience, make sure that your pricing is transparent. I think that's important here. We've got that certainly on our side of things. And that's becoming increasingly important with fees overall and junk fees and everything else.

I'm interested to see how what was signed last year now comes into fruition over the next 12 months and how that impacts an Airbnb or a Verbo or some of the fees that some of these travelers are incurring here. So yeah, it's hard to say. I mean, outside you are you can drop your prices, you can, you know, find expand your availability as possible. But ultimately, you have to deliver on what that traveler is looking for. So you know, you can certainly dive in there and go for broke on

what do you think the bargaining power is of those travelers? Yeah, yeah. My thought process, I think we're pretty aligned here, right? Is that depending on, again, this kind of goes back to that inventory discussion too, right? If you have the really unique 10 bedroom home, that's the only 10 bedroom home in that market, I think you have a lot more bargaining power, you know, to be able to go to the buyer and

say, go to the guest and say, this is what I'm charging. And if you want to come stay here and you want this kind of property, this kind of experience, you have to pay my right basically to get this kind of experience. But I do think it's something where, yeah, you know, at the end of the day, if you have commodity properties, this is, I think, the hardest game to play, because the buyers have so many other options, they can say, Yeah, you know what, I don't want to pay 300 bucks a night

for this particular vacation or property. I'm gonna go to the hotel down the street and book a room. Yeah, is it nice? Maybe not. Maybe it is not quite the same amenities. But I think the hotels are not stupid, right? Like they know, you know, that they've lost some market share in many places to vacation rentals, because in many situations, they are a better experience and they're fighting back. I mean, they have other types of inventory available now. They have other styles of properties that they're offering. You know, I said, are my wife and I stayed a while ago in

like a home with sweets that was like full kitchen, like pretty much everything that you would need there to stay if you were just looking for that type of experience. And honestly, if it was just one or two people, I think that'd be a perfectly reasonable experience and it was cheaper than other vacation rentals with the standard of a nice hotel product. Everything was clean. There was a lot of positives there. So yeah, I think that the way to, again, it's inversion thinking, right?

How do I increase my ability to have more bargaining power over my guests? It's having more unique listings, right? It's having more unique properties that they desire, not ones that they're comparing against 10 other options. Because if they do, and they're shopping, I would say most guests are shopping on value, not specifically only on price, but obviously price is part of value.

They're looking for the overall package. What am I getting? View, location, amenities, all these things. Yeah, the more differentiated you make yourself into an area where people actually want it, the better, the better, you know, I think positioned you're going to be long term. But I think this is probably one of the major threats to our industry in terms of pricing, again, particularly in high market, high inventory markets, where it's like, how do I, you know, fight back against the marketing power of a guest when

they, if they don't book me, they can book 10 other companies. So that's almost more of the, I would say the flaw, you know, in the vocational model in many situations is going into a market and it's, you know, it's relatively easy to find bookings. And again, these central Orlando markets or the Myrtle Beach market or the Destin market, the downside is it's like, man, it's just like a constant game of like, how do I make my service the best it can be, but I have to charge kind of as little as possible in many situations if I don't have really unique, awesome quality inventory, if I've got the same thing as everybody else, you're really at the mercy of what the guest is willing to pay. And the

guest has a lot of different options out there. And the guest can research a lot. Small total sidebar note here, this wasn't our outline. But I was thinking my wife is actually looking the other day, oh, what will what will our first trip be, you know, after this new baby, and we thought about maybe doing something at the very end of this year, like Thanksgiving timeframe. And I said, All right, we're sitting here on the couch, we got nothing to do anyways.

We're just sitting here and watching this baby sleep and the other kids are running around. And we said, all right, let's go on research and look for potential places that we might stay at. And we went on both direct booking sites for a destination we're interested in. And she went on Airbnb and Verbo and these platforms. And I just had this thought by the way,

that like, I don't know if this, I don't know if we wanna give up that vacation planning process as much as some might think, like, I think a lot of people think there's going to be this, like, AI agent workflow, where I just like say, book me a five bedroom house, you know, in whatever destination in Orlando, for Thanksgiving of 2025. And, and, you know, they respond back, got it, like, I just

think, like, these people like the process, we almost like the like treasure hunt, if you will, of going and finding like a property that suits us. Now, could we get better recommendations? Could we skip through stuff that we're not interested in faster, could AI help with that? I think so. I think it's a, you know, Brian Chesky talks a lot

about how it's a matching problem a little bit, more than anything. They have all the inventory. It's just matching that inventory to the right person. But I think that at the end of the day, like that AI, the idea that AI would just book things for us, I think that could happen in like a, you know, I just want a simple one bedroom hotel. I'm going for a work conference. This is the thing closest. Just just book things for us. I think that could happen in like a, I just want a simple one bedroom hotel,

I'm going for a work conference, this is the thing closest, just go ahead and book it, don't make me enter in the information. But I think for these longer cycle, vacation planning processes, I just don't know if AI is gonna emerge as much as maybe some people might think today. I mean, I could be wrong, but that's kind of my take on it

in certain types of travel planning from my perspective. Yeah, I think that's right. I think you got it right there. It is, I mean, we'll all just kind of hop into the threat and substitute products there. I think it's somewhat similar to your point. Yeah, there's lots of alternatives, right? Go ahead. It's, I think it is. And this is something where, let's face it, this is how the vacation rental industry really grew itself, I think, is that it offered that alternative, we were the threat of substitute product or service.

We get offered a, in a lot of cases, a larger accommodation, something that was more custom outside of the four walls of that hotel resort or anything like that. I mean, bed and breakfast was a little more on the same line, that's why we're Airbnb. But it is, I think that that's something that we maybe have opened ourselves up to hotels and resorts and all these other accommodation options being a higher threat.

Because that is, I don't think that we were the high, that that was a high threat five years ago, six years ago, seven years ago, eight years ago, anything like that. Now it is. Now that the value that vacation rentals offered isn't there. Some of it's because of those fees, some of it's because of the desirability, because we've given people what they're looking for, and now they want more of it.

Awesome, congratulations industry, but now we've kind of opened the door for the hotel and greater hospitality industry to kind of, you know, undercut in some cases and still continue to drive the value that they perceived that they were driving previously, but now getting a little more, I guess maybe getting a little more credit for it because now it is.

It's that thousand dollar vacation rental as opposed to the $800 hotel or resort with some add-ons and things like that. So obviously the factor is increasing that threat competitive pricing and that's become a a very, I mean, not even just the competitive pricing for that hotel, but the competitive pricing on those meta search sites and on the OTAs and things like that. It has become not quite a race to the bottom, but we talked about those tiers a couple of weeks or months ago now probably, and I think it is. A lot of it comes into the fact of people know what

they're getting from hotels and resorts and those standardized options and when we don't have that standardization I think that also kind of increases that threat of people go to a vacation rental they don't have that they don't get the amenities or service that they were offered or promised and we lose that potential traveler as an industry down the road. So ultimately, vacation rental still drive a better experience than the standard hotel resort and breakfast, anything like that. But if people know what they're looking for and that four walls and the amenities, simple amenities are what you need, that is something that is going to threaten

the continued growth of the vacation rental space, I think. So jump in and add in anything there you want to. No, and I think you nailed it. At the end of the day, this is the threat, right? Is that at the, while guests, when you survey them, there's some data backing that's up, prefer vacation rentals, that preference, as with all things, has a price, right?

I may prefer a certain pizza place to a different pizza place, but if one had a one hour wait and one said, I can make you a pizza right now and I'm hungry, guess what? I'm taking the pizza that I can get right now unless it's just trash and I don't want it at all, right? So it's kind of this like constant balancing act

between like what we're offering, again, the value, what people are, feel like they're getting for what they're paying and what the other options are. And I think that depending on where you are and the and the, you know, investment going into some of these places, like there's a lot of pluses, there's a lot of pros about these, you know, about many hotel products compared to many vacation or products, a bad vacation rental is a pretty darn bad experience. And yes, about hotels, pretty bad experience too. But generally speaking, you know, more of what you're getting into with a hotel by looking at reviews, doing

research ahead of times, you know, all that kind of thing. Whereas a vacation rental, there's a lot of people, you know, again, if you go on X or Twitter, and you look at some of these viral Airbnb threads, you'll find hundreds of comments of people who have said I tried in Airbnb, I tried a vacation rental, I had a negative experience, and I'll never do it again. They say that. Now the data would indicate that either A, they're lying or like B, you know, these platforms are continually finding new people and we're able to grow despite the fact that there's X percent of the population of the US, for example, that's just sworn off vacation rentals. But, you know, eventually, if that were to

happen at a large enough scale, people would say, Oh, it's I've had a bad experience. And that can sort of spread almost like a almost like a disease, you know, it kind of spread to more and more people. And we may lose our you know, part of our traveler base that's not going to come back. So I think that's a very fair thing. I'll bring us home here on number five rivalry amongst existing competitors. So yeah So I think that's a very fair thing. All right, bring us home here on number five, rivalry amongst existing competitors. So yeah, I think that at the end of the day, we could do a quick Ficasa,

like standing on the gravestone here for one moment, but certainly there was a moment in time if we recorded this idea three years ago, or four years ago, perhaps we would have sat here and said, man, Ficasa is just here. They're buying every single local vacational company, right? And they're merging them into this Ficasa mega brand. They just went public at a $4 billion

valuation. And we could have sat here and really made a convincing case of like, Picasso is going to swallow the vacation industry in some way, you know, whole. And now we can record this with the beautiful benefit of hindsight, and look back and say, obviously,

that did not happen. And you know, Fakasa is now going to essentially be fractionalized and turn that individual franchisees is kind of my understanding from the Kusago end of things. But yeah, the vision that maybe we once had on this national brand that's gonna take everything and all this fractured individual companies

and merge them into one mega brand, we can at least put that to bed for now. Now, we'll see how long the you and I last in this industry, but it's gonna happen again, right? We'll just timestamp it right now. It's January 2025, someone's gonna come back and say, I know everything Vakasa did wrong, I'm going to fix it. And I'm going to try it again. And I'm going to be the mega, you know, non franchise

model, right? I'm going to be the mega brand that's going to manage all the best vacation rentals in the US. And, you know, Godspeed and good luck to them when you know, they and their investors get excited into the platform. But yeah, at the end of the day, of course, this is, you know, like we've said a few times today, very market dependent, but it's not that hard to switch your property, you know, from one manager to another, we talked about it earlier, for the guest researching, again, they can go on a few times today, very market dependent, but it's not that hard to switch your property, you know, from one manager to another, we talked about it earlier. For the guest researching,

again, they can go on a few different websites and look for rates and look for properties. So there's rivalry, you know, your competition is often legitimate. And your competition is not only the other vacational company in town, we talked about this at length to previously, it is also the Airbnb host, you know, that has one or two properties. It also is the Airbnb, you know, kind of this co hosting model that's popping up now, it's someone that has seven listings, 10 listings, but is the Airbnb, kind of this co-hosting model that's popping up now. It's someone that has seven listings, 10 listings, but they can provide a lot of service to the seven or 10 listings.

And that is part of your competition, just like it is part of your competition that you're working with, the top companies in your market, maybe that have 500 listings. So the guest is gonna look at reviews, look at feedback, look at data to kind of make the best decision. But certainly the data would indicate that in many situations,

the smaller hosts and property co-host, smaller managers that have 10 units, 12 units, 15 units, often have, according to the data, better reviews or in some situations, better feedback than the larger, more established property managers in the region. Now, I know there's reasons for that when you go look at the data, the size of the amount of homes, the amount of reviews they're getting, blah, blah, blah, blah, blah. But it certainly, you can't make the argument if you're a property manager that, oh, if you go and stay with this person that has five units, you're going to get a vastly inferior experience, you can't make that argument.

Now, it may be the case depending on the person you're you're working with. But that's not a broad statement that you could make with much validity. Now, there's many large property managers that are pretty poor ratings and reviews. I was looking at someone the other day on Airbnb. They're on all the LinkedIn, all the podcasts, they talk about how great their company is 4.65 on Airbnb, you know, 10,000 plus reviews. That's a pretty large sample size right to talk about the outcome and on Airbnb that is not very good, I think is the

scientific conclusion there. So anything you want to touch on there on competition, as well to kind of round us out here. I think truly that the key part of their factors decreasing that rivalry strong brand reputation, customer loyalty built through excellent service and unique offerings. That is what's going to keep you on top of your existing competitors, whether they're a big professional property management company, an individual, a hobby host, whatever that is, that is the key. I think we mentioned that or some variation of that every episode, but it's true. That is a critical part of the business and seeing success in the business. So I of that every episode. But it's true. Like that is a critical part of the

business and seeing success in the business. So I think that's it. Right on. Awesome. Well, thanks to Michael Porter, who didn't we did not talk to him. We did this, but it's a good framework. And again, a reminder that sometimes if you go back to the basics, you can learn a lot. So again, to recap, the five forces are the threat of new entrants, the bargaining power of the suppliers, in our case, we kind of talked more about homeowners, the bargaining power of buyers, customers, in our case, we kind of talked mostly about guests, the threat of substitute products and services, we talked about hotels and other alternative accommodation platforms out there.

And then finally, number five, the rivalry amongst existing competitors. How do you kind of elbow out the competition and make sure you get the market share you need? So thank you, Paul, for recording with me today. This was a fun one. I think we got to dive into one that really makes you think today, which is a good way to start off 2025. And you're doing all your planning and thinking about what the future may hold. So appreciate that one. If anyone has any questions or feedback, we welcome that. Feel free to go to the podcast

episode page. You go to buildupbookings.com slash show. There's all the episodes there, by the way, and you can send me an email or pop me a message on LinkedIn, whatever appeals to you the most. There's also links in the show notes where you can contact myself and Paul, if you want to reach out and have any other questions or feedback, we appreciate that. One last thing before you get out of here, we need more reviews. We're starting here in 2025 with not really a ton more views than we had in 2024, which doesn't sound right to me because we have 1000s of downloads like many people

listen to the show. But if you're listening and you made it all the way to the end, you're might be one of those people who hasn't left yet a review left yet letter wasn't left to review. So anyways, go to your podcast app of choice, iTunes, Spotify listeners, you already get the most downloads. Therefore we appreciate a review from you all the most, but we'll take a review anywhere. We're not that picky. Go to your podcast app, leave five stars. We appreciate those reviews and then we'll have more episodes coming to you for the rest of this year. Thank you so much. I'm gonna catch you on the next

episode.