“Experience” Real Estate
Understanding the experience economy will position real estate professionals to deliver a unique customer experience.
Over the past decade, a monumental shift has occurred in the way consumers are experiencing real estate. With the advent of online travel agencies, the mobility of the millennial generation and consumers’ desire for unique experiences, traditional real estate has been going through a transformation.
Understanding and adapting to these market dynamics will create newfound wealth for individuals who position their real estate assets to deliver a unique consumer experience.
What’s Driving the Shift
It used to be that if you were traveling for business, vacation or other personal reasons, you would book a room at a hotel.
Today, companies like Airbnb, HomeAway, Booking.com and Travelocity, which are referred to as online travel agencies, are giving the consumer access to properties that have been adapted to compete against traditional hotels. The short-term rental market, which consists heavily of single-family homes, condominiums and townhomes, used to be a cottage industry, but it has exploded into a mainstream industry.
This past decade was simply the “coming out party” for an already proven option for consumers to experience real estate while traveling. The short-term vacation rental industry’s rate of growth is 3.5 times the growth rate of the traditional hotel industry. By the end of 2020, the short-term vacation rental industry is projected to topple the hotel industry, according to Matt Landau, founder of VRMB, a leader in the short-term vacation rental industry.
The Appeal of Short-Term Vacation Rentals
Consumers are increasingly choosing short-term vacation rentals due to the amount of space they offer for the price, as compared to a traditional hotel room. Properties that are converted to short-term vacation rentals are usually more family friendly.
As a guest, you have more control over your stay and what you want to experience. You get to choose what type of “hyper local” experience you want to have. You can choose to rent a property in a middle-class neighborhood or the urban center. Or, you can even rent a luxury home and live like you’re a rock star for the weekend. There is also the opportunity to share the cost with fellow travelers.
Online Travel Agencies
The internet has transformed many industries, especially the travel and hospitality industry. It used to be that traditional hotels had the primary access to mass media marketing channels to drive guest bookings to their properties.
The internet has given birth to online travel agencies, which allow owners of a single property to market their property for rent to a global market. In addition to market reach, online travel agencies give the property owner the ability to showcase their property in a simple way and to secure bookings from the consumer.
From the consumer’s perspective, online travel agencies give the consumer confidence to book properties owned by a third party due to the amount of information they provide, including reviews from previous guests. Eighty-two percent of all travel bookings in 2018 were made online via mobile apps or websites, without human interaction. 148 million travel bookings are completed online each year, according to TrekkSoft. And, Google data shows that travel-related searches, including “today” and “tonight” have grown by more than 519% in the past five years.
Millennials and “Experience Real Estate”?
Unlike previous generations, millennials have grown up with mobile devices. They are an extremely tech-savvy generation.
In addition, millenials are not content with the traditional approach to work and living—they are living while they work. They are searching to create experiences through their work environment. This is referred to as “bleasure travel,” which is the activity of combining business travel with leisure time.
Millennials also spend more money on travel compared to other age groups. In fact, they are predicted to spend $1.4 trillion on travel in upcoming years, according to Hospitality Net. In their pursuit to create experiences, millennials increasingly rent properties.
How to Deliver a Unique Real Estate Experience
The individual managing the property creates the unique experience. The property manager brings the human, local touch that is all about giving the guest something they haven’t experienced with a traditional hotel.
The consumer needs to feel like the experience was created just for them. An example most people can relate to is Disney’s guest experience. If you have ever visited Disneyland, you know you are experiencing it with thousands of other people, but you also feel like it was created just for you. The small things in the guest experience create the magic.
For example, communication is very important to the guest. An effective manager delivers nurturing communication tracts to guide the guest from the moment they book to after they check out. The complete experience should communicate to the consumer “be our guest”!
Really good managers do many small things that make a difference. They consider the layout of the furnishings in the property, the smell of the property, the ease of property access, the linens, and the speed of response to the guest if there are any issues that arise during their stay. We’ve heard about managers who even cook local, authentic cuisine for their guests as part of their experience.
Not only does the short-term vacation market give the consumer an opportunity to experience real estate in a different way while traveling, it also provides an opportunity for property owners to create wealth. Property owners generate recurring revenue from their bookings and realize increased equity over time as they pay down the mortgage with booking revenue. The property owner also has the flexibility to block out time to use their own property. Those who effectively combine real estate ownership with hospitality will capture this exciting market opportunity.
