How will staycations affect vacation rentals?
Perhaps it was 9/11 that began to the slow descent of what was once a nation of xenophiles. For whatever reason, the age of the staycation has begun. What is a staycation? Wikipedia defines a staycation as a vacation taken close to one’s home. A quick search on google will tell you, that as gas prices rose to historic highs last year, the staycation became more and more prevalent. The question is how did this affect the vacation rental market?
Bill Furlong, in his blog Escapia, compared vacation rentals from 2007 and 2008 by region. Some regions saw losses of up to 30%!
While the vacation traveler only makes up a small percentage of sales for the average corporate housing provider, it’s still a sale nonetheless. What’s more, as retirement accounts crashed with the stock market over the past year, retired couples who travel for extended periods of time have shortened their usual trips. This means that corporate housing has lost out to the hotel industry in areas that see a lot of vacation rentals, like Florida.
Discounting your services can be addictive.
“Price-off deals are a drug. Ask a drug-addicted brand manager what happened to his share of the market after the delirium of the deal subsided. He will change the subject. Ask him if the deal increased his profit. Again he will change the subject.”
from Confessions of an Advertising Man, by David Ogilvy
David Ogilvy, of the great advertising firm Ogilvy and Mather, describes price-off deals as a drug because the competition in the marketplace often becomes addicted to seeing who can undercut their neighbor in price. Once the frenzy has subsided, and a new standard has been set for what the price will be, what is left? According to Ogilvy, there will be less share of the market and less profit. In this economy, it may be tempting to undercut the competition in price but ultimately this is not a good idea. Once the new standard is set, it becomes more difficult to profit from the enterprise.
“The time has come to sound an alarm, to warn manufacturers what is going to happen to their brands if they spend so much on deals that there is no money left for advertising to build their brand. Deals don’t build the kind of indestructible image which is the only thing that can make your brand part of the fabric of life.”
(from Confessions of an Advertising Man, by David Ogilvy)
What’s most important during a recession is not to cut your advertising budget. As tempting as it may be, recessions are the time to build your brand. It’s true that there may be a price correction as the industry adjusts to what the market will bear. But do not get bogged down in trying to get ahead of your neighbor by lowering your prices alone. What’s better is to build the perceived value of your brand, so that at any price your company seems like the better bargain.
Not all walls in China are great.
MOBILITY magazine and The New York Times each recently had an article about issues that have arisen with Chinese drywall. The drywall, which was imported from China during the housing boom and has been installed in many new luxury apartment buildings, can cause severe health problems to those that live near it.
It’s difficult to say how many homes may be affected. In The New York Times article, Arnold Levin, a Phildelphia lawyer said that, “There could be 60,000 to 100,000 homes that are worthless and have to be ripped completely down and rebuilt.” MOBILITY inflated the number to 300,000 homes.
It’s easier to create a timeline of when the drywall was installed and to gauge the number of complaints that the government has received thus far. The Times article went on to say that, “The product safety commission has received more than 1,300 complaints from 26 states, but the bulk are from Florida, Louisiana and Virginia, where hurricanes led to an unprecedented housing boom in 2006 and 2007.” MOBILITY stated that the drywall was found in a home constructed as early as 2001, but both sources agree that the majority of homes that contain the offensive product were constructed somewhere between 2004 and 2007.
What can a provider do if they believe their tenant is being affected by Chinese drywall? The only thing to do, of course,is to move them, but who pays for the cost? The Times article elaborated on the ongoing lawsuits related to the Chinese drywall conundrum and it stated the difficulty of finding legal remedy to the situation or even of clearly delineating who is at fault. Unfortunately for now, providers who have tenants made ill by Chinese drywall may end up with a sizeable bill.
The NBTA, or National Business Travel Association, has begun compiling a list of preferred vendors who specialize in environment responsibility– they’ve only gotten as far as rental car agencies, but a carefully planned approach of the NBTA by, say CHPA, could produce a list of preferred corporate housing vendors. Why should we do this? Take note of the “Recipient List” on the last two pages, which outlines the companies that receive this bulletin by the NBTA.