Having been a real estate investor and educator for going on thirty years (yes, I really did just admit that), I’ve seen a lot of trends and fads. There is a big difference between a fad and a trend.
In dictionary.com, a fad is defined as: a temporary fashion, notion, manner of conduct, etc., especially one followed enthusiastically by a group.
Whereas a trend is defined as: To take a particular direction; extend in some direction indicated.
So, one is fleeting and the other is a change in direction. When it comes to VRBO or Airbnb, is it a trend or a fad? And as an investor, how does it affect us?
Let’s start with a little background on both companies.
VRBO is a part of the HomeAway family. HomeAway was founded in 2005 and was created by consolidating five of the leading vacation rental websites in Europe and the U.S. to be a one-stop shop. HomeAway went public 2011 and is headquartered in Austin, TX. In November of 2015 it was acquired by Expedia, Inc.
Airbnb was founded by Brian Chesky and Joe Cebbia. The two moved to San Francisco from New York; they were unemployed and needed to pay rent. They noticed that when a big convention came to town all the cities hotel rooms would sell out. So, they purchased a couple of airbeds and put up a website called: Air Bed and Breakfast. They charged $80.00 a night – a business was born.
Joe did a great TedTalk if you want to learn more.
So how do the two companies differ?
Airbnb is a marketplace where a property owner can list a rental. Airbnb also helps with the booking process and all financial transactions. It is free to list your property and there is a small processing fee that is assessed when the property is booked.
VRBO/HomeAway is an online listing service for rentals. It is as simple as that, the property owner pays to list the rental on the website. The booking and transaction is handled by the owner (or property manager). There is no other assistance from VRBO/HomeAway.
Both offer photos and a review system.
Which one is better for the investor? It is not a cut and dry answer – it depends on your desired amount of control and ability to do the administration. I would say if your property is perpetually a rental, Airbnb might be a better way to go because you aren’t paying every time you list it, you only pay when rented.
Back to the questions of Airbnb and VRBO being a fad or a trend: Well, vacation rentals have been around for a long time, these companies have just changed the way that the rentals are marketed. So, I consider them a trend.
What is a fad is that investors are buying urban units (or renting them) with the sole purpose of using Airbnb/VRBO to create income. This is a concerning business model as there are players, such as Cities and HOAs, that can inhibit a property owner’s ability to do business using the VRBO/Airbnb business model. A local city could quickly (and has in many places) restrict short term rentals. In addition, HOAs are becoming more restrictive about these rentals as well.
So, the question for the investor using Airbnb and VRBO is: if the rules change and short term rentals are no longer allowed, what is your plan B?