Part 2: Turning data into decisions: Why Domio entered New Orleans
28.05.19
This is part two of a three-part blog series on how we utilize data at Domio. In Part One we learned how Domio aggregates, cleans and stores data to create a robust data ecosystem. Now, we’ll dive deeper into how our internal teams leverage this data; from analyzing insights to making informed business decisions on what markets we enter.
Using Data to Determine Supply and Demand
When evaluating new markets Domio’s Real Estate team takes a data-driven approach. Understanding both a market’s available supply and customer’s demand for short term rentals is crucial to our success. Factors such as weather, seasonality and event schedules can greatly influence a city’s available supply and demand for those units. This constant fluctuation requires Domio to maintain sophisticated data models that update in real time and allow us to take the pulse of the short term rental industry at large.
These models, powered by our data pipeline, contain billions of data points from dozens of sources and run in the background of our systems 24/7. They turn data points into actionable insights and empower our internal teams to analyze trends that impact our business. By aggregating data from public sources, external partnerships and our internal inventory, running it through the ETL process outlined in Part One and appending a business intelligence layer, we’re able to create a holistic, supply-side view of the US rental market. If we pipe in additional data points like short-term pricing recommendations and rent statistics our view becomes even clearer.
Let’s take a deeper look at the different data sets and visualization tools we utilize within our business intelligence layer to understand the short-term rental market. Below, we’ve created a geospatial chart that illustrates both supply and demand in the US short term rental market. On the supply side, the larger and more purple a cluster, the greater the unit supply.
In order to track demand via our data models we dive deep into our listing information data set. This content includes information on a listing’s location as well as additional specifications like number of bedrooms and amenities that provide a sense of the unit’s key attributes. Demand can vary greatly based on these attributes; listings with pools are hot commodities in warm climates and summer months, just as listings with fireplaces draw more attention in the winter.
While location and amenities are factors, the clearest indicator of demand is a listing’s availability calendar. From this calendar we can glean a unit’s reserved nights; a high number of reserved nights yields a high occupancy rate which demonstrates strong demand. In the geospatial image above, vertical yellow bars are the sum of reserved nights over the last year; the taller the bar, the greater the demand. When supply and demand data are combined into one model (and one chart), we’re able to get a bird’s eye view of the whole short term rental market.
Leveraging our data model output in conjunction with other “secret sauce” factors help Domio determine what our next strategic move should be. We can test our hypotheses at the national level, then see if they hold true when we zero in on specific markets. As illustrated by the image below, abundant supply tends to center around cities and densely populated areas.
If we get more specific on the type of unit, we can see that unit supply in cities have fewer available bedrooms than rural supply due to space constraints. When analyzing supply for 1 bedroom units versus 4 bedroom units across the US, the difference is stark.
Next, let’s dive deeper into our data-driven decision making and detail how our data models provide Domio with actionable information on what markets have supply to fit our needs, and where we can find units in the best locations that both delight guests and create a profit margin.
Case Study: New Orleans
Based on analysis of our data models, New Orleans popped onto our radar thanks to its strong supply opportunities and consistently high demand. We noticed that the majority of unit supply was concentrated around the Central Business District (CBD), and the remainder was pretty evenly dispersed through the rest of the city.
However, nearly all of the supply in the CBD is for studio or 1 bedroom units. Because group travel is central to Domio’s mission we also take the number of available bedrooms in a unit into account when growing our Real Estate pipeline. In a traditional hotel there is typically no separation between bedrooms and living space, but short term rentals offer home-like accommodations with triple or quadruple the square footage hotels offer. For group travelers looking to optimize both their location and available space, options decrease significantly.
Despite the disparity in location between 1 bedroom and 4 bedroom units, demand for both followed similar trends. This indicates that large units further from the CBD are still desirable and profitable, and similar units could become even more desirable and profitable if their location improved.
While our data models play a crucial role in identifying new markets for Domio, we also seek to confirm our internal findings with external data that supports our assumptions. In the summer of 2018, Domio commissioned a survey to better understand travelers considering hotels versus alternative accommodations. When asked whether they would stay in a hotel or a short term rental at any point in 2018, over 33% of respondents noted that they planned to stay in a rental booked on Airbnb or another site. That number is up year-over-year when compared to a 2017 Morgan Stanley study that noted 25% of travelers in 2017 and 19% in 2016 planned to stay in a short term rental.
Because Domio focuses on serving the group travel segment, we aim to expand into markets that are popular for groups of friends and families. New Orleans perfectly fit the bill, with nearly 18 million visitors in 2017 — a sixth record year for Louisiana tourism. This was accompanied by a 12.3% increase in spending on lodging ($1.77 billion) in 2017. Additionally, in 2018 New Orleans was named #2 on Travel + Leisure’s Top 15 Cities in the United States list. All signs point to demand for accommodations only increasing in the years to come.
Based on our data models and confirmation of our assumptions using surveys and public data, Domio began operating impeccably designed short term rental units in New Orleans in late 2017. Our units range from multi-bedroom condos to standalone homes in the CBD and surrounding neighborhoods, and in December 2018 we opened our first apartment-hotel, Domio Baronne Street. Baronne represents the best possible offering based on the data that informed our entrance into New Orleans in the first place; the comforts and space of a home combined with the amenities, central locations and consistent quality offered by hotels.
In responses to Domio’s Alternative Accommodation Survey, 38% of respondents said they were more likely to stay in a short term rental when traveling as a group. In a city known for Mardi Gras, Jazzfest and bachelor/ette parties, groups either have to vie for the limited supply of alternative accommodations that can meet their needs, or book several hotel rooms.
Looking forward
In this post we covered how Domio leverages its robust data pipeline to synthesize supply and demand in the short-term rental market. When you look at a market like New Orleans it’s clear that traveler demand is there, but the supply of units available for large groups hasn’t caught up. Domio aims to bridge that gap through spacious short-term rentals that combine the comfort of a vacation rental with the amenities and trustworthiness of a hotel. Stay tuned for part three of this series to learn more about the Domio Difference!
As a senior product manager at Domio I’m so excited to be building products that change the way a traditional industry, like hospitality, approaches problems. We’re baking analytics and technology into every step of our process and promoting a data-driven company culture. If this intrigues you, we’re hiring!
A huge thank you to Harry Zhu for the incredible data visualizations used in this post, and to Carlos Gil, Yasmin Kothari and Umer Usman for their editing expertise!
Alex Grabowski is a senior product manager at Domio. When she’s not building awesome internal products, she’s on a never ending quest to find the best Thai food in New York.
