Innovating VRBO: Strategies for a Future of Responsible and Immersive Tourism
Developing strategies to prepare VRBO for plausible futures of tourism.
The vacation rental market is dynamic and evolving in a world where travellers increasingly seek unique and meaningful experiences. Vrbo, a key player in this market and part of the Expedia Group, faces the dual challenge of competing with giants like Airbnb while innovating to meet new consumer demands and regulatory landscapes. The Strategy Development project outlines a comprehensive strategy for Vrbo to enhance its market position and future-proof its operations. This article delves into the detailed innovation strategy proposed for Vrbo, emphasising responsible tourism, curated experiences, and technological advancements.
Part 1: Research and Analysis
Meet the Team
The team behind the Strategy Development Project for Vrbo comprises four dedicated and skilled individuals: Debaditya Jena, Prashant Matta, Advaith Mani, and Pooja Kheterpal. Each member brought unique skills and expertise to the project, contributing to a comprehensive and innovative approach to strategic development. Our collaborative efforts and diverse backgrounds have enabled us to craft a robust strategy that addresses current market challenges and leverages future opportunities. Together, we applied advanced analytical tools and strategic foresight to position Vrbo for sustained growth and competitive advantage in the dynamic vacation rental market.
My Role, Tools Used, and Skills
- Role: My role was pivotal in analysing market trends and crafting strategic recommendations. I leveraged my strategic foresight and analytical thinking skills to identify key opportunities and potential challenges. By closely examining the competitive landscape, I contributed significantly to developing a robust strategy to ensure Vrbo’s sustained growth and competitive advantage in the vacation rental market.
- Tools Used: Miro, Figma, Google Workspace, MS Suite
- Skills: Strategy Development, Foresight, Systems Thinking, Horizon Scanning, Scenario Planning, Presentation Skills, Communication Skills, Creativity, Analytical Thinking
Brand Expedia and VRBO:
Expedia Group is a leading global travel platform encompassing various brands, including Vrbo. Expedia is renowned for its extensive range of travel services, providing consumers with comprehensive options for booking flights, hotels, car rentals, cruises, and vacation packages.
Vrbo, part of the Expedia family, specialises in vacation rentals. It offers travellers unique accommodations such as entire homes, cabins, beach houses, and more. Vrbo focuses on providing families and groups with distinctive and memorable lodging experiences, differentiating itself from traditional hotel stays.
Both brands leverage Expedia’s robust technological infrastructure and vast network to deliver seamless travel experiences, catering to diverse traveller needs and preferences.
A Tree of Cash
We conducted a comprehensive driver tree analysis for Vrbo to identify and understand the key factors influencing its performance and growth. This analysis mapped out Vrbo’s business’s primary drivers, including market demand, competitive positioning, technological advancements, and consumer behaviour trends.
The driver tree analysis for Vrbo uncovered three key insights: guests and homeowners are primary sources of revenue, commissions are earned at various stages such as cleaning and cancellation, and the main drivers for future growth will be maximising lead generation and conversion rates, capitalising on new travel trends, and building customer loyalty.
The Good, The Bad, and Something in between
The vacation rental market is predominantly controlled by two major players globally, with Vrbo and Airbnb forming a near duopoly. However, Vrbo’s heavy reliance on homeowners and a lack of consistent quality control often impede its potential success. Despite these challenges, there is significant opportunity in the growing trend of travellers seeking unique ‘experiences’ over traditional hotel accommodations. Nevertheless, the ever-changing government policies and regulations regarding short-term rentals continuously threaten Vrbo’s growth and sustainability.
Business Model and Vision
Vrbo operates on a dual business model of subscription and commission, catering exclusively to homeowners who list entire properties for rent. This model allows property owners to choose between paying a subscription fee or a commission on each booking, providing flexibility based on their rental preferences and frequency.
Vrbo’s vision is to create a world where every family and group can find a place to call their own, offering unique and memorable stays beyond traditional accommodations. By focusing on entire home rentals, Vrbo aims to provide guests with privacy, space, and the comforts of home, making it an ideal choice for families and groups seeking distinctive travel experiences. The platform’s commitment to enhancing user experience and integration into Expedia’s extensive network positions Vrbo as a leader in the vacation rental market.
Challenges
- Over-dependence on Homeowners: Quality control issues arise from reliance on homeowners to maintain standards.
- Regulatory Risks: Varying government policies on short-term rentals threaten stability and growth.
- Market Dynamics: The shift towards experience-based travel over traditional accommodations creates opportunities and competitive pressures.
Part 2: Innovation Intent
In the next five years, Vrbo will empower tourists and travellers to find their niche place in any community worldwide by offering immersive vacation experiences with seamless integration between digital platforms and rental properties.
Part 3: Innovation Strategy
The Woke Local: Responsible Tourism
Objective:
Position Vrbo as a company that gives back to the community, fostering a positive impact on local economies and environments.
Global Cues:
- Growing concerns about the impact of short-term rentals on real estate markets and local communities.
- Increasing demand for sustainable and responsible travel options.
Initiatives:
- Local Employment Opportunities: Partnering with local businesses to provide ancillary tourism services, enhancing economic benefits for the community.
- Promoting Local Businesses: Integrating features highlighting local businesses near rental properties, akin to digital Yellow Pages.
- Volunteering and Charity: Creating opportunities for tourists to volunteer locally and donate to city councils and local organisations.
- Vrbo Vacation Stories: Sharing stories promoting local communities' cultural and social uniqueness.
Impact:
- Significant long-term benefits in brand reputation and community relationships.
- Enhanced trust and support from local governments and communities.
Vacation for the Future: Curated Experiences
Objective:
Evolve Vrbo will cater to the future needs of travellers, focusing on curated and personalised vacation experiences.
Global Cues:
- Rising trend of travellers seeking unique, experience-based vacations.
- Growing preference for booking vacations well in advance.
Initiatives:
- Book Now, Enjoy Later: This option allows travellers to lock in prices and reserve experiences up to two years in advance.
- Curated Experiences: Using AI tools to customise vacation experiences based on traveller profiles and preferences.
- Vrbo-Branded Inventory: Developing branded experiences and integrating them into listed properties.
Impact:
- An expected increase in lead conversion rates from 3.5% to 4%, driven by personalised and forward-looking offerings.
- A projected revenue increase of 12.14%, significantly boosting Vrbo’s competitive edge.
Tech It Up: Enhanced Digital Platforms
Objective:
Optimise and improve Vrbo’s technological infrastructure to enhance user experience and operational efficiency.
Global Cues:
- High churn rates due to complex websites and opaque pricing.
- Need for seamless integration between digital platforms and physical properties.
Initiatives:
- Transparent Pricing: Implementing clear and straightforward pricing models.
- Automated Check-in/Audit Tools: Ensuring consistent quality and streamlined check-in processes.
- AI and Chatbots: Utilising AI to forecast demand, identify trends, and enhance communication between owners and travellers.
Impact:
- A projected increase in lead conversion rates from 3.5% to 3.9% resulted in an 11.43% rise in revenue.
- Improved user satisfaction and loyalty through a more intuitive and responsive platform.
Current and Proposed Portfolio of Initiatives
Prioritisation of Initiatives
The initiatives recommended in the three innovation themes were prioritised as follows:
- Transparent Pricing: Implementing clear and straightforward pricing models.
- Local Employment Opportunities: Partnering with local businesses to provide ancillary tourism services, enhancing economic benefits for the community.
- Book Now, Enjoy Later: This option allows travellers to lock in prices and reserve experiences up to two years in advance.
- Promoting Local Businesses: Integrating features highlighting local businesses near rental properties, akin to digital Yellow Pages.
- Automated Check-in/Audit Tools: Ensuring consistent quality and streamlined check-in processes.
- AI and Chatbots: Utilising AI to forecast demand, identify trends, and enhance communication between owners and travellers.
- Volunteering and Charity: Creating opportunities for tourists to volunteer locally and donate to city councils and local organisations.
- Curated Experiences: Using AI tools to customise vacation experiences based on traveller profiles and preferences.
- Vrbo Vacation Stories: Sharing stories promoting local communities’ cultural and social uniqueness.
Part 4: Road Map and Implementation
Immediate Future
- Focus on building trust with users by improving platform reliability and transparency.
- Lay the groundwork for long-term initiatives through community engagement and sustainable practices.
Near Future
- Develop and integrate technological solutions to support seamless digital and physical experiences.
- Strengthen connections with local businesses and communities to reinforce Vrbo’s brand reputation.
Far Future
- Position Vrbo as an integral part of the community, leveraging its unique offerings to create a resilient and sustainable business model.
- Execute advanced initiatives that integrate previous efforts, providing a holistic and immersive vacation experience.
Part 5: Conclusion
The proposed innovation strategy for Vrbo is a comprehensive approach designed to address current challenges while positioning the platform for future success. By focusing on responsible tourism, personalised experiences, and technological enhancements, Vrbo can differentiate itself from competitors and build a sustainable, community-focused business model. This strategy aims to enhance Vrbo’s market position and contribute positively to the communities and environments in which it operates, embodying the principles of modern, responsible tourism.
