The taxi industry denied that Uber could disrupt their business. Retailers said online shops like Amazon would never replace brick and mortar stores. Today, we're hearing a similar denial from the hotel industry regarding the disruptiveness of the vacation rental by owner movement.
What is this movement and how will it impact our community and real estate values?
What Is The VRBO Movement?
Whether you've heard of VRBO, stayed at an Airbnb, or rented a home through Homeaway, you're likely familiar with the idea: nowadays, empty properties can be transformed into mini hotels with minimal effort and massive reward.
While travelers were initially hesitant to try vacation rentals and hosts were initially hesitant to let complete strangers stay in their personal space, a movement has begun which will only continue to grow.
Vacation rentals represent a product that people love and a solution that people need. Property owners, particularly in second-home markets like Amelia Island, enjoy the ability to offset expenses by generating rental income. Vacationers love the idea of staying in a property that feels like home.
The proof is in the numbers. If you go onto VRBO and search for Amelia Island Plantation Resorts for the following dates, you find the following booking percentages:
Concours de'Elegance: 100% booked
Shrimp Festival: 97% booked
Easter Weekend: 99% booked
July 4th: 91% booked
And these results were based on criteria with no pets and only two guests. As you increase the number of guests in your party, the booking percentages increase.
It's clear that vacation rentals by owner are gaining in popularity both among vacationers and among property owners.
How Will It Impact Our Community?
How will the VRBO movement impact our community? The hospitality industry will be most impacted which will have reverberations for local businesses.
Local hotels in great locations like the Hampton Inn downtown or the Amelia Hotel on S. Fletcher, will have a certain level of protection as their proximity to the beach and historic downtown will remain very popular among travelers. However, they will also have many opportunities to evolve with the industry. If hotel bookings are negatively impacted in a major way by the VRBO movement, as I expect they will be, these hotels might shift their revenue models. Perhaps they can convert the upper floors into apartments/condos and transform their first floor into commercial rental space. Regardless of how they evolve, the prime locations of these particular hotels, will offer opportunities to successfully reimagine their businesses.
Hotels in less prime locations will have a more difficult time, however there will still be opportunities. On-island rental demand is high while rental supply is low so perhaps these hotels could evolve into mini apartment complexes, office spaces, etc.
The resorts on the south end of the island will also be impacted. The Ritz has a brand built upon customer service that caters to high-end clients. While their business will feel the effects of the VRBO industry, it will not impact them as much as other brands.
The Omni is a more interesting situation considering they have their own rental program. Their program is very expensive for homeowners compared to other options. Omni retains anywhere from 40% to 50% of rental revenues in exchange for their services. By comparison, local property management companies charge 25% of the rental revenue and homeowners can keep 100% (minus expenses) of their revenue if they manage their property themselves.
While the Omni has a major advantage with its exclusive amenities like their oceanfront pool, its hard to imagine the VRBO movement won't put pressure on their bookings.
The Omni will have to compete with VRBO on two fronts: among property owners and among vacationing guests. How the Omni decides to compete will have major ramifications for the Plantation community.
I believe the Omni will not opt to lower the rates they charge guests or the rates they charge their villa owners. Instead, they will compete by offering their guests more exclusive amenities and experiences. They will also cater to corporate conventions and special events like weddings and these will become a larger percentage of their bookings since families will move towards VRBO.
I believe we're already seeing the Omni take action towards providing a broader amenity package for their guests. For example, the decision to close the Ocean Links golf course provides property they can use for other amenities and guest experiences. The Omni has not been clear on how it intends to utilize this space but how this plays out will have major impacts on property values.
How Will This Impact Real Estate Values?
The VRBO movement will impact property values across our community in other ways besides the effects of the Ocean Links closure. It will impact different properties in varying ways.
Communities in which a majority of properties are vacation homes will see an increase in value as the VRBO movement grows. These properties rely heavily on short term rentals and the ability to generate more rental revenue in a profitable way will bring new buyers into the market which will increase demand.
Properties with more full time residents are different. Buyers looking for a full time home, or even a home for half of the year, usually want a sense of community which can be difficult to find in the transient conditions caused by short term rentals. Therefore, the lack of short term rentals is a positive for these buyers and having rental restrictions in place, usually results in increased values.
However, many of the single family homes in our community do not have restrictions on short term rentals because past limitations on rental ability discouraged homeowners from placing their homes for rent. The success of VRBO however is changing this and making the prospect of renting a single family home more enticing. It would be prudent for the single family home communities to evaluate the impact should short term rentals increase in their neighborhood. If they believe increased short term rentals would be a detriment to home values, they should consider implementing stricter rental policies before VRBO becomes more popular in their neighborhood.
Although full time residents should consider limiting short term rentals within their communities, they can still benefit indirectly from the growing VRBO movement. How? Many of our community members begin their Amelia Island homeowner experience by first buying a vacation property. Then later in life, they decide to move here full-time, sell their vacation home and purchase a permanent residence. This process is really important to the health of our real estate market. As the VRBO movement increases the appeal of our short term rental-approved vacation homes, the pool of future buyers for our full-time properties will grow. This increased demand will raise the value of these properties.
How Our Community Can Take Advantage Of This Trend
Many of our villas allow short term rentals and this is important to the health of these condo associations. The VRBO movement will broaden these villa's appeal to more buyers. As this movement grows, condo associations could help improve their property values by enhancing their amenitity packages to assist VRBO owners in attracting guests. The number one question VRBO guests ask is "do I have access to the Omni amenities"? Since VRBO guests are not paying the Omni and cannot take advantage of their amenities, it will become important for villa associations to make sure their amenities, particularly their pools, are up to par.
The AIPCA can also play a part in helping homeowners take advantage of the VRBO movement. Their current actions and initiatives regarding common property enhancements like Walker's Landing, Drummond Park, Sunken Forest, and the many walking trails, will all create quite the amenity package for VRBO guests.
Overall, the growth of the VRBO movement will have positive impacts on our community and property values. The revenue potential for homeowners will make Amelia Island properties affordable to more buyers. It will also broaden the awareness of Amelia Island and bring more guests here on vacation which will be a boon to our tourism industry. Our community should be excited about the benefits VRBO will offer homeowners. As long as we understand the future ramifications of this movement, we can best prepare our community to take full advantage of the VRBO opportunities while limiting some of the risks that come with increased short term rentals.