How Did Marriott International Enter The Vacation Rental Space?

It is a well-known fact that for the past 2 decades vacation rentals especially in the luxury segment has taken a lot of toll on the traditional hospitality industry. Hoteliers are slowly realizing that vacation rental customers are not a different segment of customers than their traditional customers but the one choosing to spend their time on vacation in a different way. The modern consumer values a lot the need for individual space and ultimate privacy which vacation rentals can provide without a doubt.

When faced with increased market competition many hoteliers decided to try their hands in the vacation rental business. A trend has emerged where major hotel companies, including Marriott, Accor Hotels, Hilton, and Hyatt (which invested in Oasis Collections in 2017), have looked at venturing into the vacation rental industry. While Hyatt sold the acquisition the following year Marriott seems to be doing fairly well with the newly acquired vacation rental business.

So what are the reasons that Marriott made it and others haven’t been able to pull off the slack?

Testing through a Pilot Project.

As its known Marriot used its extensive experience in the hospitality industry to set up a pilot project for vacation rentals especially in the luxury segment. The pilot was first started in London under the brand extension of Tribute Portfolio homes and has almost 50 properties. Over months in 2018-2019, they extended the service to almost 340+ homes across Paris, Rome, and Lisbon. After the success of the pilot project which was able to give the company a hands-on experience, they decided to launch a fully functional vacation rental website. Homes & Villas by Marriott International, a home rental initiative offering 2,000 premium and luxury homes located in over 100 destinations throughout the United States, Europe, the Caribbean, and Latin America.

Customers stay longer in Vacation rentals.

Of the guests that booked in the pilot project of which 90% were European cities, it was found that on average the guests would stay almost 5 days which is 3 times more than the average hotel stays. Also, most of these trips were made for family and leisure related trips. Anyone in the hotel industry knows that leisure guests make more money than business clients just because of the number of members in the booking and the stays are longer as well. Hence, it was a great discovery that leads to Marriott carefully choosing the rentals homes. The homes are chosen based on their overall design, functionality, and location. Having also met high quality, safety, and security standards, selected properties feature 1- bedroom or more, full kitchens, and in-unit laundry. Guests also have access to 24/7 support as well as an in-person welcome/check-in experience through Hostmaker.

Choosing Luxury segment of vacation rentals.

The challenge that hoteliers had to face to enter the vacation rental market is the fact of managing the property according to their hospitality industry gold standard. Hyatt tried to buy the vacation rental agency and tried to manage and enforce their standards on their own. But with multiple owners and not much experience in managing and advising decentralized owners things didn’t work out well for Hyatt. Although recently Hyatt has shown interest again in the vacation rental space by buying a more traditional vacation rental company Two roads hospitality in 2018. The model used by Hyatt was self-owned and self-managed. On the other hand, Marriott made partnerships with the rental management agency and is the only luxury segment that already has its standards regarding the property, management, and concierge services.

Choosing the right partners for collaboration.

Our approach to home rentals allows us to curate an incredible collection of homes that deliver an elevated travel experience

Homes & Villas by Marriott International, added in the statement. The partners are already connoisseurs of luxury vacation rental and association with Marriot was the cherry on the top. Marriott partnered with TurnKey Vacation Rentals, LaCure, Loyd & Townsend Rose, Veeve, London Residents Club, Mainsail Lodging, CPG, and Reserva Conchal. It reduced work on Marriott's end and still ensure that its customer gets the world-class services that they are proudly famous for.

One customer many choices.

While many other hoteliers like Hilton were very skeptical about the customer of vacation rentals as a new type of customer, Marriott realized that it’s the same customer with different travel needs. As can be pointed out from Marriott s internal survey report after the pilot it was found that the customers have different demands with different kinds of trips. For example, while on a business trip a hotel saves a lot of hassle but at the same time when it’s time to spend some time with family and friends in groups, vacation rentals seem to be a better idea. The fact is that when its vacation time to spend with the family, the customers are more likely interested in doing things on their own. Say for example set up a barbecue, cooking classes, truffle hunting, hiking, biking, snorkeling, etc. These kinds of activates cannot be found with hotel amenities.

Marriott Bonvoy benefits.

Marriott’s Bonvoy points bring both customers together as the points can be shared. With every booking and dollar spend there are points to be earned which will allow loyal customers to have discounts, the invitation to special events or a cheaper price on certain properties, etc. These Bonvoy points also facilitate the membership of the Marriott Club as there are basic, Silver, Gold, and Platinum memberships. The points allow people to have experiences that Marriott partners with other agencies. The website has clear indications on how to gain the points and how to redeem them. This strategy has helped Marriott to generate ultimate customer loyalty. That has helped them to integrate the hotel and vacation rental services flawlessly. While others failed to fund the best way to integrate, Marriott has done a great job in understanding its customer needs and changing the strategy thereafter. A key selling point for members of Marriott Bonvoy could be the ability to earn points and spend them on villa stays. The company plans to integrate its experiential reward offerings — like taking a local cooking class or attending a concert — with its rentals.

How do you earn the Bonvoy points?

Customers earn 5 Marriott points per dollar spent as well as elite night credits on Home and Villas by Marriott (HVM) stays. If you want to redeem points for your booking, the tests showed that each Marriott points were worth 0.7 cents toward a stay. The TPG Marriott Bonvoy point valuation is currently set at 0.8 cents per point, so while this is below that threshold, it isn’t dramatically off the mark. Getting $700 in value out of a 100,000-point Marriott welcome bonus is probably the best thing out there. Starting from May 18th all the bookings made by the HVM will be discounted at 10% which improves the value you get out of your stay with the Marriott’s. They have also gone far and wide to make the booking and cancellation policy with the owner’s as flexible as possible to give their customers the freedom of choice and the best quality of service.

Healthy competition ensures the best results.

With hotel industries coming in the vacation rental and especially the Luxury Vacation rental segment many competitors are putting their hands in different businesses. In response to Marriot, Hyatt, and Hiltons' response to entering the vacation rental space Airbnb on the other hand has started registering hotel rooms in their listings. Also, Airbnb is moving deeper in traditional hotel space in partnership with New York City real estate developer, RXR Realty, to convert portions of iconic NYC commercial properties into a “new category of urban lodging, made available exclusively through the Airbnb platform.” But all in all, Marriott is not trying to overtake the home rental market segment. They are not able to compete with the size and number of listing to that of Airbnb and Boooking.com. What they are trying to do is to provide more choices to a certain customer segment with best-curated luxury vacation rentals. They are trying to increase their share of pie while maintaining their traditional loyal customers.