November 2017, Amsterdam
Viva the villa and the opportunity for APAC
There are just 9,000 villas to let in Asia Pacific, according to research from Villa-Finder, and plenty to play for – not least the outbound Chinese traveller
‘Vacation rentals’ is the catch all title for villas, shared accommodation, apartments, second holiday homes, homestays and more. Today big names – yes we are talking the likes of Airbnb and HomeAway – dominate the global headlines. However, there are, a host of others looking to differentiate and deliver value in different niches, with many focused on delivering managed services. Their aim: to secure a piece of the global $120 billion pie.
Although much of the talk about vacation rentals is focused on Western markets, there are number of interesting trends playing out in Asia-Pacific.
EyeforTravel’s Chinese travel consumer report points to the growing demand for vacation rentals. Citing Analysys Mason, a global consulting and research firm that specialises in telecoms, media and digital services, the report says that the market for vacation rentals in China has expanded by over 60% in the past three years, to deliver revenues of RMB12 billion in 2017.
Tujia, Airbnb’s Chinese rival and the country’s biggest homestay provider, launched in 2011 and seems to have got in at the right time. It has been steadily growing its footprint, acquiring the vacation rentals channels of Ctrip and Qunar, for example, and today claims to host 650,000 homes and apartments online both at home and abroad.
Then in October this year, the firm announced that it had raised $300 million in a funding round led by Ctrip and All Stars Investment. This injection will be invested in domestic high-end real estate and in foreign markets according to founder and CEO Luo Jun.
The firm has also launched VaShare, an international vacation rental platform, and has signed agreements with HomeAway and Japan’s homeshare portal Rakuten LIFULL, among others.
Of particular interest is the growing number of outbound travellers. In 2016 Chinese travellers made close to 140 million outbound journeys and were the world’s biggest on-trip spenders.
While high earners and those in the middle income bracket still prefer to stay in hotels, and smarter ones at that, an FT outbound tourism report finds that demand for vacation rentals is growing. Importantly, wherever they are staying Chinese tourists want not just better, but ‘different’ accommodation when they go abroad. In other words, they might want a homely stay but they also want a differentiated vacation rental experience!
Firms like Tujia have clocked this and for this reason some of its recent funding round will go towards standardising services like washing and cleaning, and other touches you would typically find in a hotel.
For accommodation providers in Asia Pacific, what Chinese travellers are looking for is worth understanding because, as EyeforTravel’s research shows, 82% of Chinese outbound trips are to Asia. Admittedly Hong Kong and Macau are still the most popular destinations, attracting 63 million visits in 2016, but others are increasingly in the frame - Thailand (7.9 million), Japan (6.7 million), South Korea (6 million) and Taiwan (2.8 million) to name a few.
82% of Chinese outbound trips are to Asia
Recognising this is David Chambat, CEO of Villa-Finder.com, which launched in Singapore back in 2012, and now hosts a thousand villas in five destinations. Aside from existing markets like Bali, Koh Samui and Phuket, Chambat believes that villa supply is expected to grow right around the region.
For the record, he is referring here to ‘villas’ rather than apartments or shared properties that also fall under the big vacation rentals umbrella. These are also properties that can be let for a minimum of 300 days.
According to Chambat, the APAC villa rental market, which accounts for $390 million of the wider global vacation rental market, is more professional, closer to the hospitality industry and less of a community play. This bodes well for those targeting Chinese travellers who until recently have been more comfortable choosing a hotel.
The APAC villa rental market is more professional, closer to the hospitality industry and less of a community play
The market for villas is certainly growing. “More investors are coming and building villas, either for returns, or to prepare for retirement. These can be private investors, but also large tourism or real estate groups developing villas to meet demand. Countries like Vietnam, Myanmar, Laos, China, India are developing such an offer to respond to customer demand for a more unique travel experience,” Chambat explains.
There is certainly room for growth. Villa-Finder’s recent research estimates that there are just 9,000 villas for rent in APAC. “As a point of comparison, that is only about three-quarters of the total number of properties that are available full-time in Paris,” stresses Chambat.
What is clear though is that competition is growing and it’s only going to get fiercer. Recognising this is White Rose Samui, a villa rental provider on Koh Samui the Thai island. Its Managing Director Richie Lopez says that although rates are being driven lower, this will mean more bookings and very likely from a Chinese audience, which, he believes “will be the market for the next five years”.
5 tips for an Asian audience
Asia Pacific is clearly a growing market. According to Statisa, revenue growth in vacation rentals in Asia is forecast at 16.7% a year, and user penetration, which is 1.1% in 2017 is expected to rise to 1.8% in 2022. Villa-Finder’s Chambat, who founded his business in 2012, shares some other trends and observations for firms looking to make their mark in this emerging region.
1. Know your target: According to Chambat, the choice of destination varies a lot within Asia. Singaporeans, for example are shifting away from Bali as a destination, whereas Chinese tourists are flocking there.
2. Stand out with service: Asian travellers are more demanding when it comes to service. “They usually enjoy a lot more service at home due to low cost manpower. Many have domestic helpers, nannies, drivers etc, and they expect the same, or more, when they travel,” says Chambat.
3. Make it modern: Asian travellers tend to go for recently built villas with a modern style, air conditioning and closing windows. They will even choose a newer villa with fewer reviews over an older one with many positive reviews, he says. Garden space is less important! Interestingly, says Chambat, an interesting trend is that Europeans too are starting to go increasingly for modern villas over more traditional ones.
4. Deliver a discount: Asian travellers are far more likely to book their trip at the last minute, as they are highly sensitive to discounts. And in places with low occupancy like Bali, Sri Lanka, Koh Samui or Phuket, you can almost always negotiate the price of your villa holiday.