Skift Take

Keeping the members of the world's largest loyalty program happy, is about bringing quality as opposed to quantity. That's according to Jennifer Hsieh, vice president for Homes & Villas, who shared the company's approach to loyalty at the Skift Short-Term Rental Summit.

Traditional hospitality brands have risen to the disruption challenge of the short-term rental market. One such brand is Marriott International.

Homes & Villas by Marriott Bonvoy, started four years ago by the world’s largest hospitality company, is in a growth phase, having almost doubled the number of homes it has listed and seeing 90 percent of its direct booking demand from its 180 million Bonvoy members. Jennifer Hsieh, vice president for Homes & Villas, shared these insights and the company’s overall approach to loyalty through its alternative accommodation brand at the Skift Short-Term Rental Summit in New York.

Watch the full video of the discussion with Skift senior hospitality Editor Sean O’Neill, as well as read the transcript below.

Sean O’Neill: Jennifer, you are the brightest of the rising star execs at the world’s largest hospitality company, so we’re delighted to have you here.

Jennifer Hsieh: Thank you, Sean. Excited to be here again.

O’Neill: For people in the audience, please ask your questions in the Slido app and we’ll get to them in the last minutes of the presentation today. So Jennifer, when we last met a year ago, you would… So it’s the fourth anniversary of the launch of-

Hsieh: We are four years years old.

O’Neill: … Yeah.

Hsieh: We are officially, I think past toddlerhood and into, probably a tweenville.

O’Neill: Must be feeling good about all the progress today.

Hsieh: It’s great.

O’Neill: Yeah. So it has been, when we met a year ago, you had said you had about 60,000 listings.

Hsieh: Right.

O’Neill: How many do you have now?

Hsieh: We have 115,000 listings on homes and villas.

O’Neill: 115,000, that’s really incredible growth. Congratulations.

Hsieh: Thank you.

O’Neill: And so, about what is your geographic coverage?

Hsieh: We aim to be global. We’re in all over the world. And so in this last year we have entered into Australia and New Zealand. We just recently entered India with a splash. And you’ll see our units in, and homes in Korea as well. And so, we continue to grow.

O’Neill: That’s awesome. I know that your team has put together some data and some consumer trends and stuff, so maybe if we can bring up the slide with that. So, you skew somewhat on the premium, premium is what you’re all about.

Hsieh: Yes.

O’Neill: So we keep that in mind when we’re thinking about this, but what are you seeing in terms of consumer demand trends?

Hsieh: Over the last year, we have really seen demand continue to hold fast. And so, one of the things that I’m cautious about is, a lot of times we’ll read articles and there are averages, and the trick is, there’s a lot hidden in those averages. And so, when we look at demand and performance, we look at it with three defining attributes for the business. One is around booking window, is the customer booking close in or far out? Are you a type A person or a type B person? And I know where I fall on that grid. Length of stay, how long are you planning to be on vacation? And so, is it a short stay, is it a weekend getaway for a football game or is it a long beach trip that you all have been planning for quite some time? And then, how big is a home that you are looking for?

And so, when we look at demand, I want to caveat with this with a couple of things. One, remember Homes and Villas is really focused on just the professionally managed component of the business. We are whole home rentals. We do skew towards the premium and luxury, and this is global data that you see. I don’t see the data anymore though.

O’Neill: Here’s the data.

Hsieh: Okay, great. So this is global data that you see. But I think what’s important is, we like to make sure folks understand that when you take averages, a lot of things get lost in those averages. And so, when you look at demand for us, we take a look at those three defining attributes. And across the, anecdotally when you look at things like booking windows, it varies widely cross-border travel, which is coming back. I would say like 2023, I said last year, 2022 was the first year where it began to feel like a normal year in the US-Canada component of our business. 2023 is beginning to feel like what hopefully is a normal year for us in international. And so, cross-border travels coming back, we’re seeing Asian customers also becoming, coming back into our international destinations.

we see a trend, the three to seven day hover on stays tends to be really the sweet spot for vacation rentals. And so, we’re seeing more and more of that. And then larger homes are the majority of our stay. So, a few things as you take a look at it. Average transaction value, we grew, to Sean’s point, from 60,000 homes to 115,000 homes year over year. So we’re not a mature business, we’re still in our growth mode. And so, when we look at our our numbers, we recognize that we will always look fantastic, thankfully. And so, when you’re growing, you’re kind of creeping up. But when we look at average transaction values year over year, it’s stable.

Now when you dive deeper into each of these segments, we begin to see some early indicators of where the strength is and where the softening is happening. I think where the strength continues to be is these large homes that people are booking with long windows of booking time, those premiums and those price points continue to hold well. I think where we’re seeing a little bit of softening is those close in near term bookings, these last minute bookings where you see some more competitive pricing happening out there. For us, that kind of nets itself out. And so, we’re seeing good average transaction values. Booking windows are beginning to shorten for far out long stay vacations. So this is the type A person. This is the person who finishes their vacation and then books it again for the next year already. Or this is the person in January where we love, it’s January, beginning of the year, I’m going to sit down, I’m going to book spring break, summer break and ski for my family. And we’re seeing that shortened a bit.

And so a couple hypotheses there, maybe consumers are feeling less frenetic about the need to get that one single home that they knew that they wanted, potential for supply to actually, they’re seeing the supply growth in the market. And so, the need to book 450 days in advance is less urgent, we’re seeing some of those booking windows tighten up. Now, they still exist. If you could see the tail, you still see folks booking 300 plus days out. But we are seeing that that is tightening up a bit. And my hunch is, it’s give and supply and more availability of supply. And then stay durations on the close and long stays are increasing. And so, that was a little surprising for us-

O’Neill: I’m sorry, say that again. Sorry.

Hsieh: … So, people are booking closer in for more days are increasing. And that tells me the flexibility and work-life balance continues to remain. And so, this idea of, “Okay, let’s go in two weekends to the beach, we’re going to extend that stay a little bit and I can work from the beach.” And so, this inherent shift in consumer behavior continues to show itself in some of our booking trends. I know this is an eye chart, so hopefully.

O’Neill: Yeah, I’ve been resisting getting reading glasses, but this is my [inaudible] But these are really good, really good data though. So Jennifer, we’re both, we were out yesterday and all that Canadian smog. So if you want to take a-

Hsieh: Oh, thank you.

O’Neill: … some water. One of two points that you mentioned that caught my eye. So, it could be two hypothesis there about why the booking window is in. One, you have more supply, so there isn’t that sense, “I need to book now because it might disappear.”, that inventory. And the other is, people may be loosening up, relaxing a little bit because the behavior has changed and also they still feel confident in the hybrid work environment they can, it’ll change.

Hsieh: That’s right.

O’Neill: Okay. So, earlier this week I talked with Tony Capuano, your CEO, he was at the NYU Hospitality Conference and he brought up Marriott Homes and Villas… Excuse me, Homes and Villas by Marriott Bonvoy.

Hsieh: That’s our other exciting news that we did in the last year.

O’Neill: Okay. So there’s a little change in the branding, right?

Hsieh: There’s a little change in the branding. And that really goes back to our core strategy. Homes and Villas is here to really keep our guests within our ecosystem. And we are seeing that strategy pay off well. We’ve never wanted to be scaled to the millions. We want to be in a business where we are curating the best properties for our guests who already in their mind have a sense of what they expect from Marriott, right. And that’s trust, it’s safety, it’s security, it’s design, it’s quality. And so for us, bringing and rebranding from Homes and Villas by Marriott International, I know that’s a mouthful, to Homes and Villas by Marriott Bonvoy has really spoken to this incredible behavior that we are seeing with our best guests. And so, let me just share a few stats with you. Over 90% of our bookings are generated by our Bonvoy members and we have over 180 million Bonvoy members.

O’Neill: So 90%. So that’s essentially direct bookings, because most likely loyalty.-

Hsieh: That’s right. And so, over 90% of our bookings are generated by our members. And when they book, about 40% of the time, they use our alternative form of currency, they use Bonvoy points. And so, as people are watching their wallets and their cash flow, they dig into this incredible bank points that they’ve been building through hotel stays. And then when they redeem, we see about 40% of those transactions have some form of point redemption. And on the average point redemption, we project that it’s 40 to 60 stays at a hotel that they’re earning.

And so, they stay at our hotels 40 to 60 times to get to the point where they can redeem for part of a vacation home or a whole vacation home. And that creates this incredible virtuous cycle. Which is, we want you to be part of our ecosystem, we want you to spend your points on these amazing homes because trust us, we’ve curated these homes, we’ve done the work to find great professional property managers. We review these homes, we make sure that we are your safety net should anything go wrong in the homes. And so, we create an ecosystem where we want to keep our customers in it. And the shift on the Bonvoy name has been fantastic, because it really just sharpens our distinction in the marketplace.

O’Neill: Yeah, that’s cool. Yeah, Tony Capuano very much thought that it’s sort of a model example of what he wants to do because it’s build adjacent products off of the core hotel brand, he said, and this is an example. These are use cases, if I want to go to Pigeon Forge or to Malibu, they may not have a product for that size or occasion, and you sort of fill in the grid.

Hsieh: And it anchors back on our core belief, which is, how are we serving that customer? Because I think sometimes when we talk about the industry, we try and create a false separation like, “Oh, you’re an STR customer and you’re a hotel customer.”, that’s not true. Every one of you in this room I bet is both, right? And so, really the distinction that we should be thinking about is trip purpose. What do you want to achieve during that stay? And so, at our business, at our company, we’re really thinking about how do you fill out that series of trip purposes?

And so, I’ve always talked about, look, if I’m coming to New York City for a Skift conference, I’m going to stay one night. Absolutely, a hotel makes much more sense than a home rental. If I am very tired from taking care of all of my children and I don’t want to lift a single finger, then our all-inclusive products is the best solution that exists out there. And if I’m going out with friends or extended family and we all want to go to the beach and we want to spend time together making dinners, doing puzzles and all those fun things that you do in downtime, then I choose a home rental. And I am every one of those individuals.

And for us, the reason why the shift to the Bonvoy name is so important is, we want to be able to keep our guests within our ecosystem. We want to create ways for them to pay and redeem within our ecosystem and earn. And so, the more we give them options on adjacents… These are all stay products. And so, it’s an adjacency to hotel, but it certainly is where we’re focused on meeting more of the guest needs.

O’Neill: Cool. So to build on something my colleague, Seth Borko, earlier today who gave a presentation, one of my takeaways from it was that, when the hotel industry came up, hotels had many years to develop their brands, the holiday inns of the world, then online travel agencies came along. It is sort of the inverse in alternative accommodations. I know that a lot of vacation rentals have been around for a lot of times, but for many consumers, HomeAway sort of established it as a category. For short term rentals, people think they stay in an Airbnb. And so the sector, when you have players, we’re going to hear from Red Awning later, we’re going to hear from Sonder and others, they’re trying to build a brand in the shadow of this online agency brand that has come first. So it’s a very different kind of dynamic. And in that context, Marriott coming in with this brand, which is already so powerful, has a bit of an edge. Would you say that that’s true or?

Hsieh: Yes. Absolutely. I think one of the challenges, and this is part of the reason why we work with our professional property managers, because at the core we are looking for great operators. And it is very difficult to be a great operator and also a great brand and marketer. And so, the most important thing for professional property managers, and I think Lawrence said this too, when you are developing and growing your businesses, have really strong operations, that has to be your core competency or that guest will not come back to you no matter how beautiful your logo is. If that stay isn’t good, they’re not coming back.

And so, our business model innovation in this space is really different than other competitors. We are not an open platform. We are a closed platform. We work specifically with professional property managers and we make sure that those that we work with are really strong operators.

And the beauty of Homes and Villas is, we have a global presence. And so, not the ability for an individual property manager if they’re a small player, to get that particular guest back every single year in that same home, absolutely that happens. But more frequently we’re seeing customers wanting to go to different places. And for you to be able to expand that scale to say, one year you want to go to Myrtle Beach, but another year you want to go to Rome. And by the way, we’ve curated those homes and we reward you for that with the ability to earn and burn points. And so, that is something that is unique to us. Obviously we have an advantage because we have the world’s largest hotel company and we have the scale to be able to do that, to say, “Hey, look, we’re going to be able to provide you a solution no matter where you want to go, and we want you to be able to trust that home.”

O’Neill: So the trust, there’s like a tension there, because in order to have the trust, onboarding supply, you have to really vet the supply to a certain extent, make sure they’re professionals. And so, that can be a little bit of a bottleneck. Do you feel like for growth, supply is more of a constraint for you or demand is more of a constraint?

Hsieh: Yes. It’s interesting, if you asked me three years ago, supply, absolutely supply, supply, supply. And so, we’ve gotten to a point in our business where we’re getting to a really nice balance and that we’re finding… And we often ask ourselves, “How many filters does somebody have to put in before they get zero?” And obviously, when Coachella is happening or some high profile citywide event is, everyone’s going to get challenged on supply. But I think we’re at a much more balanced view this year, where we are not only saying, “Hey, look, we’ve got a really wonderful base of supply today and we’re really happy with the partners that we work with. Now it is really about sharpening up that demand. And for us, while Marriott is still an incredible powerful name, we continue to try and drive awareness for Homes and Villas. And so, that is certainly an area that we want to focus on and grow, and that is something that we continue to do.

O’Neill: So how many people ever rented from, booked a rental from Booking.com, Airbnb, HomeAway, Marriott Homes and Villas, any of these channels? Most everyone in the room. How many people have ever rented from Marriott Homes and Villa? Got one and two, three. So yeah, it is a challenge on the demand side. So according to my reporting, talking to some of the stakeholders in the industry who work with Marriott, my best guess is that maybe last year you maybe had 15 million revenue, maybe 20 million in revenue. We don’t know for sure because the company doesn’t break out the reporting. And you can’t really talk about a timetable for growth. But how should we think about materiality, or what is another way of seeing how the business develops? You mentioned earlier it’s immature business, you’re not competing against the Airbnbs of the world, you’re doing your own thing.

Hsieh: Yeah. Yep. I think one of the things that folks are trying to always hypothesize is, how are we doing? And for us, success is measured in a couple of ways. One proxy is, home growth. And so, if you don’t have demand, you don’t need supply. And so, that is one good way to think about that as a proxy for growth. I think folks often ask us, “Well, how does this compare to your hotel business?” Let me remind you, Marriott has been around for almost a 100 years, and our hotel business is very mature. It is over $20 billion.

And so, when you think about this segment of the business, strategically very important for the company, very important for keeping our guests within our ecosystem. However, we’ve never said that we want to be the biggest out there, and actually, we don’t think that’s the right strategy. We want to be the best out there. And we will continue to do the work that we need to do to build the best. And for us, where we see value is a couple things. We call it stickiness to our portfolio. And so, how well are we able to keep our guests within our ecosystem? And then obviously, we’re competitors. We want better share of wallet when it comes to our consumers. And so, for a Bonvoy guests, I want a bigger share of their wallet, their travel wallet. And so, that’s how we think about it.

O’Neill: Cool. Thank you Jennifer.

Hsieh: Sure.

O’Neill: We have an audience question. How has the pandemic altered your customer base in terms of demographics?

Hsieh: The pandemic started when we were babies. I don’t even know that I really had a full business when it started, so I don’t know what it’s done to alter it. We were in business for about six months and then the world stopped. And so, at that time I had 2,000 listings. And so, it was really, really tiny. But I can tell you, in terms of demographics of what we see now, we tend to see a skew, a very strong skew for high household income. And so, this makes sense because we tend to skew towards premium and luxury products. We tend to see a lot of married families with young children, that’s the perfect use case for some of these products, “I need a full kitchen. I need separate bedrooms. I need…’ Vacation for me is sometimes time away from my children. And so, that’s a great use case. We do tend to see, we skew younger than we do in the typical base. And that might be because these are young families who are traveling quite a bit.

O’Neill: And so, Airbnb and April said that out of all of its inventory, it’s most affordable inventory was the most in demand, but they had the least supply for it. And what I’m hearing from you is you definitely, because you have that focus on premium, which may vary by market what counts as premium in Pigeon Forge, Tennessee is going to be different than in Miami. But so you’re still seeing the high net worth income and-

Hsieh: Yeah. And when I look at that, I take a step back and look at Marriott as a company. What can we provide to fill in the gap? And so, I don’t need a lot of studios. I’ve got hotels all over the world. And so, what we do need is, opportunities to keep that stay in our portfolio when it’s a bigger stay. And then, we need opportunities to fill in these amazing destinations that just don’t sustain hotels. We have, in Homes and Villas, we’re in over 10,000 cities around the world. And so, it allows us… The fundamentals of short term rentals are such that you can put single family homes up and beautiful properties right on the lake that are so seasonal, it doesn’t sustain a hotel business necessarily. And so, Homes and Villas allows us to expand the footprint for our guests with over 10,000 cities that they can go to anywhere in the world and keep them within our ecosystem.

O’Neill: Audience question is, what’s Marriott’s view in permitting for short-term rentals and vacation rentals in areas where hotels are in the same cities? How do you balance those conversations with governments?

Hsieh: Yeah. Priority for us is, for Homes and Villas we always operate within regulatory requirements. We make sure that the partners that we work with understand the regulations and are compliant with those. So that is always a must. And if we feel like we can’t operate without a gray area, we don’t enter that market. We’re not in New York City. And so, where we are in shared cities with our hotels, absolutely, we focus on a different product.

And so, if you are, let’s say in Nashville, and Nashville, if everyone doesn’t know this, Nashville is the capital for bachelor and bachelorette parties. And so, I remember doing a tour with some of our partners in Nashville and we saw this amazing house. It was two town homes right next to each other, one was the Elvis and the other was the Dolly one. And that is a very different product. It was like six bedrooms, had a stage in the garage and it was very different. And so, are we in the same cities? Absolutely, because customers want to be in the same cities. People want to go to Nashville for bachelorette parties or business or whatever that may be. We just really focus on giving our guests something different and meeting a need that historically they had to leave our ecosystem for.

O’Neill: Well, I have to congratulate you on surviving the pandemic, getting up to this level of listings growth and everything.

Hsieh: It was tough.

O’Neill: And as you say, you’re sort of like the ultimate soft brand.

Hsieh: Yeah, [inaudible] we are. It’s a term that a hotel business uses. Hard brand, which is like a courtyard. Which means, anywhere around the world, when you go in, it looks pretty familiar and the prototype is there. Soft brands in our hotel business are collections of unique boutique hotels. We are the ultimate soft brand. We have 115,000 unique homes, and every home is a little bit different. That is what makes it so incredible for our guests, but also so complicated.

O’Neill: Yeah, it’s got to be-

Hsieh: Because messaging to our guests and saying, “Hey, look, when you go to Pigeon Forge, you’re going to expect a whole lot of wood stuff. Wood furniture, wood chairs, everything.” And if you had that placed in Miami Beach, you would say, “This [inaudible]”. And so, we try and figure out ways to-

O’Neill: Surface the relevant content.

Hsieh: … surface the relevant content, but also curate the product in a way that we know that is appropriately local, but also meets the needs of the guests.

O’Neill: Fantastic.  , thank you so much for sharing this story.

Hsieh: Thanks, Sean.

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Tags: hospitality, marriott bonvoy, Marriott International, skift short-term rental summit, str, vacation rentals

Photo credit: Homes & Villas by Marriot Bonvoy's Jennifer Hsieh in conversation with Skift senior hospitality editor at Skift Short Term Rental Summit in New York.

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