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Vacasa Is On Top Now But Competition Is Coming

·5 min read

The overwhelming feeling one gets after listening to property manager Vacasa’s maiden earnings call as a public company is that it has tons of room for expansion, and that its competition in North America is relatively weak for now.

In the call to review its fourth quarter and full-year 2021 financial performance, Matt Roberts, the CEO of Vacasa, the largest vacation rental property management company in North America, said the company is not feeling any increased competitive pressure.

But, watch out, Vacasa, there are tons of private equity and real estate investors anxious to fill the void.

After all, Vacasa, which is backed in part by private equity firms Level Equity and TPG Capital, bought out its biggest competitors, Wyndham Vacation Rentals in 2019 and Turnkey in 2021, and currently faces off primarily against local property managers, which Vacasa is steadily buying up.

After debuting as a public company in December, Vacasa emerged from the special purpose acquisition company deal with more than $340 million in gross proceeds. That’s enough to keep adding to its vacation rental property stockpile.

Investors are very keen on entering the short-term rental space — although to be sure Vacasa is involved in the less glamorous and messier property management sub-sector.

In a Skift story about private equity’s appetite to enter the short-term rental space, Senior Travel Tech Editor Sean O’Neill wrote: “Andes STR, a property manager for short-term rentals, recently began working with Chilean investment firm WEG Capital to buy U.S. units, the Wall Street Journal reported.”

The story added that in February, “private equity firm Durable Capital Partners led a $100 million capital raise for Evolve, a vacation rental property management service.”

It’s almost unprecedented in the travel industry for a sector, in this case vacation rental property management in North America, to have an undisputed leader that can keep challengers at bay.

In addition to private equity and real estate firms entering the fray, huge companies such as Airbnb could get more involved in property management, but the company doesn’t appear to have the inclination at this juncture. Non-U.S.-based property managers such as Awaze, the largest in Europe, and Sykes Cottages in the UK, might consider the property management competition vacuum in the U.S. a ripe opportunity.

In the U.S., VTrips, which is reportedly profitable, could be an up-and-coming competitor, too.

Vacasa Humming Along

Vacasa piled up losses in 2021 (see the section on its financials below), but Chief Financial Officer Jaime Cohen said Wednesday the company projects profitability in 2023. Last year, because of its acquisition of Turnkey and a bevy of small local competitors, Vacasa saw its roster of homes climb more than 60 percent to 37,000. Vacasa doesn’t own the homes, but has exclusive rights to operate their availability calendars.

“The vacation rental industry is a local marketplace ripe for disruption, with many homeowners either doing it themselves, relying on a local property manager that lacks technological sophistication, or not renting at all,” Vacasa said in a shareholder letter. “We believe the disruption opportunity is similar to how the real estate, mobility, and on-demand delivery markets have been redefined over the past decade.”

Although the disruptor could eventually get disrupted, Vacasa for now doesn’t have a ton of pesky obstacles in the form of strong competitors to block its expansion.

For example, Vacasa said it invested almost $50 million on tech products in 2021, “an amount we believe is greater than the spend of the combined entire population of competitive local vacation rental managers.”

After downsizing like everyone else did in 2020, Vacasa added about 200 salespeople in 2021. CEO Roberts pointed out despite all the challenges there are around the country in hiring because of a labor shortage.

The company said when salespeople have worked at the Vacasa for at least a year, they tend to be twice as productive as new-hires. So Vacasa envisions enhanced productivity from the sales team in 2022.

As the pace of its sales in terms of signing up individual homeowners and small property management companies increased in the fourth quarter, Vacasa argued that its proprietary tech, including products such as itinerary-based pricing and a tool to automate inspections of the cleaning process, will work in its favor, as well.

The Financial Mumbo Jumbo

For the fourth quarter, Vacasa notched a net loss of $118.1 million compared with a narrower loss of $45.2 million a year earlier. Fourth quarter revenue jumped 76.3 percent to $192.1. million.

For full-year 2021, Vacasa’s net loss widened to $154.6 million from $92.3 million in the red a year earlier. With the addition of Turnkey as a substantial factor in April, Vacasa’s revenue increased 81 percent to $889 million last year.

Vacasa Wednesday raised its previous revenue and adjusted earnings guidance, made in July, for full-year 2022. The company forecasts revenue for the year in the $1.125 billion to $1.175 billion range, and adjusted losses to land between negative $21 million to negative $14 million.

In a small pandemic-related tailwind, Vacasa reported that its revenue and earnings marks would benefit in the first quarter of 2022 from $13 million of “breakage,” or future stay credits issued in March 2020 that have expired without consumers using them.

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