Ask any small business owner, franchise owner, or entrepreneur the biggest challenges to starting and running a business and most will list two main issues: Capital, to purchase locations, equipment, and inventory; and cash flow. With those considerations in mind, Tom Bissmeyer and the founders of iTrip® Vacation Rentals (iTrip.net) set out to create what they call “the perfect business.”
Ask any small business owner, franchise owner, or entrepreneur the biggest challenges to starting and running a business and most will list two main issues: Capital, to purchase …
First some background. In North America the hospitality industry is a $100 billion a year industry. Vacation rentals make up approximately $24 billion of that total. Yet despite its size the vacation rental industry itself is incredibly fragmented. Consisting of mostly local operators, the average vacation rental management company has one office and operates under what could be called a legacy overhead model: Brick and mortar location, multiple employees, white van, long-term lease, etc. iTrip set out to turn that model on its head, along the way creating a virtual vacation property rental system that is transforming the industry in a way similar to the way Charles Schwab transformed the financial services industry.
Think about how vacation properties have traditionally been booked. If you wanted to travel to Southern California you checked newspapers, checked magazines, found ads, and called an 800 number to inquire about availability. You spoke to a person in an office, exchanged phone calls and documents, and eventually made a reservation.
Sound archaic? It was. In the mid-90s the Internet could have transformed the industry, but surprisingly did not. While companies like Orbitz and Hotwire were early adopters of online vacation travel technology, most providers focused on airline flights, hotel rooms, and rental cars. Where booking vacation rentals was concerned, not much changed.
“My partners and I have a background in real estate and Internet real estate,” Tom explains, “and we saw a window of opportunity open up in the latter part of the past decade. We took a close look and realized no one embraced the Internet and built best practices to take advantage of a massive market. Sure, local companies were putting properties on static web pages, but otherwise they were waiting for people to stumble on their sites. We wanted to bring a national (and now international) approach so we could leverage our Internet expertise and really scale the concept. And with the iTrip model, that’s exactly what we did.”
Vacation travelers reap the benefits. More often than not, booking a vacation rental property is significantly cheaper than staying in a hotel, even in prime travel destinations. And most times you end up with much more room, a full size kitchen and a much bigger gathering area.
Say you plan to visit Disney World in Orlando. Like many, you could choose to stay in a hotel on the resort; you’ll likely spend the week in a 350 square-foot hotel room with two double beds. Or, you could rent a town home a couple of miles away with four bedrooms, a full-sized kitchen, dining room, and living room, two master suites, a splash pool… and pay approximately 35% less. If you and another family plan to visit Disney, both families could easily fit in that town home… and then your total savings would be approximately 70% over paying for two hotel rooms.
“Once they stay in a vacation rental property,” says Tom, “have a better experience, and enjoy the savings involved, most people never go back to staying in a traditional hospitality space.”
iTrip draws a line of distinction in terms of the properties they represent, focusing on properties with whole ownership: Condominiums, beach villas, ski cabins, and other vacation properties. In short, iTrip doesn’t help hotels market their properties.
Serving that targeted market were two main types of providers. One is the rental by owner model, where businesses provide Online Classified Ads for people who wish to manage and rent their properties themselves – the owner-managed market. At the other end of the scale is a full-service management company that manages and rents properties, charging fees of 20, 30, 40, and sometimes even 50% of rental receipts.
“iTrip kind of slots into the middle ground and brings in a virtual component,” says Tom. “We are able to help the rent by owner increase their bookings on a annual basis as well as offer full service rental and management services like the traditional providers, but at a lower cost to the property owner”.
Vacation rental by owner companies typically provide services to owners who have one or two properties to rent. iTrip logs all properties in their system and then creates a huge virtual net to drag through the ocean of Internet traffic. iTrip takes advantage of all portals and web channels possible to maximize web marketing and search engine optimization to drive traffic to the iTrip site and ultimately to an individual’s property – and everyone profits.
iTrip licensees profit from another key component of “the perfect business”: No accounts receivable. When a traveler rents a property from a licensee, the traveler pays a deposit when they actually reserve the unit, typically three to four months or more in advance. Then the traveler pays the balance of the rental fee thirty days prior to arrival. As a result, licensees have no accounts receivable because they are paid in full well before the customer actually uses the service.
Speaking of licensees, in a few short years iTrip already boasts twenty one locations serving North America, Mexico and Costa Rica. “Our ideal licensee candidate is a person who has already been successful, 15 to 20 years of experience … and isn’t terribly excited about starting a business that requires managing a lot of employees. Our licensees can get started with an iTrip territory and have zero employees; later, when they have about forty units under management, they may need a part-time person to help with bookings and other tasks.”
“Because our entire platform is in the Internet cloud,” Tom continues, “all a licensee needs is a laptop, a phone, and a camera. It’s truly a lifestyle-oriented business. Monthly overhead is extremely low and you can take the business with you wherever you go.”
While iTrip is a three year-old concept, Tom and the other founders have over twenty years experience in the vacation rental marketplace, including owning and managing their own properties. That experience has allowed them to build and offer a turn-key system. Licensees do not need extensive technical expertise since iTrip maintains a full-time IT staff. Licensees don’t need extensive real estate knowledge; in fact, only two of the current licensees have any real estate background at all.
“We’ve run millions of dollars through our systems,” Tom explains. “As long as you can answer phones, open e-mails, and move documents around online, our systems take care of the rest.”
One reason for iTrip’s success is the strength of their business model and systems (complete information for prospective licensees can be found on itripbusiness.com). Another is the change in the real estate market. Thousands of vacation properties were built before the market collapsed, with many worth less than the original cost of construction. Since most owners can’t sell those properties – or choose not to in order to avoid taking a loss – they rent them instead. iTrip taps into this exploding market. The so-called “shoulder seasons” fit particularly well in the iTRIP model: Most traditional vacation rental companies shut down after the season is over, but many travelers enjoy visiting, for example, a beach market in September and October when the crowds have disappeared. iTrip’s virtual model makes staying open for business easy.
“When our property holders can pick up a few extra weeks on the front end of the season, and a few extra weeks on the back end, that substantially changes their financial model. By driving significant traffic and casting our huge virtual net, we help property owners increase their revenue.”
“Here’s a personal example,” Tom continues. “I was taking my family and another family to a desert town in Utah. We were taking motorcycles, mountain bikes… trailers full of stuff. We didn’t want to leave everything sitting in a hotel parking lot. I called a few hotels, but the cost of two rooms, meals, and everything else seemed really high. We ended up renting a house that had four bedrooms and a two-car garage where we could store bikes and equipments. The house had full-service laundry and a fully stocked kitchen so we could eat some meals in the unit itself. Even including all of the extra conveniences we still saved money: We spent about fifty percent less compared to what we would have spent on hotel rooms… plus we didn’t worry about our stuff sitting in a parking lot or finding a place to eat every meal.
“A better vacation experience at a lower cost – that’s a hard deal to turn down.”