Vacasa is a Leader in Brand Building But Relies Too Much on Booking Sites

25.08.2023 - 13:19 / skift.com

Vacasa’s public debut in December 2021 was a big deal for the short-term rental market. As the largest branded property manager in the U.S., it touches nearly every part of the short-term rental sector and is an important bellwether for the space.

That’s why its stock market performance, down a staggering 94% since that debut, is such a disappointment. True, except for a few blockbusters, the entire stock market has been shaky. But with Vacasa’s losses of $17 million over the past 12 months and an outlook for slowing revenue growth, it’s hard to blame the market.

Skift Research recently conducted a deep dive into Vacasa and the future of branded short-term rentals to explore these issues.

The below excerpt focuses on Vacasa’s sales and marketing strategy. This is a critical piece of its business since it is so closely tied into the company’s distribution strategy. As Vacasa strives for profitability, is the company’s branded direct-to-consumer strategy paying off?

The full report digs deeper into the rest of Vacasa’s business, including its inventory, occupancy, pricing power, and overall cost structure. It also take a broader look into the current state of the short-term rental industry and how it will grow in a more normal environment after the pandemic-era boom.

One of Vacasa’s major expense items is sales and marketing, at an average cost of 19% of revenue.

This line item include spending on advertising and salaries for salespeople and marketers as you’d expect. But it also includes its third-party distribution costs, the commissions that Vacasa pays to Airbnb, Vrbo, and other online booking sites.

While many think of Airbnb as a peer to Vacasa, we think that is misleading. Airbnb is a distribution channel and competes more directly with Expedia Group’s Vrbo. Rather, in our opinion, Vacasa’s nearest comparison is Marriott. Both are the largest branded operators in their respective space. Both invest significant resources in building a consistent, branded experience. Both benefit from large scale and nationwide reach. 

Vacasa spent $35 million on advertisements and promotional materials in 2022. That was 1.4% of its gross bookings, about in-line with other major players. For example, Marriott spends 1% of its annual room revenue and Airbnb spends 1.2%. However, both of those businesses drive higher direct traffic for that spending.

What’s surprising is that out of a total sales & marketing budget of $247 million, advertising is just 14% of that. For context, Expedia earmarked 64% of its sales & marketing budget toward advertising and Airbnb allocated 52%. In fact, we believe that the large majority of Vacasa’s sales & marketing is going towards paying OTA commissions.

Vacasa is rare in the