Homes & Villas by Marriott turns 3: Will it ever be an Airbnb threat?

The pandemic exploded the vacation home rental business, with more travelers than ever wanting total control of the place where they are staying during a leisure trip.

Airbnb, which has more than 6 million listings, is the giant in this sector by far. Homes & Villas by Marriott International, which launched three years ago this month, has 60,000 listings and is a much smaller offering by a traditional hotel company. In fact, its existence might come as a surprise to some given the hotel industry’s initial pushback against Airbnb in many cities.

Homes & Villas is a strong option for those wanting some degree of hotel standardization in their vacation rental, as well as a way to earn loyalty points where they are not staying at a full-service hotel. However, Marriott curiously downplays the size and scope of Homes & Villas — and has for years — despite the platform’s significant growth since its 2019 launch.

“We're still calling it a very small part of Marriott,” Jennifer Hsieh, vice president of Homes & Villas by Marriott International, said with a laugh during an interview with The Points Guy. “Part of the reason why is because when you look at our listings, it is not the same as a hotel listing.”

For more TPG news delivered each morning to your inbox, sign up for our daily newsletter.

Travelers should plan ahead and have some flexibility if they’re set on a Homes & Villas stay. That's because when you go to book at a Sheraton or a JW Marriott or any other of the company’s hotel brands, that property is open for booking every day of the year. However, a Homes & Villas property might only be available for select times of the year due to a variety of reasons.

Local regulations might cap how many nights can be available for short-term rentals. The home could have blocked off dates from bookings taking place on other rental platforms where the property is listed. Sometimes the homeowner wants to stay in the property for part of the year and will take away some availability.

“By the time you kind of whittle it down, that nearly 60,000-listing figure equates to probably something that's a fraction of that in [terms of] hotel-style availability and occupancy” at any given time, Hsieh said.

Just last week, other Marriott executives were similarly downplaying the role this vacation rental business plays in the broader company. However, they, like Hsieh, also see that the lane Homes & Villas operates in presents a growth opportunity.

Marriott only lists whole homes on its platform. That's compared to entities like Airbnb, which have listings that can be just a room in a home still occupied by the owner.

Leeny Oberg, Marriott’s chief financial officer, called the scope of Homes & Villas “still tiny relative to some of the peers in that space” on the company’s first quarter earnings call this month.

The division is rapidly growing, though. Homes & Villas launched in May 2019 with only 2,000 home listings across 100 destinations. It has since expanded to around 60,000 properties in more than 700 markets.

“The growth from 2,000 to nearly 60,000 has been a very thoughtful and strategic growth,” said Hsieh. “We took a look at where our Bonvoy members were based, and then the pandemic hit, so then we said, ‘OK, where are our Bonvoy members based, and then where can they drive to?’ Once the pandemic hit everything really was about domestic driving for a long period of time.”

Loyalty strategy

Bonvoy was an enormous factor in launching Homes & Villas. Talk to anyone in the hotel business, and they’ll tell you the worst thing that can happen to a company is for a loyalty member to go to a market where the brand doesn’t have a presence and for that member to end up liking someone else’s product.

A 2017 study at Marriott showed 27% of Bonvoy members were looking outside the Marriott program when it came to renting vacation homes.

“We knew there was obviously a product need out there,” Hsieh said. “We did deep work to build a different business model than our competitors because customers were telling us about the pain points.”

Some of those included there being too much product out there and it being too difficult to determine what was a quality rental and what wasn’t. There were other hesitations as well: Would the pictures in a listing match up to reality? What happens if something goes wrong?

In response, Marriott only includes homes operated with professional management companies on the Homes & Villas listing platform. The idea is to offer some of the standard amenities and safety measures afforded with a typical hotel stay while retaining the unique qualities driving people to book a home stay in the first place.

“We want to be where our customers want to go, so demand has a factor in that,” Hsieh said. “We also want to be in a place where we can grow the footprint for Marriott International.”

Marriott isn't the only hotel company ramping up vacation rental offerings. Accor has the similar-sounding Apartments & Villas platform, and Mandarin Oriental partnered with rental company StayOne earlier this year to launch Mandarin Oriental Exclusive Homes.

Highly seasonal markets like St. Bart’s, Vermont ski towns and Cape Cod are popular travel destinations for certain parts of the year — but maybe do not see enough tourism in off-season months for a company like Marriott or Accor to pump resources into parking several hotels there. Something like Homes & Villas, even if listings are only available for part of the year, strikes the right balance.

It gives Bonvoy members a place to earn and redeem points. It also gives Marriott a new opportunity to bring in revenue, even if company leaders reiterate Homes & Villas is not yet making much of a dent in the company’s overall financial figures.

“As you would expect with that sort of exponential growth in the sheer volume of listings, we've seen a very meaningful uptick in the revenue coming through [Homes & Villas],” Oberg said on the investor call last week. However: “This is extremely small relative to ... the overall size of Marriott from a financial standpoint, really across the spectrum of both investment as well as profitability.”

Where people are going

Homes & Villas may be small, but those in the know are clearly using it to book their vacations.

A whopping 90% of bookings for Homes & Villas comes from Bonvoy members, so the platform is still very much a loyalty-driven offering. More travelers may want to consider it as an option this summer and beyond, though.

Hsieh noted the U.S. coasts, as well as other areas near bodies of water like lakes or rivers, are home to some of the most popular listings. Travelers are also increasingly using it to secure lodging at ski destinations and near national parks. Additionally, you’ll find homes in Europe, the Caribbean and Latin America, the Asia Pacific region and other international destinations.

If you are considering a stay, plan ahead: Just as hotels are booking up fast heading into the summer, so are Homes & Villas listings. Guests on average were booking stays 49 days out in 2020, but that increased to a 75-day booking window last year. Today, it's 85 days, Hsieh said.

“We thought that was super interesting because it tells us that, domestically in the U.S., people recognize that it's going to be the summer of revenge travel, and everyone's booking early and fast,” she said. “So, if you want to get something, you've got to be doing it far in advance.”