The inevitable shift towards technology consolidation in short-term rentals

In the short-term rental (STR) management arena, a persistent debate revolves around technology choices: should property managers assemble customized tech stacks with specialized tools or adopt an all-in-one property management system (PMS) for simplicity and efficiency?

While this question dominates discussions, it overlooks a more pressing issue — the inevitable consolidation of technology within the STR sector. Ironically, this is the critical missing puzzle piece in this ongoing debate.

This oversight is happening because the STR industry tends to view itself in isolation, focusing exclusively on its own unique challenges. While there are indeed unique aspects to the STR industry, the industry follows common patterns observed across other cloud software verticals. When the industry considers broader business trends, a common thread emerges: industries naturally gravitate toward consolidation, culminating in comprehensive, all-in-one solutions.

Consider HubSpot. What started as a marketing software platform evolved into an all-encompassing ecosystem that now supports sales, customer service and customer relationship management (CRM) capabilities. Microsoft expanded beyond its foundational Windows and Office products to create Microsoft 365, integrating cloud services, collaboration tools and enterprise-level security — all under one umbrella. Even online travel agencies like Expedia and Booking.com have consolidated services, allowing users to book accommodations, flights, experiences and rental cars on a single platform. 

Despite potential challenges or failures in some consolidation efforts, the overarching strategy remains toward unification. This pattern isn’t just a trend; it’s the natural evolution of industries as they mature and professionalize. Industries often experience a “mushroom phase,” characterized by the rapid proliferation of players and specialized tools — a phase the STR industry is currently emerging from. This phase often begins when industries digitize or consumer behavior shifts. 

While this phase fosters innovation, it also leads to fragmentation and complexity. Over time, as industries seek to streamline operations and enhance the consumer experience, consolidation becomes the logical next step. The STR industry is primed for this transformation, approaching a new level of professionalization — not only in technology but also in services.

Investor interest

Investors are acutely aware of this trajectory and are actively accelerating consolidation within the STR industry. Recognizing patterns observed in other sectors, they are strategically injecting capital into companies positioned to drive this unification. This influx of investment stems from an understanding that professionalization and consolidation enhance scalability, efficiency and profitability.

The only logical and natural place for this consolidation to occur is within the property management system (PMS). Investors recognize that the PMS is the strategic point for consolidation, because it sits at the heart of property management operations and serves as the system of record, housing the core functions and tools needed to run an STR business.

By focusing on expanding the capabilities of PMS platforms, several industry pain points can be addressed. Consolidating functionalities like revenue management, dynamic pricing, financial reporting and maintenance scheduling into the PMS eliminates the fragmented approach of managing a patchwork of systems, which is increasingly unsustainable in a market demanding agility, efficiency and cost-effectiveness.

Property management companies are increasingly opting for streamlined tech stacks — typically a PMS plus one or two additional tools — to focus on providing excellent hospitality experiences to guests. This approach spares them the complexity of evaluating numerous software solutions and dealing with the connectivity issues between them. Training staff to use multiple systems can be burdensome, and a simplified tech stack alleviates this challenge.

However, consolidation doesn’t mean that every single tool will be absorbed into the PMS. Specialized tools will continue to have a place, particularly for niche services requiring deep expertise. These tools will become complementary layers added to the robust foundation provided by the all-in-one PMS. For example, while HubSpot provides an all-in-one solution, it also offers a marketplace of apps, enabling businesses to integrate specialized functionalities as needed.

This model offers the best of both worlds — a strong, efficient platform for core operations with the flexibility to incorporate specialized tools. Property managers benefit from having a single source of truth for their day-to-day activities, with centralized support and accountability. 

Ultimately, the debate between assembling a customized tech stack and adopting an all-in-one PMS is becoming redundant in light of the unstoppable wave of consolidation. Whether the industry is ready or not, this natural progression will unfold — if not in one year, then in five or ten.

It's not a question of choosing between plug-and-play solutions or integrated systems; it's about recognizing an evolution that is reshaping the very foundation of the STR industry. Adaptation isn't optional. Property managers and industry stakeholders must embrace this shift toward unified platforms or risk being left behind.