When was the last time you worked with a travel agent? Unless you’re doing some unique, specialty trip or are a total technophobe, it’s probably been well over a decade since you engaged a travel agent when booking any part of a trip. There’s a simple reason: booking online is way easier than working with a person. And yet if you want to buy a house or rent an apartment, you’re almost certainly engaging with at least one human (e.g., a realtor, broker or leasing agent) and quite possibly several. In most cases you’re going to spend several hours conquering in-person tours and visits despite having a professional engaged during your search (which casts some question into the pro’s value in the first place). If Travel has mastered the entire booking funnel why can’t Real Estate?
Some will argue that while there are similarities between Travel and Real Estate there are notable differences which undermine the analogy. Obviously the relative size of the transaction is a big one – making a mistake on a $150 hotel room hurts, but messing up a $300K+ home purchase can be devastating. The other is the ability for a prospective buyer/renter to actually tour in-person whereas travel by definition is conducted remotely. But according to a Capgemini study, 44% of consumers are willing to buy a car online and that’s on average a bigger transaction than the average 12-month apartment rental. And while it’s true most home-buyers/renters are capable of visiting a prospective property, many times people are moving from long distances, which makes touring inconvenient. And nobody likes touring a bunch of places, so that’s hardly a feature. If anything, successful Real Estate portals should provide consumers more confidence about a property’s quality (or lack thereof) than a fallible human being.
I posit there are two core reasons Real Estate has lagged: 1. The ability to complete the transaction online still isn’t commonplace (although sites like Open Door and individual property management firms are beginning to change that) and 2. There’s a lack of information online for consumers to feel confident in their potential transaction thereby requiring additional touch from a pro. The winners in this vertical will either close these gaps or become quickly surpassed.
Confidence in complete information is the key. Being able to complete the transaction online is ultimately critical but a moot point if consumers aren’t prepared or comfortable moving forward. So what does that additional information look like? Well again the Travel sector leads the way. There are two primary touch points for most users in their Travel search: First at the top of the funnel, where you have TripAdvisor and other sites that help users decide where in the world to visit, all the way down to what part of town to stay in and the best hotels available for their budget. While TripAdvisor can get you there, the second touch point most users experience is at the bottom of the funnel. There’s stiff competition at that level from sites such as Expedia and Priceline who help close the transaction with their own robust property reviews. Travel website users have a glut of well-organized content to guide them through their entire search which makes the ultimate transaction feel like the natural next step.
That’s the critical difference with Real Estate. Sites like Zillow and Apartments.com have done a good job of building robust and verified supply to compete and differentiate from Craigslist which has robust but weakly verified listings. But these sites don’t do enough to inform throughout the funnel. Location remains a major driver, particularly for Millenials. So much so, that more employers are building offices in urban centers specifically to compete for talent. Besides a map interface, most Real Estate sites have limited intelligence or information on locations. Neighborhood descriptions are more targeted to SEO and aren’t easy to digest. Even if they are surfaced in a more streamlined way, there are still concerns since even “good” neighborhoods have questionable parts. Photos matter – on RentLingo we saw a 28% increase in conversion from properties we deemed having quality photos over those that don’t. Most Real Estate portals do well there, but consumers expect even bad properties to have good photos – that’s virtually table stakes and hardly sufficient to take a plunge on a place.
To win consumer confidence, Real Estate sites need to layer in more specific intelligence on a location, which is much of what a Realtor provides their clients. Innovations such as Walk Score, Trulia Local, and the Noise and Charm Indices (disclaimer: indices are RentLingo products) are likely the first wave of hyper-local, location intelligence that provides consumers with an assessment all the way down to the address level as opposed to broad categories such as neighborhood or zip code. The other key is layering in review content both at a location and property level. Sites like Street Advisor have made this their focus but incumbents can also achieve some of this intelligence by having in-house property appraisers and reviewers provide consistent and widespread expert insight since the low frequency of transactions makes user generated content difficult to achieve en masse. Although it’s hard to beat the authenticity of user generated content.
That level of centralized intelligence will provide a consumer experience 10X better than the offline equivalent and unlock much more of the $1.2 Trillion in transactions that occur annually in residential Real Estate to be had by the winning portals.