Just when the vacation rental industry thought traditional occupancy and rate trends may be returning after post-covid pent-up demand, record high supply and consumer sensitivity to pricing in a fragile economy are making rate decisions even trickier. With the peak summer season quickly approaching for East Coast beach markets, we’re taking a look at how this summer is looking for property managers in those markets.
Adjusted Paid Occupancy
Guest occupancy is pacing behind both 2022 and 2021, but a mixed bag when compared to 2019.
Adjusted Paid Occupancy % is slightly different than traditional occupancy because it accounts for owner stays and holds to look at property performance only on the nights that were available to be booked by guests, which are the nights you have control of. Almost all of the markets above are pacing behind the past two years due in part to increased supply and decreased demand. Dare County, NC, and the Myrtle Beach Area in South Carolina are pacing significantly behind both 2021 (when record-high occupancy was seen due to a release in pent-up covid demand) by 21% and 25% respectively, and 2022, by 11% and 17% respectively. Hilton Head Island, SC (-20%), Kiawah Island, SC (-22%), and Tybee Island, GA (-13%), are also pacing far behind 2021, but their decreases from 2022 are not as steep. Vacation rentals in Ocean City, MD are seeing the slightest year-over-year pacing decreases in paid occupancy; -7% from 2021 to 2022 and -6% from 2022 to 2023. Cape Cod, MA, is the only market above pacing ahead of last year (+2%).
When compared to pacing for the 2019 summer season, Cape Cod (+13%), Dare County (+12%), and Kiawah Island (+8%) have higher on the books occupancy rates in 2023 than in 2019. Tybee Island is pacing on par with 2019, and Hilton Head Island, Myrtle Beach, and Ocean City are all pacing behind (-1%, -14%, and -2%, respectively). Myrtle Beach and Ocean City’s booking windows are pacing about 10 days longer than in 2019.
On the bright side, the 2022 summertime average booking windows for most of the markets above ranged between 110 days and 140 days, so there is still time to capture additional bookings. Tybee Island, GA had the shortest summer booking windows last year at 73 days, implying many reservations for summer stays have yet to come in.
Average Daily Rates
Nightly rates in most of these markets are pacing higher than in the previous three years.
Average Daily Rates depict the average unit revenue paid by guests for all of the nights sold. In all markets above, excluding Tybee Island and Cape Cod, rates are pacing higher than in 2022, 2021 and 2019. In Dare County and in Myrtle Beach, rates are pacing furthest ahead. Dare County’s on the books rates are about $200/night higher than in 2021, and about $80/night higher than in 2022. Myrtle Beach’s nightly rates are pacing about $140 higher than in 2021, and $60 higher than in 2022.
Markets like Hilton Head Island, Kiawah Island, and Ocean City are experiencing significant increases from 2021 to 2022 (+$217, +$171, and +$50, respectively), but slight increases from 2022 to 2023 (+$35, +$27, and +$25). Rates in Tybee Island are pacing about $64/night ahead of 2021, but about $18 behind 2022, and rates in Cape Cod are following the same trend (+$109/night ahead of 2021, but $10 behind 2022). All markets are pacing significantly ahead of 2019, with the largest increase in Hilton Head (+$330/night). These summer season rates will likely drop slightly as bookings at lower rates are made closer to the stay date, as shown by the final rates for 2021 and 2022 in light green.
Pricing power has decreased tremendously for property managers in these markets because of decreased occupancy, and they should pay close attention to their occupancy and rates as consumers may be more price sensitive than they used to be.
Even with nightly rates pacing higher than in the previous two years, dips in on-the-books occupancy are leading to lower revenue.
Adjusted RevPAR uses adjusted paid occupancy rates and average daily rates to show revenue per available rental. Higher nightly rates are not enough to offset adjusted paid occupancy rates that are pacing significantly behind, and RevPAR is decreasing.
In Dare County, RevPAR is only pacing $7 lower than last year, but still ahead of 2021. Unfortunately, this trend does not translate to any of the other markets above. In Ocean City, 2023 RevPAR is pacing $8 behind 2021 and $14 behind last year. In Kiawah Island and Tybee Island, RevPAR has been pacing behind year over year since 2021. Hilton Head Island and Myrtle Beach are seeing the sharpest decreases over 2022; -$42 and -$50 respectively. However, all markets above saw increases in final RevPAR from 2021 to 2022, even when 2022’s RevPAR figure was pacing behind 2021’s. Additionally, all markets are projected to have increased RevPAR over 2019.
Due to the seasonality of these East Coast Beach markets, Property Managers and other businesses alike rely heavily on summer revenue. With a slight decrease in demand and increased supply, Property Managers will need to keep a close eye on their occupancy and rates to ensure travelers are choosing their properties over their competitors.
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