In part one of our summer vacation rental performance review, we dove into rate and occupancy changes from last year to this year. If you haven’t read that article, or if you need a refresher, you can find it here. While part one provides insight into the percentage of properties following or diverging from the national trend, it doesn’t address the intersection of KPIs. Although the data showed that 66% of U.S. vacation rentals had decreased occupancy and 67% had increased rates, it didn’t show how those two groups overlap or how revenues trended for either. Grouping properties into different performance categories provides even deeper insight into industry performance and how rates and occupancy are related.
The table above shows the percentage of properties, average percent change in average daily rate (ADR), average percent change in the adjusted paid occupancy rate, and the average percent change in adjusted revenue per available rental (RevPAR) for each possible combination of year-over-year change in ADR and occupancy between summer 2021 and Summer 2022. As in part one, only properties active during this summer, defined as June 1 through August 31, and last summer were included to provide insight into how performance for individual properties shifted from 2021 to 2022. Outliers were removed and the data was sourced directly from vacation rental property managers. Geography plays a huge role in property performance so the chart below shows how the distribution of properties across the rate and occupancy categories varies by state.
For 14.6% of U.S. vacation rentals that were active during both summers, both ADR and adjusted paid occupancy increased. On average, ADR increased by 15% and occupancy increased by 11%. Unsurprisingly, this category had the highest average adjusted RevPAR change of +27%. Rentals in Hawaii, where travel was slower to return and pandemic closures were lengthy, were among the most likely to have both higher rates and occupancy; 34% of Hawaii vacation rentals fell into this category.
Rentals in this category followed the national average trends for rates and occupancy. With 45% of U.S. rentals, this category claims more properties than any other. On average, ADR increased by 18% and adjusted paid occupancy decreased by 18%, which are among the largest average changes of any category. These changes almost balanced each other out and adjusted RevPAR decreased by only 3%. Units were especially likely to fall into this category in Wyoming (66% of Wyoming units are in the category), Maryland (60%), Hawaii (55%) , and Florida (55%). Each of these states experienced high demand last summer so occupancy decreased this summer as demand returned to more normal levels.
Occupancy rates held steady primarily for properties that were fully booked both summers, which is more likely to happen in destinations with extremely high summer demand such as the Outer Banks of North Carolina. 7.7% of U.S. rentals had higher rates and the same occupancy. The average ADR increase was 15%, which led to a 15% increase in Adjusted RevPAR. States along the Atlantic coast like North Carolina (35% of NC properties), Delaware (14%), and South Carolina (12%) had disproportionate shares of units in this category.
For 11% of U.S. vacation rentals, the ADR decreased and occupancy increased. For these rentals, adjusted RevPAR barely budged from 2021 because the changes in rates (-16%) and occupancy (+16%) balanced each other out. This combination of rate and occupancy changes was most likely to happen in midwestern states like Arkansas and Missouri, where 44% and 41% of units respectively experienced these changes.
The second largest share of properties, 20%, falls into this category. For these properties, the average ADR percent change from last year was -13%. Occupancy fell further by -19%. Combined, these led to the largest average decline in adjusted RevPAR of -30%. Markets where last year was exceptionally strong were prone to having a large number of properties in this category; 43% of Arizona units and 35% of Tennessee units had lower ADR and occupancy.
Very few properties are located within the other four sectors, which is a good sign. Few properties have the exact same ADR as last year, meaning that property managers and hosts are making adjustments from year-to-year. It’s important to not make assumptions about cause and effect with this data. While increased rates and occupancy led to higher RevPAR, there’s no way to say which change came first; increasing rates may not lead to higher occupancy and in fact, they often do the opposite. Furthermore, many of these year-over-year differences are heavily influenced by changing market conditions. It’s up to property managers and hosts to respond appropriately to changes in demand and competitors’ pricing and to use data to understand the relationship between prices, demand, and revenue for their specific market and inventory segments.