U.S. Vacation Rental Performance for the Last Six Months
January rental performance can set the tone for the entire year. So, it’s important to take note of the changes and potential trends. In this article, we will examine the U.S. vacation rental performance over the last six months. We’ll explore occupancy rates in comparison to previous years, the decline of pricing power, changes in RevPar, average length of stay, booking windows and more. Continue reading for additional analysis and regional breakdowns.
Occupancy Rates are slightly lower than in the previous two years but still higher than in 2019.
Calendar Occupancy %
Calendar Occupancy % = (Nights Sold + Owner Nights + Hold Nights) / (Total Nights)
In Q4 of 2022, occupancy started to return to more typical seasonal patterns and was 4% lower than in 2021. This trend continued through January 2023; calendar occupancy was 4% lower than last year, and 2% lower than in 2021. Though occupancy is lower than last year, it remains higher than in 2019. Demand increases sparked during 2020 have not disappeared but increased supply is driving occupancy down. In 2022, the number of nights booked (demand) on Airbnb remained higher than in 2021 until November. Active Nights, or supply, has increased dramatically year-over-year, and in many months, the change in supply was larger than the change in demand. When this happens, occupancy drops.
Daily Rates are trending closely with last year. January’s ADR was a slight $12/night ahead of 2022.
Average Daily Rate
ADR = Total Unit Revenue / Nights Sold
The average daily rate in the United States increased by $12 over last year during January but was $70 higher than in 2021. In Q4 of 2022, nightly rates were only $1 more than in 2021, which was a stark difference from the increase of $55 from 2021 to 2022. Pricing power has declined in the face of lower occupancy rates.
RevPAR is starting the year lower than last year but is still significantly higher than in 2021 or 2020.
RevPAR = Occupancy x ADR or Total Unit Revenue / Total Nights in a given period
RevPAR suffered because occupancy decreased and rates did not increase enough to offset the difference. At $86/active property, revenue decreased from January 2022 by $12. This trend began in Q4 of 2022 when RevPAR was $7 lower in 2022 than in 2021. Property Managers were split on how to react to lower occupancy; raising rates too much could drive occupancy lower. On the flip side, lowering rates could still lead to lower revenue if occupancy didn’t increase enough. We reviewed this quagmire in depth in our article titled 2023 Vacation Rental Pricing: Is it time to drop rates?
U.S. Regional Vacation Rental Performance
All regions saw a decrease in year-over-year calendar occupancy for January 2023, except for the Hawaiian Islands. The Hawaiian Islands’ delayed recovery and seasonality played into the 5% increase in occupancy. In the thick of their snow sports season, the Rocky Mountains saw a 3% decrease in occupancy, which is substantially better than the other regions above. The Mid-Atlantic states, which already experience lower occupancy during winter months, saw the steepest decrease in occupancy (-16%) over last year. A return to normal occupancy trends could be responsible here, as shoulder season occupancy has decreased from previous years.
The Hawaiian Islands and Rocky Mountain States were the only regions that saw higher nightly rates over January of last year; by 13% and 6% respectively. These two regions have decent occupancy and more pricing power. Rates in the Southeast U.S. were close to last year and decreased by a slight 1%.
Combined with increased occupancy and nightly rates, the Hawaiian Islands increased RevPAR by 22% compared to 2021. Even with a slight decrease in occupancy (-3%), a 6% increase in rates led to a 4% increase in RevPAR for the Rocky Mountain States. And although the Southeast U.S. only decreased year-over-year rates by 1%, a 9% decrease in occupancy decreased RevPAR by 16%. The remaining regions experienced significant decreases in occupancy and rates, and RevPAR suffered. However, a majority of these markets don't rely on Q4 revenue, so while the decreases aren’t beneficial, they’re not necessarily detrimental.
U.S. Vacation Rental Performance: Booking Activity
Net Reservations per active property
Net reservations per property = (bookings made - cancellations) / active properties
In the first five weeks of 2023, net reservations are trending similarly to last year, though slightly lower. However, net reservations are higher than in 2019 and are following similar seasonal trends, suggesting we can expect booking activity that follows a normal annual trend.
Average Length of Stay and Booking Window
The average length of stay has stayed very consistent throughout the past four years.
Average Length of Stay
Average Length of Stay = Total Nights Sold / # of Guest Check-ins
Typically, the length of stay during the winter months is slightly longer due to snowbird stays, as evidenced by a two-day spike in January. This trend has not deviated much through the years, except in Q1 of 2019, where ALOS was roughly one day longer than in the last three years.
Booking windows are still shorter than in 2019, but have increased from lows only seen in 2020-2021.
Average Booking Window
Average Booking Window = (Arrival Date - Booked Date) / # of Guest Check-ins
In the past six months, booking windows have trended extremely similarly to the previous year, with January’s average booking window being 66 days. The United States 2022 average booking window was 68 days, or about two months long, which was an increase of five days over 2021, but still nine days shorter than in 2019.
State of the U.S. Economy
The inflation rate in the United States slowed only slightly during January, from 6.5% in December to 6.4% in January. This marked the seventh consecutive month where the year-over-year inflation rate decreased and it is at the lowest level since October 2021. In short, Americans are paying an average of 6.4% more for goods and services than they were in January of last year.
Gasoline costs increased 1.5% from December to January, reversing December’s 1.5% decrease. Airfare decreased by 1.4% over the month but is still 25.6% higher than in January 2022. Airfare was one of the few indexes to decrease this month.
Trends to Keep an Eye On
Destination Analysts reported that 62% of American travelers surveyed in December 2022 were concerned about an impending recession; January’s continued easing inflation coupled with GDP growth seemed to assuage some of that anxiety. A majority of the 4,000 travelers surveyed still believe a recession is imminent, though 30% feel that now is a good time for leisure travel, the highest figure since last summer. Furthermore, 45% of respondents believe they will be better off financially a year from now, and over half say that travel is a priority in their near-term budget.
Another significant finding was that a majority of respondents (52%) rated the importance of credit card and reward points highly, and redemption of these rewards points for travel for airline tickets and hotel stays has increased to 33%.
The Value of Quality Time
Destination Analysts also found that “Top Tier” motivators, like quality time with loved ones, creating memories, experiencing new places, escaping the pressures of daily life, and recharging were cited as very motivating or critically important by about two-thirds of American travelers. “Second-tier motivators include connecting with nature, visiting places of historical significance, food, and the chance to expand one’s own perspective. Third-tier motivators are concerts, the arts, and shopping, with partying and bragging rights more relatively niche motivations.” Taking these points into consideration when marketing your properties can help attract travelers.
Quality time with loved ones also seemed to encapsulate family pets; as 24% of American travelers say they have brought a pet along with them on at least one trip in the last year. Of this group, 44% say they “usually” or “always” travel with their pet(s). If you have pet-friendly rentals, it appears to be increasingly important to advertise this amenity.