The vacation rental industry continued to experience fluctuations and changes in performance during the first half of 2023. According to industry sources including KeyData Dashboard, Skift, and AirDNA, the market has softened, leading to a decline in occupancy during June and July, which is expected to continue into August and later into the Fall. We are seeing these trends, which can be attributed to a variety of factors, play out in our data as well.

Travelers prioritized international destinations as they made their summer vacation plans, diverting demand away from traditional vacation spots like rural, mountain, and beach destinations that saw a surge during the pandemic. Traveler preferences have also shifted back to urban areas, where they can attend events and immerse in cultural activities, leading to a resurgence of demand in urban markets. 

Data & graphs adapted from: State of Travel 2023, Skift. www.research.skift.com

Despite occupancy and demand experiencing declines, Average Daily Rates (ADR) have remained higher than 2019 levels, though we expect to see ADRs soften as part as demand continues to recede.

The industry has also witnessed a significant increase in available vacation rentals, with a 30% year-over-year growth rate. This surplus supply, evidenced by a 90% rise in supply in rural and mountain communities over the last three years, has created a mismatch between supply and demand. As a result, occupancy has been declining for 15 consecutive months, and this decline is expected to persist for the next 17 months. The supply growth rate of 30% has outpaced the demand growth rate of 15%, which is contributing to the occupancy decline.

Travelers have simultaneously become more strategic in their bookings. The number of reservations made within 45 to 30 days of arrival has increased, as travelers who are seeking the best price and expect last-minute discounts are waiting to book closer to their arrival dates. Travelers are also booking shorter lengths of stay – moving away from the multi-week reservations that became the norm during the pandemic. As a result, while the number of reservations has remained unchanged, the number of booked nights is down year-over-year.

As the vacation rental landscape becomes more competitive, and in an effort to adapt to the changing market conditions, Vacation Rental Collective is closely monitoring rates, occupancy, and ADR in all markets and adjusting our rate management strategies accordingly. For Homeowner Partners who want to ensure their property remains a top contender for travelers in a saturated marketplace, we suggest that our Owners consider investing in additional amenities, such as air conditioning, private hot tubs, and game amenities, like pool tables and ping pong, to better meet travelers' needs and maintain strong performance, even during a down market.

As we look ahead to Q3, we anticipate a further decline in performance, primarily stemming from the ongoing mismatch between supply and demand, along with the resurgence of cross-border travel. Occupancy levels are expected to continue mirroring those of 2019. However, despite some latent weakness in performance, future bookings for U.S. short-term rentals remain strong, and our optimism for the future of short-term rentals remains steadfast. Throughout the pandemic, many travelers embraced short-term rentals as their preferred lodging option, and although some are now transitioning back to hotels, short-term rentals still hold a place in their consideration set when planning vacations.

At Vacation Rental Collective, we are diligently working on behalf of our Homeowner Partners, actively implementing strategies to adapt and innovate in response to the evolving behaviors and preferences of travelers. We recognize the importance of staying flexible and responsive to ensure that our offerings continue to meet the needs and expectations of our mutual guests.

We’ve recently transitioned to a new process for providing a starter set of supplies and basic amenities for our guest stays. The new supplies come in sealed packages for safety and sanitary reasons and are standardized for every guest stay. As part of our new product offering, we also provide guests with high-end Aveda bath products. The cost of the starter supplies is paid for by the guests, just as it always has been.

For our guests’ convenience and to start their vacations off right we provide some basic amenities:

• One set of Travel-Size Aveda Bath Products, Per Bathroom (Shampoo, Conditioner, Bar Soap, Lotion)
• 3 Rolls of Toilet Paper Per Bathroom
• 2 Rolls of Paper Towels
• Sample Pack of Local Coffee and Coffee Filters
• Sponge
• 2 Dishwasher Pods
• 2 Laundry Pods
• Tissue

These supplies are located in the Sojo/VRC packages in the bathroom(s) and kitchen.

Airbnb, Vrbo, and other OTAs use algorithms to generate search results that appeal to potential guests. These algorithms sort through the millions of listings on Airbnb & Vrbo to find the right listings for each search. Guests enter search criteria and the algorithms return listing results that reflect their specified criteria and traveler preferences.

Pricing
Airbnb & Vrbo’s algorithms factor in total price before taxes, including any discounts or additional fees, and compares it with the prices of similar spaces in the area. Listings with competitive prices rank higher than those that don’t have prices that reflect the market rate. Listings offering the best value in any given region appear higher in search results, which is why VRC’s dynamic pricing and yield management techniques are so important in giving our owners an advantage in an increasingly competitive market palace.

Whatever your financial goals, a savvy pricing strategy is key to success. Price is one of the main factors guests consider when choosing where to stay. No matter how beautiful your home is, if it’s priced higher than comparable listings in the area, there’s a good chance you’ll miss out on bookings

Availability
Airbnb & Vrbo’s algorithms factor in listing’s availability, response times to inquiries, and how often bookings are accepted. The more open dates a listing’s calendar offers, the more likely the listing will meet a guest’s search criteria and appear in their search results. Similarly, the more flexibility a host offers around how long guests can stay, the more likely the listing will work with the guest’s plans and show up in search results. Prescriptive minimum night stays impact listing’s performance and limit the number of search results it appears in.

Our Owner Portal is a great resource for our Homeowner Partners to help track their home’s revenue performance, monitor their calendar, and access prior months Owners Statements. Not only is the Owner Portal a great resource for accessing data about your property, but it’s also a functional tool. You can easily set up Owner Stays and guests of Owner Stays for friends and family members.

You can access the Owner Portal using this link: https://owner.escapia.com/dist/index.html#/login, which is also available from the drop down menu on our website.

If you haven’t previously registered or accessed the portal please reach out to your VRC contact for assistance in setting up your account.

Please note: If you have an existing reservation and you want to add nights or edit your existing reservation and you are not able to make changes in the portal, please reach out to a member of the VRC team to assist rather than creating a new reservation. We use software to manage arrivals and departures with our housekeeping and maintenance teams and want to avoid creating confusion in their scheduling efforts.