When the economy is up, it’s to maximize the revenue for your vacation rental. But What happens when it’s not? It’s time to create a Unique Selling Point for your vacation rental.
As vacation rental hosts, we all look like geniuses when the economy is booming. There is an influx of traveler demand, the money is flowing freely, and you’re able to book the reservations you want when you want them. However, we all know how the tale of ‘tough times’ plays out when the economy is down. Inevitably, people are forced to tighten their purse strings, consumer spending decreases, and we’re left with an oversupply of properties. While we all wish a bull market would command the economy, we know the reality is that markets will churn and markets will change.
Since the pandemic, the vacation rental market has been running red-hot, to say the least. Interested parties from individual homeowners to billion-dollar investment groups have been looking to capitalize on the market in an attempt to get in on the income-producing game. As a result, thousands of vacation rentals have been entering the real estate market ultimately leading to a dramatic increase in the overall supply of vacation rentals throughout the country.
Let’s look at Sarasota County for example. In Q4 of 2020, there were 4,847 individual vacation rentals listed on the Airbnb and VRBO platforms. By Q2 of 2022, there were 6,992 rentals, an increase of 2,135 rental properties or a 30.68% increase. This doesn’t include additional rental properties that are listed exclusively through HOAs and management companies that do not list on these platforms. That is a substantial increase.
During the guest-driven travel economy of 2021, an increase in accommodation supply of this magnitude could easily be handled by what seemed like endless traveler demand. However, the realities of the global economy have started to catch up. The end of Q1 2022 saw the cresting of vacation rental revenue growth. Through Q2 of 2022, we have seen a 12% decrease in overall occupancy and a 6% decrease in average room rental revenue. It appears the market has reached its maximum market saturation rate and the overall demand is not keeping up with the total supply of vacation rentals in the Sarasota County Market. With recent increases in inflation and a decrease in consumer spending, the tourism market is starting to see the squeeze.
This drop in market occupancy is contributed to several market factors including.
- The return of the hotel industry and some travelers returning to hotel stays.
- Changes in traveler habits including more overseas trips, and vacations targeted as family reunions and/or family trips requiring larger properties.
- More demand for premium markets over their secondary and tertiary counterparts.
- The return of urban destination travel.
- The return of office work leads to fewer remote workers.
- Economic fears and increasing gas prices.
- Oversupply of vacation rentals in the market.
Does this mean that investing in the vacation rental market is a bad idea? I don’t think so. However, it does mean that there is going to be a fundamental shift in the way that properties are marketed and operated. Those properties that are able to adjust to the market changes will become lasting legacy properties in the short term market while many other properties will lose out and potentially fold. As a result, now is the time to establish yourself as a market differentiator. You need to make yourself stand-out from the crowd. The flower with the brightest colors attracts the bees. Why should guests choose your property, what is it offering, and is it fitting the needs of your target audience? Your property needs a Unique Selling Point.