A temperature check on vacation rentals

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Vacation rentals were the undoubtable success story of the travel industry in the first year of the pandemic.

Bookings ramped up rapidly and demand climbed to unprecedented levels.

For travelers largely confined by closed borders and worried by the surge in the coronavirus cases, but still wanting to get together with family and friends and just take a break from it all, vacation rentals seemed the obvious choice. They offered privacy, safety and a home away from home.

Bans on international travel also herded travelers towards domestic trips and encouraged them to try vacation rentals as a result. Consumers discovered the untapped delights of their own country – whether that was beaches, mountains or cities – and booked unique stays in yurts and treehouses.

Some chose a vacation rental out of necessity rather than choice as hotels were unable to open as quickly, bringing in a new generation of guests to the sector.

By last winter, it became clearer that COVID-19 was not going anywhere fast. Vacation rentals seemed set to continue their growth through the summer of 2021 as travel restrictions eased, surpassing the “normal” levels of 2019 and dominating the accommodation sector.

As kids return to school and employees are tentatively returning to the office, it seems an appropriate time to reflect on whether this year’s summer has lived up to the hype. Has it really been the best on record?

More importantly, are vacation rentals now in a good position to sustain this demand in future? Or is it too soon to tell?

What does the data say?

All the data we’re seeing right now points towards another record-breaking period of growth for vacation rentals over the last summer.

Only a few weeks ago, AirDNA reported a high of 74.9% occupancy in the U.S. during July, with a 23.9% increase in nights sold from 2020 (a 3.9% increase from 2019).

The last 18 months have proved the value of vacation rentals, shown they can professionalize and accommodate the changing travel habits of their guests. The continuing custom of this segment is going to sustain the sector in the future.

Marcus Rader – Hostaway

It’s even more impressive given that there were actually 10.6% fewer listings for travelers to choose from, though that’s probably in turn why the average rate for properties was up $294 for that month – a 20% increase compared to 2019 and 8.8% higher than 2020.

Not every location was equal though and our data at Hostaway certainly reflects that.

Top places in the U.S. where demand far outstripped inventory supply on major booking platforms we partner with, like Airbnb, Booking.com and Vrbo, were predictably coastal locations, like Pensacola, smaller cities with easy access to nature, like Santa Fe, or national and state parks like Lake Tahoe. Predictably, urban locations continued to suffer but this was generally in line with expectations.

Companies such as ours which provide services to the vacation rental industry have also experienced a sharp growth trajectory.

Our business has been growing by 10 to 25% month on month this summer as more property owners and managers have sought to professionalize the management of their business and cope with surging demand. This data should be considered when we measure the success of the vacation rental industry.

In short: the summer of 2021 most definitely lived up to industry expectations by exceeding 2019 and 2020 booking levels and prices in predicted areas.

Learning from the trends of 2021

Just because the industry has experienced success these past two summers doesn’t necessarily mean that the same will happen for 2022.

After all, no-one really can say for sure what the long-term repercussions of the pandemic will be for the industry and on society as a whole.

What we can all do now is unpack the trends behind the growth and use them to understand our customers and how they might behave in the future. This will put the industry in a much more confident place to not only retain its existing customers, but convert the first-timers it has picked up this year into loyal, repeat bookers.

1. Travelers felt vacation rentals offered a safe, COVID-secure stay

Staying in a vacation rental enables travelers to bubble themselves in a COVID-secure environment, something which is much harder to do in a hotel with less space and amenities.

And traveling domestically or to a vacation rental closer to home accessible by car cuts out the additional risks of changing border restrictions or simply just moving through a busy airport. For as long as COVID exists, the traveler’s need to feel safe at home and abroad is going to feed into the sector’s success.

In fact, property operations platform Breezeway found that 73% of industry professionals thought cleaning and safety will remain the most important factor when booking.

So if vacation rentals can provide insight into their operations processes at this point this is going to help give confidence to their customers. It could be as simple as explaining a later check-in and earlier check-out to higher standards of cleaning. Plus, owners and managers can take advantage of a host of new contactless technologies that are making it easier to provide peace of mind to future guests.

2. People are traveling for different reasons than before the pandemic

Airbnb’s CEO Brian Chesky said this year that “the lines between travel, living and working are blurring”. Vacation rentals sat comfortably in the convergence of all three and shed light on how traveler habits were changing dramatically.

The length of stays went up from 3.2 nights to 4.6 nights from 2019 to 2021. The average number of people in a booking also went up from 1.3 to 1.9. The seasonality of bookings went out the window as peak season locations were popular all year round.

This all boils down to the rise of remote working. If you can work from home, you can work from anywhere in the world as long as there is an internet connection. You can extend a family vacation just by bringing along a laptop.

The industry now needs to anticipate why people will be traveling in future. Learning from the previous seasonality of a property will also help predict future demand and help accurately set rates.

And whilst workplaces are opening up again all over the world and it will become harder for some to become a digital nomad, the business travel sector is one potential customer base that is set for a comeback this year. Fast Wi-Fi will be an essential amenity for vacation rentals going forward.

3. Direct booking has become more popular

Whilst OTAs continue to dominate the sector, buoyed by Airbnb’s IPO last year, travelers have quietly been moving towards direct bookings over the last couple of years.

This peaked in summer 2021: on Hostaway’s platform, the proportion of direct bookings increased from 4% in July 2019 to 11% in 2020 and now stands at 18%. This shows a confidence in the sector – from both guests as well as owners and property managers.

The growing number and intelligence of software solutions is enabling professionals to take their marketing and sales in-house. Consumers are becoming more adventurous with their travel plans and research as the likelihood of losing money through a cancelled booking diminishes.

It’s interesting that Booking.com and TripAdvisor have both rebooted their loyalty programs this year to perhaps win back some of this share from direct bookings.

An initial look into 2022

You may see other industry members already predicting a record summer for 2022 from current booking data. To be frank, robust data on this doesn’t really exist yet, but that’s completely normal for this time of year and we likely won’t see a surge in bookings for a few months.

Early signs are promising. There are so many external factors at play, particularly with vaccines and border restrictions, that it’s just going to be a waiting game for a while longer.

These external factors are what will tip the interest of travelers who tried vacation rentals for the first time this year, those who may have traditionally booked hotels, city stays or hostels. It could go either way. On the other hand, the biggest opportunity will lie with repeat customers, particularly those who already regularly stayed in vacation rentals pre-pandemic.

The last 18 months have proved the value of vacation rentals, shown they can professionalize and accommodate the changing travel habits of their guests. The continuing custom of this segment is going to sustain the sector in the future.

The biggest challenge on the horizon for next year is no doubt going to be diminishing inventory supply. This continues to be a critical issue not just for the vacation rental industry but for real estate as well.

source : phocuswire

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