Growth in the US vacation rental market – how do you keep up?

In October 2019, Transparent released the North American Vacation Rental Survey, providing an authoritative picture of the state of the North American vacation rental climate. More than 300 property managers managing a combined 30K properties participated, shedding light on the structure and growth of the market, and technology and operating practices used by different PMs in the industry. This report has given us extensive insight on the growth of the US market.

The vacation rental industry has continued to grow exponentially in recent years. So, how large really is this market, and how can you keep up?

Property Manager Inventory Growth

As more guests steer away from the traditional hotel stay in favour of short-term rental properties, demand in the vacation rental space continues to increase year-on-year.

Our first graph shows that the average PM reported 30% growth in their inventory in the past 12 months, but they expect this to fall to 25% over the next 12 months. However, PM optimism around future growth varies depending on units managed. Compared with last year, the smallest and largest PMs both expect growth to accelerate, while the two middle segments expect growth to slow down. In absolute terms, however, growth expectations are a function of PM size: the smaller the PM, the larger the expected growth rate.

Here we see inventory growth for our top 9 responding states, and the other responses grouped by region. 34% was the average growth seen across our top 9 states, with North Carolina in particular boasting a number of businesses who reported more than doubling their stock. A more conservative 22% is the average prediction for stock growth over the next year in the same states. And yet, 4 states expect an increased rate of growth, and of the aggregated numbers by region and for Canada, only the midwest foresee a decline in growth.

In the third graph, results indicate that urban inventory experienced double the growth of rural/mountain inventory and almost triple that of seaside inventory. However, urban inventory growth is expected to fall by almost half in the next 12 months.

Unlike more established vacation rentals, which tend to be in the leisure market, the urban market is relatively new, increasingly drawing from traditional hotel consumers. PMs have grown their supply in urban markets at a rapid rate in comparison to the leisure market over the last 12 months at 51%. However, they are only expecting to continue growing at 27% in the following year, which is more aligned with the leisure market’s growth in the last 12 months.

Property Manager Revenue Growth

Graph number 4 shows that the average increase in booking revenue for last year was 19%, but the most common growth rate among all PM size segments was 0-10%. PMs with 10-49 and 100+ properties demonstrated the greatest average growth at 21%, while PMs with 2-9 properties reported the lowest growth averaging 11%. Negative growth was relatively rare with only 11% of PMs reporting a decline in booking revenue.

Meanwhile, our 5th graph breaks down the revenue growth by top 9 states and then by region and for Canada. The overall picture here is encouraging, with most falling in the 0-10% increase bracket, and only 16% percent sitting on or below 0%. The numbers are particularly rosy for Canada, where 57% of PMs reported a revenue increase between 20-30%!

And lastly, graph 6 illustrates that urban inventory reported most significant growth – urban PMs claimed a 25% revenue growth on average, followed by seaside inventory (17%) and then rural/mountain inventory (16%). Urban PMs were however also the most likely to have recorded a decrease in revenue.

How do you ride this wave?

The vacation rental growth trajectory is likely to continue for the foreseeable future, providing huge opportunities for property managers, and technology innovation has played a major role in this growth. One thing VR technology has given us for the first time is a window into the short-term rental industry and strategy; through data. It is important to understand your performance and your market and strategize accordingly, and comprehensive data plays a huge role.

Do you have an inventory development strategy?

Data on supply, rates and occupancy can provide insight into the best stock types and markets for vacation rental acquisition. You must delve deeper than just looking at where to buy your properties. What type of properties are booked most often? What type of properties achieve the highest return on their value?
We can even use data to analyse which specific locations or amenities are most desired. All of this can help in selecting the most profitable stock.

Do you have a revenue management strategy?

Revenue growth is still on the rise as property managers are becoming more informed and proactive with revenue management. Your strategy should be based on selling your property to the right person at the right time for the right price. Data can also help you to tread the tightrope of maximized rates and maximized occupancy by keeping you up to speed on market trends. Further, it can help paint a picture of the most effective distribution and marketing strategies throughout your inventory.

Utilizing Data

Without data, property managers are forced to base their decisions on estimates and indirect or limited information, which is both unsustainable and time-consuming. Utilizing a market intelligence platform such as Transparent provides ready and extensive market data for you to gauge your performance, track competitors, align rates, inform distribution and monitor demand and supply, allowing you to maximise revenue by aligning strategy with reality. It allows you to proactively make adjustments to optimise your strategy through fluctuating market conditions, before your competition.

If you want to learn more…