U.S. December Overview: Short-Term Rental Market Cools Despite Slowing Inflation

State of the U.S. Economy

The inflation rate in the United States decreased from 7.1% in November to 6.5% in December; marking the sixth consecutive month where the year-over-year inflation rate decreased. This figure is the lowest since October 2021 and is in line with market forecasts. In short, Americans are paying an average of 6.5% more for goods and services than they were in December of last year. 

Gasoline costs decreased by 9.4% from December 2021, following a 2% decrease in November. Airfare has decreased by 3.1% this month, following a 3% decrease in November. Again, airfare was one of the few indexes to decrease this month.¹

It is important to note that a decrease in the annual inflation rate does not equal deflation; which is when overall prices decrease. The annual rate in December (6.5%) was still positive - meaning prices rose, but at a slower pace than earlier this year. More significantly, prices fell from November to December by 0.1%. The last time this happened was in May 2020, when consumer demand collapsed in the early months of the COVID-19 pandemic. 

Additionally, according to a study done by Destination Analysts which surveyed over 4,000 American travelers in December 2022, 45% of respondents stated that travel being too expensive has prevented them from taking as many trips as they would have liked in the past six months; representing a 5% increase from last month. 50% stated that high travel prices have prevented them from traveling in the past month alone. The exorbitant cost of airfare specifically was cited by 30% of American travelers as the reason they’re not taking trips.

62% of American travelers surveyed said that they are currently being more careful with their money because they are concerned about an impending recession. Of these travelers, 77% say their reduced spending habits target travel. A post-pandemic low of 22% feel that now is a good time to spend money on traveling. While 53% will still prioritize travel over the next three months, this figure is 5% lower than in December 2021.²

The World Bank is also not feeling optimistic; they slashed their 2023 global economic growth outlook from 3% to 1.7%, with the United States’s growth outlook being downgraded from 2.4% to 0.5%. The World Bank also reduced its 2023 growth outlook for China from 5.2% to 4.3%, Japan from 1.3% to 1%, and Europe and Central Asia from 1.5% to 0.1%. These downgraded estimates would mark the third weakest pace in growth (behind only the recessions in 2008 and 2020) in three decades.³

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1 Bureau of Labor Statistics; U.S. Department of Labor. “Consumer Price Index - December 2022”

2 Destination Analysts. “Welcome 2023! The State of the American Traveler in January - Americans’ Top Travel Predictions for the New Year”

3 Jihye Lee; CNBC. “World Bank makes big cut to its 2023 growth outlook, says globe is ‘perilously close’ to recession”

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U.S. Vacation Rental Performance; “Big Three” KPIs

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Calendar Occupancy % 

Calendar Occupancy % = (Nights Sold + Owner Nights + Hold Nights) / (Total Nights)

Direct Calendar Occupancy rates were very similar this year and last year, though slightly lower than last year from March through December. The year-over-year difference ended at 3% below 2022, with December’s occupancy rate 5% lower than in 2022. Comparing the year to 2019, occupancy has increased by 10% overall. However, comparisons to 2019 in 2023 will slowly become obsolete as demand normalizes and the pre-pandemic period reaches the five-year-old mark.

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Average Daily Rate

ADR = Total Unit Revenue / Nights Sold

The increase in nightly rates from 2021 to 2022 decreased as the year went on, until December when 2021’s rates were higher than in 2022. In January, the average daily rate across the United States was $288, compared to $231 in 2021; a year-over-year increase of $57. Halfway through the year, June’s nightly rates were $420, compared to $384 in 2021; a smaller increase of $36/night. In December 2022’s rates fell $10/night below 2021’s.

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RevPAR

RevPAR = Occupancy x ADR or Total Unit Revenue / Total Nights in a given period

RevPAR for the first half of the year was ahead of, or on par with, 2021. However, starting in July, RevPAR for 2022 slowly decreased from 2021. In January of this year, RevPAR was almost $30 higher than last year. In December, RevPAR was $17 lower than last year. However, the year-over-year average in 2022 was able to pull ahead by $5/unit. Both years did see marked increases over 2019; 2022’s RevPAR was $44 higher, and 2021’s was $39 higher.

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U.S. Regional Vacation Rental Performance

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All regions saw a decrease in year-over-year calendar occupancy for December 2022. The Hawaiian Islands’ calendar occupancy, after an entire year of increases, experienced a slight 1% decrease compared to 2021. During its first big month of snow sports, the Rocky Mountains saw an 8% decrease in occupancy, and occupancy in the Southeast and Western U.S. also decreased by 8% and 9%, respectively. The Mid-Atlantic States and the Midwest had the largest decrease in occupancy compared to 2021 at 12%.

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Though occupancy fell 1% in the Hawaiian Islands, nightly rates increased 11% over last year in December 2022. The Southeast U.S. booked properties at rates on par with last December, but a majority of the regions above had decreases in nightly rates this December.

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Though occupancy decreased slightly in the Hawaiian Islands, nightly rates increased enough that revenue per available rental increased 8% over December 2021; the only region to increase their RevPAR. All other regions are seeing year-over-year decreases between 13% (Rocky Mountain States) and 24% (Southwest U.S.) in December.

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U.S. Vacation Rental Performance; Booking Activity

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Net Reservations per Active Property

Net reservations per property = (bookings made - cancellations) / active properties

Overall in 2022, there were 7% fewer net reservations per property than in 2021, but 19% more than in 2019. Though there was a prolonged increase over 2021 in Q3 of 2022, the spike spanning late Q1 - early Q2 in 2021 due to pent-up traveler demand post-pandemic was too great to overcome. December is typically a slower month for bookings so a year-long low was not surprising to see. 

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Average Length of Stay and Booking Window

Average Length of Stay

Average Length of Stay = Total Nights Sold / # of Guest Check-ins

In 2022, the average length of stay was about 5 days; the same as in 2021. Typically, the length of stay during the winter months is slightly longer due to snowbird stays - evidenced by a two-day spike in January. This trend does not deviate much through the years, except in Q1 of 2019, where ALOS was roughly one day longer than in 2021 or 2022. 

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Average Booking Window

Average Booking Window = (Arrival Date - Booked Date) / # of Guest Check-ins

Property Managers in 2021, especially in Q1 and early Q2, saw dramatically shortened booking windows. During this period, the average booking window, or the time between booking and arrival was roughly 24 days shorter than in 2019. From January - May 2022, booking windows increased by roughly two weeks over 2021, but were still shorter than in 2019 by 10 days. However, as the year went on, booking windows lengthened and were comparable in 2021 and 2022. The United States 2022 average booking window was 68 days, or about two months long. This was an increase of 5 days over 2021, but still nine days shorter than in 2019. 

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