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March vacation rental performance mirrored the same trends we saw in February; decreasing occupancy rates compared to previous years, the decline of pricing power and RevPAR, and stay lengths and booking windows consistent with last year. How do these high-level trends break down? Let’s take a closer look.
U.S. Vacation Rental Performance for the Last Six Months
Occupancy Rates for March were lower than in the previous two years, but still higher than in 2020.
Calendar Occupancy %
Calendar Occupancy % = (Nights Sold + Owner Nights + Hold Nights) / (Total Nights)
In Q4 of 2022, occupancy started to return to more typical seasonal patterns and was 4% lower than in 2021. This trend continued through Q1 2023; calendar occupancy was 5% lower than last year, and 3% lower than in 2021. In March specifically, calendar occupancy was 5% lower than in 2022 and 6% lower than in 2021. Though occupancy is lower than last year, it remains higher than in 2020. Demand increases sparked during 2020 have not disappeared but increased supply is driving occupancy down.
Daily Rates are trending closely with last year. March’s ADR was a slight $5/night ahead of 2022.
Average Daily Rate
ADR = Total Unit Revenue / Nights Sold
The average daily rate in the United States decreased by $15 over March 2022, but Q1 2023 nightly rates finished on par with Q1 2022 ($324). In Q4 of 2022, nightly rates were only $1 more than in 2021, which was a stark difference from the increase of $55 from 2021 to 2022. Pricing power has declined in the face of lower occupancy rates, and consumers may be more price sensitive than they used to be. Additionally, when adjusted for inflation, rates are much lower than last year.
RevPAR is starting the year lower than last year but is still significantly higher than in 2021 or 2020.
RevPAR
RevPAR = Occupancy x ADR or Total Unit Revenue / Total Nights in a given period
RevPAR suffered because occupancy decreased and rates did not increase enough to offset the difference. At $123 per active property per night, revenue decreased by $19 from March 2022. This trend began in Q4 of 2022 when RevPAR was $7 lower than in 2021, and continues through Q1 2023 with RevPAR figures averaging $10 lower than in 2022. Property Managers were split on how to react to lower occupancy; raising rates too much could drive occupancy lower. On the flip side, lowering rates could still lead to lower revenue if occupancy didn’t increase enough. We reviewed this quagmire in depth in our article titled 2023 Vacation Rental Pricing: Is it time to drop rates?
U.S. Regional Vacation Rental Performance
All regions saw a decrease in year-over-year calendar occupancy for March 2023; even in the Hawaiian Islands. The Hawaiian Islands’ delayed recovery and seasonality helped the region keep occupancy on an upward trajectory for the past few months, but as time goes on, these trends are waning. With their peak winter season coming to an end, the Rocky Mountains saw a 7% decrease in occupancy. The Western U.S. saw the steepest decline in occupancy (-10%). A return to normal occupancy trends is partially responsible here, as shoulder season occupancy has decreased from previous years.
Even with a slight decrease in occupancy, The Hawaiian Islands saw higher nightly rates (+6%) over March of last year. The Rocky Mountain States (-2%), Western U.S. (-4%), and Southeast U.S. (-5%) all saw slight decreases in nightly rates. The Midwest U.S. saw the most significant decrease in nightly rates over last year (-17%), indicating pricing power in this region is weakest.
For the Hawaiian Islands, the increase in rates was enough to offset the slight decrease in occupancy, and RevPAR increased 3% over last year. The Mid-Atlantic States saw the smallest decrease in RevPAR (-4%), but the remaining regions experienced significant decreases in occupancy and rates, and RevPAR suffered. However, a majority of these markets don't rely on Q1 revenue, so while the decreases aren’t beneficial, they’re not necessarily detrimental to overall annual performance.
U.S. Vacation Rental Performance; Booking Activity
Net reservations have fallen behind even 2019 levels.
Net Reservations per active property
Net reservations per property = (bookings made - cancellations) / active properties
In the first fourteen weeks of 2023, net reservations resembled the seasonal patterns of 2022, suggesting we can expect booking activity that follows a normal pre-pandemic annual trend. However, in volume, it resembles 2019 trends. There was a slight dip in net reservations in Q1, but inflated supply is likely influencing this decrease.
Average Length of Stay and Booking Window
The average length of stay has stayed very consistent throughout the past four years.
Average Length of Stay
Average Length of Stay = Total Nights Sold / # of Guest Check-ins
Typically, the length of stay during the winter months is slightly longer due to snowbird stays, as evidenced by a two-day spike in January. This trend has not deviated much through the years, except in Q1 of 2020, where ALOS was roughly one day longer than in the last three years.
Booking windows are still shorter than in 2019 but have increased from lows only seen in 2020-2021.
Average Booking Window
Average Booking Window = (Arrival Date - Booked Date) / # of Guest Check-ins
In the past six months, booking windows have been extremely similar to the previous year’s, with March’s average booking window being 54 days. The United States 2022 average booking window was 58 days, or about two months long. This was an increase of 17 days over 2021, but still 12 days shorter than in 2019.
State of the U.S. Economy
The inflation rate in the United States slowed during March, from 6% in February to 5% in March. This marked the ninth consecutive month where the year-over-year inflation rate decreased and it is at the lowest level since October 2021. In short, Americans are paying an average of 5% more for goods and services than they were in March of last year.
Gasoline costs decreased by 4.6% from February to March, following a 1% increase in February. Airfare increased 4% over the month, with March being the second consecutive month of increases.
A Trend to Keep an Eye On
Leisure trips to cities are anticipated to make a comeback
Destination Analysts surveyed 4,000 Americans in February 2023, asking how excited they are about leisure travel in the next 12 months, and where they were planning to travel to. According to the results, using an 11-point scale, Americans’ excitement about travel reached a record 8.2 points. When asked about destination types, 60% of respondents were most excited about beach destinations, followed by cities (47.7%), then small towns (44.8%), then national parks (41.2%). However, in a turn from the COVID-19 era, cities actually topped the list in the reported number of leisure trips Americans plan to take this year. Travelers plan to take 2.9 leisure trips to cities this year, up from 1.4 reported in 2019. Travelers plan on taking 1.8 Beach destination leisure trips.
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