.png)
September vacation rental performance saw some of the same patterns we observed in the first half of the year; decreased occupancy rates compared to previous years, and a decline in pricing power and RevPAR. However, September stays saw similar stay lengths and booking windows to last year, which has not happened since April. September trends include:
- Vacation Rental demand continues to underperform 2022 and 2021, but averaged 10% above 2019.
- Rates are softening, but still higher than in 2019.
- September RevPAR was lower than last year and 2021, but higher than in 2019.
- Net reservations are lower than in 2021, but significantly higher than in 2019.
- Average stay lengths and booking windows are similar to last year for the first time in six months
How do these high-level trends break down? Let’s take a closer look.
U.S. Vacation Rental Performance for the Last Six Months
Calendar Occupancy %
Vacation Rental demand continues to underperform 2022 and 2021, but averaged 10% higher than in 2019.
Calendar Occupancy % = (Nights Sold + Owner Nights + Hold Nights) / (Total Nights)
In September, calendar occupancy was 3% lower than in 2022 and 7% lower than in 2021. However, compared to 2019, occupancy was 10% higher in 2023. According to our direct data, the number of nights sold is starting to wane after peaks in 2021 and 2022. The decrease in nights sold combined with increased supply, is driving occupancy down. Q3 Calendar Occupancy rates finished at 62%; 3% behind last year and 9% behind 2021. Occupancy rates finished about 1% higher than they were pacing about a month ago, so there was not much pick up, or unexpected demand, during September. Interestingly enough, September did perform better year-over-year than August, so it is possible there is some extra shoulder season demand sticking around.
Average Daily Rate
Daily Rates are softening but still higher than in 2019.
ADR = Total Unit Revenue / Nights Sold
The average daily rate in the United States decreased by $9 from September 2022. With increased supply, property managers are facing more competition, and pricing power has declined in the face of lower occupancy rates. With more options and high inflation, consumers may be more price sensitive than they used to be. Additionally, when adjusted for inflation, rates are much lower than last year. Q3 2023’s nightly rates finished $13 lower than in Q3 2022 ($288), and $2 higher than in Q3 2021 ($277). Property Managers are torn between decreasing rates and hoping for more reservations, or holding rates steady to account for lower occupancy. They will have to have a solid pricing strategy during the fall season, as decreased demand and price sensitivity will factor into travelers’ vacation plans.
RevPAR
September RevPAR was lower than last year and in 2021, but higher than in 2019.
RevPAR = Occupancy x ADR or Total Unit Revenue / Total Nights in a given period
RevPAR suffered because occupancy and rates decreased. At $84 per active property per night, revenue decreased by $12 from September 2022. This trend began in Q4 of 2022 when RevPAR was $7 lower than in 2021, and continued through Q1 and Q2 2023 with RevPAR figures averaging $10 and $18 lower than in 2022, respectively. Q3 2023 RevPAR finished $20 behind Q3 2022 and $26 behind Q3 2021. Now is the time to communicate openly with your owners and shift strategies for the coming months. Consider implementing light discounts or price decreases and focus on capturing bookings outside your markets’ typical booking windows. We anticipate less investment activity in many markets due to high mortgage rates and lower revenue potential.
U.S. Regional Vacation Rental Performance
Almost all regions saw a decrease in year-over-year calendar occupancy for September 2023, except for the Rocky Mountain States (+2%). The Hawaiian Islands saw the steepest decline in occupancy (-10%), likely due to the devastating wildfires in Lahaina. However, most regions' decreases were only slightly better; between -3% to -8%. Calendar Occupancy was still higher than it was in September 2019 for all regions. The Hawaiian Islands saw the smallest increase from 2019 to 2023, but it was still a significant increase of 14%. The remaining regions’ calendar occupancy increased between 25% (Mid-Atlantic States) and 38% (both the New England and the Southwest U.S. regions) from 2019.
All regions above saw lower nightly rates year-over-year in September 2023. Demand has waned so guests are likely no longer willing to book reservations at the rates they were this time last year. Though rates in the Southeast are only 1% lower last month than in September 2022, they are 37% higher ($275) than in 2019 ($201). The Mid-Atlantic States saw a 13% increase in rates ($245 in 2019 compared to $276 in 2023), which was the smallest increase observed. Conversely, the Hawaiian Islands saw the largest increase in rates from 2019 (46%). The remaining regions saw relatively similar increases in nightly rates compared to 2019 (20%-30%). The Midwest was the only region with lower ADR’s than in 2019; $226 compared to $231. This was also true in August, which suggests that property managers in the Midwest should focus on their pricing strategies.
With marked decreases in both occupancy and nightly rates, RevPAR has also declined year-over-year for all of these regions. The Rocky Mountain States (-3%) saw the smallest decreases, likely propped up slightly by an increase in occupancy. The Midwest U.S. saw a decrease of 18%, while the Southwest U.S. saw a substantial decrease of 24%. Even with significant decreases from last year, when compared to 2019, RevPAR has increased dramatically. The Rocky Mountain States saw the largest increase in RevPAR; a 70% increase ($44 to $75). The remaining regions saw a $16-$34 increase from 2019.
U.S. Vacation Rental Performance; Booking Activity
Net Reservations Per Active Property
Net reservations lower than in 2021 but higher than in 2019.
Net reservations per property = (bookings made - cancellations) / active properties
From week 22 (May 28th) to week 26 (June 25), the increase in net reservations continued to grow, surpassing 2022, 2021 and 2019 figures. In the first week of July 2023 (week 27), net reservations increased 12% compared to 2019, 35% compared to 2021, and 10% compared to last year. In July (weeks 27 - 31), net reservations paced right alongside 2022, though still averaging 6% ahead of 2021 and 7% of 2019. Starting in week 32 (August 6), net reservations dipped below 2022, and in the following week, dipped below 2021 as well. In the last week of August (Week 35), net reservations per property averaged roughly 5% lower than last year and 4% lower than in 2021, but 21% higher than in 2019. Through September, net reservations increased slightly. By week 38 (September 17), reservations had increased to 7% ahead of last year, but still 4% behind 2021. Again, net reservations were still 21% ahead of 2019.
Average Length of Stay and Booking Window
Average Length of Stay
Average stay lengths are slightly shorter than in previous years, and these shortened stays are contributing to lower occupancy rates.
Average Length of Stay = Total Nights Sold / # of Guest Check-ins
At 4.2 days in September 2023, stay lengths are 1% longer than last year, 6% shorter than in 2021, and 11% shorter than in 2019. This is the first time since April that stay lengths have been on par with last year. And though the change from 2021 and 2019 may seem minute (-0.27 and -0.5 days, respectively), the 6% decrease in the average length of stay from 2021 leads to 6% fewer nights sold if the number of reservations remains the same. With nightly rates remaining high and remote work becoming less popular, shortened stay lengths are an important indicator of changing consumer behaviors.
Average Booking Window
Booking windows were significantly shorter than in July 2022, 2021, or 2019.
Average Booking Window = (Arrival Date - Booked Date) / # of Guest Check-ins
In the first half of 2023, booking windows were extremely similar to the previous year’s. September’s average booking window finished at 69 days, compared to 71 days last year, and 78 days in 2019. Of the stays with arrival dates in September 2023, 32% were booked within 14 days of the stay, 15% were booked 15-29 days before check-in, 18% were booked 30-59 days before check-in, and 34% were booked 60+ days in advance. A slight majority of these September stays were booked more than 60 days out but compared to last year, the sub-14 day booking window increased by 2%, and the 60+ day booking window decreased by 1%. Compared to 2019, the sub-14 day booking window increased by 2% and the 60+ day booking window decreased by 4%. With lower occupancy rates, are travelers booking closer to the date of arrival to secure lower rates, because they know they will still be able to find a property that suits them? Or are property managers pushing travelers to book closer to the date of arrival because they are holding rates too long? With shortened booking windows, ensure you have an appropriate pricing strategy to capture last-minute bookings. Focus on marketing properties outside of your popular booking windows and adjusting rates accordingly.
State of the U.S. Economy
The inflation rate in the United States remained at 3.7% during September, extending the gradual slowdown in consumer prices. In short, Americans are paying an average of 3.7% more for goods and services than in September of last year.
Gasoline costs increased by 2.1% from August to September 2023, after the steep 10.6% increase from July to August. Airfare increased by 0.3%, after the increase of 4.9% in August.
Trends to Keep an Eye On
The belief that now is a bad time to travel remains elevated, but positive feelings about travel spending rebounded
Destination Analysts surveys American travelers monthly in order to generate insights into domestic travel trends. In September’s survey, 37.9% responded that now is a bad time or very bad time to travel, compared to the 28% that believed it was a good time to travel. However, the percentage that believed it was a good time to travel was up 3% from last month. The traveler demographic played into the responses as well; Millennials, Affluent people, and people from large cities were most positive about travel spending.
High Costs Remain the Top Impediment to Travel
When asked “In the past six months, which (if any) of the following have kept you from traveling more than you would have otherwise preferred?”, 40.7% of respondents answered that “Travel is too expensive right now”. In fact, 3 of the top 4 responses had to do with travel costs. (Travel is too expensive right now, Gasoline was too expensive, and Airfare was too expensive, respectively) Interestingly enough, only 3.6% of the responses listed “Sold Out/Lack of reservations available”. So, more potential guests are being deterred by costs than because they don't have rental options available to them. Ensure you are keeping an eye on your data to respond in real time to changing economic conditions.
Looking Forward; Travel excitement remains high and may help boost Holiday Season travel
American Travelers were asked to rate how excited they were on a scale of 0-10 about leisure travel in the next year, and 86.6% responded with a six or higher. Additionally, 25.9%, or a quarter, of those surveyed already have a trip planned for November, and 30.3% have a trip planned for December. Pay close attention to your pacing data for the next couple of months! Adjust pricing appropriately for high occupancy periods and consider your marketing strategies.