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October 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, as in September, October occupancy is significantly higher than it was in 2019. 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 October, calendar occupancy was 3% lower than in 2022 and 6% 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. Q4 Calendar Occupancy rates are pacing about 3% behind last year and 6% behind 2021. Interestingly, there is some extra shoulder season demand sticking around. During the peak Summer travel season, calendar occupancy averaged about 5% higher than in 2019. In September and October 2023, the average increase from 2019 to 2023 jumped to 11%. Shoulder seasons offer the biggest opportunity to increase revenue, so lock in your marketing and rate strategies as we transition from the peak summer season!
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 $12 from October 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. Q4’s rates are pacing $9 lower than last year, and $7 lower than in 2021. Property Managers are torn between decreasing rates and hoping for more reservations, or holding rates steady to account for lower occupancy. However, with high-demand periods such as the Thanksgiving and Christmas holidays coming up, make sure to keep your rates high.
RevPAR
October 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 $65 per active property per night, revenue decreased by $11 from October 2022. This trend began in Q4 of 2022 and is continuing into Q4 this year. Q4 2023 RevPAR is pacing $11 lower than last year and $15 lower than in 2021. Now is the time to communicate openly with your owners and shift strategies for the coming months. 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 October 2023, except for the Rocky Mountain States. They were able to keep occupancy consistent with last year. The Hawaiian Islands saw the steepest decline in occupancy (-15%), likely due to the devastating wildfires in Lahaina. However, most regions' decreases were slight; between -1% to -5%. October is the first month in which almost all of the regions above saw single-digit year-over-year occupancy decreases; though likely because most of these regions are not in their peak seasons.
All regions above saw lower nightly rates year-over-year in October 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 Midwest were 6% lower last month than in October 2022, they are also 5% lower ($189) than in 2019 ($199). This region is the only one to see a decrease from 2019. This was also true in August and September, suggesting that Midwest property managers should focus on their pricing strategies.
The Mid-Atlantic States saw a 10% increase in rates ($193 in 2019 compared to $213 in 2023), which was the smallest increase observed. Conversely, the Hawaiian Islands (+38%) and the Rocky Mountain States (+31%) saw the largest increases in rates from 2019 (38%). The remaining regions saw relatively similar increases in nightly rates compared to 2019 (18%-28%).
Though there were only slight decreases in both occupancy and nightly rates, those decreases compounded and led to decreased year-over-year RevPAR for all of these regions. The Mid-Atlantic States (-4%) saw the smallest decrease, and New England and the Rocky Mountain States saw similar decreases (-8%). The Southwest U.S. (-19%) and Hawaiian Islands (-32%) saw the largest decreases. However, even with significant decreases from last year, RevPAR has increased dramatically when compared to 2019. The Rocky Mountain States saw the largest increase in RevPAR; a 71% increase ($21 to $36). The remaining regions saw a $9-$12 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 20 (May 14th) to week 26 (June 25), the increase in net reservations continued to grow, surpassing 2022, 2021 and 2019 figures. 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 2019 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. Through October (weeks 40-44), net reservations were 5% higher than last year, 20% higher than in 2019, and 6% lower than in 2021.
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 days in October 2023, stay lengths are 6% shorter than last year, in 2021, and in 2019. And though the change from 2021 and 2019 may seem slight (-.26 days), 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 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, shortened over the peak summer season, and are now returning to lengths similar to last year. October’s average booking window finished at 55 days, compared to 58 days last year, and 61 days in 2019. Of the stays with arrival dates in October 2023, 33% were booked within 14 days of the stay, 16% were booked 15-29 days before check-in, 18% were booked 30-59 days before check-in, and 32% were booked 60+ days in advance. A slight majority of these October stays were booked less than 14 days before the stay, but compared to last year, the sub-14 day booking window increased by 1%, and the 60+ day booking window decreased by 1%. Compared to 2019, the sub-14 day booking window increased by 1% and the 60+ day booking window decreased by 2%.
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 eased to 3.2% during October, the lowest since July 2023. In short, Americans are paying an average of 3.2% more for goods and services than in September of last year.
Gasoline costs decreased by 5% from September to October 2023, which translated to a 33-cent average decrease per gallon of regular-grade gas. Airfare decreased by 0.9% from last month, and is now 13.7% lower than in October 2022.
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% who 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.
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