2023 brought about a resurgence of trends that we had come to expect pre-COVID. However, in returning to “normal”, we saw year-over-year declines in occupancy, RevPAR, booking windows, and stay lengths. So far, we anticipate that 2024 will follow similar trends. How do these high-level trends break down? Let’s take a closer look.
U.S. Vacation Rental Performance for the Last Three/Next Three Months
Calendar Occupancy %
Supply increases and shorter booking windows continue to shift occupancy trends.
Calendar Occupancy % = (Nights Sold + Owner Nights + Hold Nights) / (Total Nights)
In January, Calendar Occupancy in the United States was 45%; 4% lower than in 2023, and 9% lower than in 2022. The continued decrease in nights sold per property combined with increased supply is driving occupancy down, though supply increases are starting to slow down slightly.
Looking forward, 2024 is consistently pacing behind the previous three years. In February, calendar occupancy is about 5% behind 2023. However, booking windows continue to shorten, so there is still plenty of time for occupancy pick-up. For markets that do not have strong winter or early spring occupancy, shoulder seasons offer tremendous opportunities for revenue increases. Be sure to stay vigilant with your marketing and rate strategies to capture bookings during this time!
Average Daily Rate
Rates were on par with previous years in January, and are pacing ahead for the next three months.
ADR = Total Unit Revenue / Nights Sold
Last month, daily rates were right in line with 2023 and 2022 figures at $275; $5 less per night than last year and $3 more per night than in 2022. During 2023, increased supply caused property managers to face more competition, and pricing power declined in the face of lower occupancy rates. With more options and high inflation, consumers are more price-sensitive than they used to be.
In February through April of 2024, rates are pacing higher than in 2021, 2022, or 2023. Part of these rate increases could be due to shortened booking windows; not as many consumers are booking this far out so more discounted bookings will come later. As we move into the spring break booking period, make sure to hold rates high during the high-demand period!
RevPAR
RevPAR is higher than in 2021, but lower than in 2023 or 2022.
RevPAR = Occupancy x ADR or Total Unit Revenue / Total Nights in a given period
RevPAR suffered because occupancy and rates decreased in January. At $65 per active property per night, revenue decreased by $7 from January 2023. This trend appears to be continuing through April because occupancy is pacing behind. 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
Q4 2023 Calendar Occupancy %
There was a significant variation in how regions performed during Q4 2023. The Mid-Atlantic States (+2%), Midwest U.S. (+2%), and New England (+5%) regions saw increases from 2022. These regions had some of the largest opportunities in Q4 because it is off-season. The Rocky Mountain States did not experience a year-over-year change coming into their peak season. The Southwest U.S. saw a slight decrease (-1%), and the Western U.S. and Southeast U.S. regions saw 3% and 4% decreases, respectively. The Hawaiian Islands are still experiencing significant impacts due to the 2023 Lahaina wildfires.
Q4 2023 Average Daily Rates
All regions above saw lower nightly rates in Q4 2023. Demand has waned so guests are likely no longer willing to book reservations at the rates they were in Q4 2022. New England saw the smallest year-over-year change (-2%) in rates, during an off-season. The Southwest U.S. and Southeast U.S. saw decreases of 3% and 4% respectively, and the remaining markets saw decreases of -5% and -6% (the Hawaiian Islands).
Q4 2023 RevPAR
With mixed performance in occupancy and rates, most regions saw decreases in year-over-year RevPAR. The Mid-Atlantic States were the only region that saw an increase in RevPAR from Q4 2022 to 2023 (+3%). New England (-4%), The Midwest U.S. (-6%), and the Rocky Mountain States (-7%) all saw moderate decreases in RevPAR, even though the Midwest U.S. and Mid-Atlantic States saw increases in calendar occupancy, the decreases in rates offset those increases. The Southeast U.S. (-10%), Southwest U.S. (-13%), and Western U.S. (-14%) all saw significant decreases in RevPAR when slight decreases in both occupancy and rates compounded.
State of the U.S. Economy
The inflation rate in the United States eased to 3.1% during January, a slight deceleration from 3.4% in December 2023. However, this is still higher than experts anticipated. In short, Americans are paying an average of 3.1% more for goods and services than in January of last year.
Gasoline costs decreased by 3.3% from December 2023 to January 2024. Airfare increased by 1.4% from last month.
Key Data’s Tips for Navigating 2024
2024 will need strong strategies
Supply growth vs. demand growth determines market occupancy. Guests have more choices and are increasingly value-conscious, so property managers need to balance that with their owners expecting strong returns. Monitoring real-time data to track occupancy, ADRs and RevPAR performance is crucial to be able to flex and adjust to changing market trends.
*Pro Tip: Set up automated reports in your Key Data Dashboard to have your most utilized date ranges and KPIs sent to you on demand!
Monitor shortening booking windows and stay lengths
If a property sees its average length of stay change from 5 days to 4.8 days, that’s a 4% decrease in occupancy if the number of reservations remains the same. Property managers would have to work harder to increase the number of reservations to keep the occupancy rate level with the previous year. Let guest behavior and feeder market data help you target when and how to market to guests willing to stay longer. Ways to try to mitigate these changes include:
- Enacting “Early Bird” specials to encourage travelers to book further in advance
- Utilize length of stay pricing and “Stay More, Save More” discounts to encourage longer stays
- Have a gap night strategy to prevent orphan nights
*Pro Tip: Use Key Data’s Feeder Market reports to determine where to focus your marketing efforts!
Continue to place the utmost importance on homeowner communication
Explaining year-over-year changes can be challenging with so many variables impacting property performance. How is their property performing this year? How is their property performing compared to the market? What strategies are you using to react to market changes?
*Pro Tip: Key Data’s Owner Reports and Comp Sets can help provide these answers and more!
