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August vacation rental performance saw the same patterns we observed in the first half of the year; decreased occupancy rates compared to previous years, a decline in pricing power and RevPAR, and shorter stay lengths and booking windows. August trends included:
- Vacation Rental demand continued to underperform 2022 and 2021, but averages 2% above 2019.
- Rates are softening, but still higher than in 2021 or 2019.
- August RevPAR was lower than last year and 2021, but higher than in 2019.
- Net reservations have dipped below 2022, 2021 levels.
- Average stay lengths are slightly shorter than in previous years, and these shortened stays are contributing to fewer nights sold.
- Booking windows were significantly shorter than in 2022, 2021 and 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 averages 2% higher than in 2019.
Calendar Occupancy % = (Nights Sold + Owner Nights + Hold Nights) / (Total Nights)
In August, calendar occupancy was 5% lower than in 2022 and 10% lower than in 2021. 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 2023 calendar occupancy rates are pacing at 61% as of September 13th; 4% behind Q3 2022 and 10% behind 2021. Q3 Calendar Occupancy is pacing 5% ahead of what it was a month ago, similar to last year when mid-August to mid-September pickup was 5%. With shortened booking windows, pick-up may occur later in the quarter.
Average Daily Rate
Daily Rates are softening but still higher than in 2021 and 2019.
ADR = Total Unit Revenue / Nights Sold
The average daily rate in the United States decreased by $13 from August 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 are pacing $9 lower than in Q3 2022 ($392), and $10 higher than in Q3 2021 ($373). Property Managers will have to have a solid pricing strategy going into the fall season, as decreased demand and price sensitivity will factor into travelers’ vacation plans.
RevPAR
July 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 $137 per active property per night, revenue decreased by $23 from August 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 is currently pacing $21 behind Q3 last year ($169) and $28 behind Q3 2021 ($176). 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
All regions saw a decrease in year-over-year calendar occupancy for August 2023, except for the Rocky Mountain States. The Hawaiian Islands saw the steepest decline in occupancy (-16%), likely due to the devastating Wildfires in Lahaina. However, most regions' decreases were only slightly better; between -4% to -9%. Calendar Occupancy was still higher than it was in July 2019 for most regions; The Hawaiian Islands and the Mid-Atlantic were the only regions that saw decreases, though they were slight. (-2% and -1%, respectively) The Midwest U.S. saw the largest increase from 2019 to 2023; 45%. The remaining regions’ calendar occupancy increased between 2% (Southeast U.S.) and 18% (Rocky Mountain States) from 2019.
All regions above saw lower nightly rates year-over-year in August 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 August 2022, they are 22% higher ($375) than in 2019 ($307). The Rocky Mountain States saw an increase of 21% ($261 in 2019 compared to $315 in 2023. The remaining regions saw relatively similar increases in nightly rates compared to 2019 (7%-11%). The Midwest was the only region with lower ADR’s than in 2019; $295 compared to $312.
With marked decreases in both occupancy and nightly rates, RevPAR has also declined year-over-year for all of these regions. New England (-5%) and the Rocky Mountain States (-7%) saw the smallest decreases, but they are still significant. The Midwest U.S. saw a decrease of 20%, while the Southwest U.S. saw a substantial decrease of 26%. Even with significant decreases from last year, when compared to 2019, RevPAR has increased. New England saw the largest increase in RevPAR; a 38% increase ($175 to $242). Along with the New England, the Rocky Mountain States also saw a significant increase in RevPAR from 2019 (27% or $20). The remaining regions saw a $7-$16 increase, except for the Southwest that saw a 10%, or $6 decrease in RevPAR compared to 2019.
U.S. Vacation Rental Performance; Booking Activity
Net Reservations Per Active Property
Net reservations are staying consistent with last year, and are higher than in 2021 or 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 34 (August 6), net reservations dipped below 2022, and in the following week, dipped below 2021 as well. In the last week of August (Week 37), net reservations per property averaged roughly 5% lower than last year and 4% lower than in 2021, but 21% higher than in 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 4.5 days in August 2023, stay lengths are 3% shorter than last year, 8% shorter than in 2021, and 7% shorter than in 2019. Though that change seems minute (-0.14, -0.38, and -0.34 days respectively), the 3% decrease in the average length of stay from last year leads to 3% 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. August’s average booking window finished at 69 days, compared to 75 days last year, and 84 days in 2019. Of the stays with arrival dates in August 2023, 27% were booked within 14 days of the stay, 17% were booked 15-29 days before check-in, 18% were booked 30-59 days before check-in, and 38% were booked 60+ days in advance. A majority of these August stays were booked more than 60 days out but compared to last year, the sub-14 day booking window increased by 3%, and the 60+ day booking window decreased by 3%. Compared to 2019, the sub-14 day booking window increased by 4% and the 60+ day booking window decreased by 7%. 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 rose during August, from 3.2% in July to 3.7%. This is the second month that experienced an increase after a full year of year-over-year inflation rate decreases. In short, Americans are paying an average of 3.7% more for goods and services than in August of last year.
Gasoline costs increased by 10.6% from July to August 2023, which is cited as the main factor behind the steep inflation increase month-over-month. Airfare increased by 4.9% after decreasing 8.1% from both May to June and June to July.
Trends to Keep an Eye On
In January, Destination Analysts surveyed 4,000 American travelers about their predictions regarding issues that impact travel. These predictions were revisited in July to see how beliefs have shifted in light of current events.
Price Gouging and Labor Shortages
There was a slight decrease in those that responded that price gouging is more common in the travel industry, from 63.8% in January to 62.6%. The belief that labor shortages will be a problem for the travel industry in the coming year has also lessened; to 61.8% from 65.1% in January.
Feelings about Domestic Travel
61.7% of respondents believed that domestic travel will generally become more frustrating, up 1.7% from January. Additionally, the belief that popular National Parks will be over run with tourists has jumped 5.3% from January to 44.7%. Now is the time to get your marketing strategies in order; showcase how seamless you can make their trip.
New Technology
American Travelers seem to believe that some of the latest technology will transform travel. Over half of the July respondents (54.4%) believe that AI, or Artificial Intelligence, will start to replace some travel agents/advisors. This is a 15.7% increase from January. Additionally, predictions that the metaverse will start replacing some real-world travel jumped from 21.3% to 30%.
