Thus far in 2024, the performance of the United States vacation rental industry has continued to decline, although less dramatically than last year. Occupancy has been slightly lower than in 2023 due to increasing supply and softening demand. Rates have been relatively stable and revenues have dropped slightly. The ongoing question has been, “When will supply and demand stabilize, causing occupancy declines to stop?” The year-over-year stabilization did not come in August, but the late fall travel season is pacing well.
U.S. Vacation Rental Performance for the Last Three/Next Three Months
Calendar Occupancy %
Vacation Rental occupancy varies as we enter Q3.
Calendar Occupancy % = (Nights Sold + Owner Nights + Hold Nights) / (Total Nights)
In August, calendar occupancy was 2% lower than in 2023, and 5% lower than in 2022. According to our same-store property managers’ direct data from 2022 to 2023, guest nights increased by 2% while supply increased by 11%. When supply growth outpaces demand growth, occupancy decreases, though our data indicates that supply increases are starting to slow down slightly. In September, 2024 calendar occupancy is pacing 5% behind last year, suggesting we have not yet hit the point where supply and demand have stabilized.
However, looking forward to October, calendar occupancy is pacing 1% ahead of last year, and November is pacing 2% ahead of last year. This suggests we may finally be returning to pre-pandemic trends, and that the gap between supply and demand is starting to decrease as they become better balanced. Keep in mind that shoulder seasons offer the most opportunity for growth as we head into the late fall season.
Average Daily Rate
Rates are fairly consistent with 2023.
ADR = Total Unit Revenue / Nights Sold
In August 2024, daily rates were $329, $3 higher than last year but $23 lower 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. Through the 2024 summer season, rates were only a few dollars higher per night than last year’s.
That trend is continuing in October and November, as rates are pacing $8 higher per night than last year, though September’s rates are pacing a few dollars lower than last year. Expect to see average rates decrease as you move through the booking window. Bookings made earlier tend to be for larger units at higher prices.
RevPAR
Varied occupancy and rate performance leads to decreased RevPARs.
RevPAR = Occupancy x ADR or Total Unit Revenue / Total Nights in a given period
RevPAR has been declining because occupancy decreases have outweighed rate increases, but August RevPAR was consistent with last year at $129 per active property. Looking forward, RevPAR is pacing $11 behind last year in September, but only $1 behind in October and November is pacing alongside last year. Again, shoulder seasons offer the most opportunity for increased revenues, so keep an eye on occupancy and capitalize on the demand you see.
U.S. Regional Vacation Rental Performance
Q3 2024 Calendar Occupancy %
In Q3 2024, all regions are experiencing year-over-year occupancy decreases. The Southwest U.S. (-2%), Western U.S. (-2%), and Rocky Mountain States (-3%) are experiencing the smallest decreases, while the Mid-Atlantic States and New England are seeing the largest decreases (-7%). Though Q3 is still pacing behind last year for the Hawaiian Islands, with calendar occupancy at 56%, this is the smallest year-over-year decrease (-2%) in occupancy since the August 2023 fires in Lahaina. This signals that the Hawaiian Islands may be on a recovery trajectory as we move toward 2025.
Q3 2024 Average Daily Rates
Regional rates have mostly increased over the last year in Q2 2024. The Midwest U.S. (+6%), New England (+5%), and property managers in the Mid-Atlantic States are booking rates with the largest increases over last year (+4%), while the Southeast U.S., and Western U.S. booked rates similar to last year. The Hawaiian Islands are the only region booking rates significantly (-13%) lower than last year.
Q3 2024 RevPAR
Even with some regions’ increased rates, all regions saw decreases in year-over-year RevPAR, though mostly slight. The Southwest U.S. (-8%) and Southeast U.S. (-5%) are seeing the largest year-over-year decreases in RevPAR, while the Mid-Atlantic States, Midwest, Rocky Mountain States, and Western U.S. are all pacing 4% behind last year. Q4 can be one of the most lucrative periods for a majority of property managers in the United States as we enter shoulder seasons for beach markets and peak season for ski markets, so be sure to pay close attention to your occupancy figures and rate strategies.
State of the U.S. Economy
The inflation rate in the United States declined to 2.5% during August; after finishing at 2.9% in July. In short, Americans are paying an average of 2.5% more for goods and services than in August of last year. In mid-September, the Federal Reserve cut interest rates by half a percentage point, the first cut since 2020, signaling their confidence that inflation is slowing down from its June 2022 peak of 9.1%.
Gasoline prices fell 0.6% from July to August, and are down 10.3% from August 2023. Airfare increased 3.9% from last month, following five consecutive months of decreases.
Trends to Keep an Eye On
In July, Key Data collected 203 unique responses to twelve multiple-choice questions regarding the respondents' expectations of their property management company’s performance in 2025. These questions explored industry sentiment around upcoming changes in booking activity, rates, challenges, and competition, and the responses represented property managers of all sizes across the United States.
Below are two teasers, but access all of these insights in the 2025 Vacation Rental Industry Outlook coming this fall, and subscribe to our blog for updates.
89% of Property Managers surveyed anticipate occupancy will remain flat or increase modestly in the coming year
As supply has increased and demand has decreased, occupancy has declined over the past couple of years. The adjusted paid occupancy rate from January through August 2024 was 47%, down from 50% for the same period in 2023 and 54% in 2022. However, it appears that property managers believe we are headed back to typical occupancy figures. Almost half (48%) anticipate modest growth, while 41% expect occupancy to remain flat. No property managers surveyed anticipate a significant decline in occupancy.
Property Managers anticipate more marketing and labor costs in 2025
Operating a profitable vacation rental management company has become even trickier during the last few years due to higher operational costs and lower rental revenues. For 2025, the majority of property managers, 67%, anticipate that marketing costs related to improving the occupancy of existing units will be a primary cost driver in the next year. However, fewer than half ranked marketing costs related to new owner acquisition. Increased labor costs were also commonly ranked for both front- and back-office staff. Notably, only 44% of managers expect owner acquisition to be a primary driver of business costs despite 74% of managers planning to add new inventory. This indicates that homeowner acquisition can be a fairly affordable way to increase company revenues.