By Bill Furlong, CEO
Today, we’re pleased to release our exclusive look at the state of the vacation rental industry as we enter 2010. Based on an analysis of over a million rental days in 2009 booked using Escapia’s leading web hosted software, our annual report is packed with data on vacation rentals that provide unparalleled insight into industry trends.
How you feel about the results depends on your perspective. On the one hand, the story of the past year has been “Fewer. Cheaper. Later. Nearer.” Travelers made fewer bookings, spent less money, waited later to book the rental and were less likely to travel long distances for their trip. And that adds up to a tough year for anyone in the business of renting vacation homes.
On the other hand, there’s scant evidence that travelers responded to the recession by taking a “Shorter. Smaller.” vacation strategy. Average length of stay changed little in the past year. And the share of booking in smaller homes (which tend to be cheaper) was about the same as the year before.
The best news is that 2009 ended and 2010 began on a positive note. Booking dollars, average booking amounts, lead times and length of stay all jumped significantly in the fourth quarter of 2009 compared to 2008. Of course, the comparison is a relatively “easy” one since 4Q 2008 was a miserable time. But it is a relief to see numbers going up!
Annual results: Bookings – low; Dollars – even lower Vacation rental unit bookings dropped by 4.2% in 2009 compared to 2008. But with sharp prices and good deals the watchword for anyone in the travel business, booking dollars dropped even more as prices declined. The final tally for 2009 was an 8.1% drop in gross booking dollars for vacation rentals. Bad as it is, the 8.1% drop seems less shocking than it should. Some 15 months after the “Great Recession” began, we’re a bit too accustomed to hearing about big drops in economic activity.
It is worth keeping in mind that the 8.5% drop in bookings is probably a significant bit better than hotel bookings in 2008. While we haven’t yet seen annual hotel numbers released from the leading hotel research firms, the data suggest that results in the first half were comparable but that vacation rentals have come back much more quickly and strongly than hotels. The hotel data suggests that the decline in hotel bookings was comparable to vacation rentals in the first half of the year (down approximately 16%). While vacation rentals have recovered significantly in the second half of the year compared to a year ago, hotel demand and rates have been regularly reported as down 10% or more in the second half of the year, as well.
Quarterly bookings: Bad start; strong finish
The biggest relief of 2009 was also one of the bigger problems. We got the worst of the booking freefall out of our system early. Year-over-year declines topped 25% in January and February 2009. With each passing month, the numbers got a little bit less bad. And by the fourth quarter (when we had the advantage of an easy comparison to 4Q2008 when the financial sky was falling), bookings were up by double digits.
So why was that a problem? For the industry, the number of bookings made per month peak in January and decline fairly steadily through the year (in the chart above, the size of each color bar gets smaller as you go from bottom to top). So the part of the year when travelers were the most skittish was the time of the year when vacation rental bookings are at their highest. And the “best” part of the year was at year end – when less than half as many people are traditionally booking vacation homes.
Regional results: See where it really hurt
It really didn’t matter much where your vacation rental homes were, 2009 was a tough year. But the pain wasn’t felt evenly everywhere. Four areas – the Mountain West, the Northeast, California and Hawaii – all suffered the worst declines while the drops in the Southeast and Pacific Northwest weren’t as sharp. Why so? Our guess is that the total out of pocket cost for trips to the Mountain West, the Northeast, California and Hawaii are the highest when you include airfare and other big ticket items like ski lift tickets. And fewer people were ready to spend that much with the flood of bad economic news.
Lead times: Talk to you later
Ask any vacation rental manager and they will bemoan the relentless trend of travelers to book their rentals later and later. The lead time between the booking date and the rental start date once again became even shorter in 2009. The good news here is that the longest lead time bookings in the first quarter are done in the peak booking period of the year (as the darkness of the blue bars above indicates).
Prices: Let’s make a deal!
Consumers were in a bargain-hunting mood in 2009 (that is, when they weren’t in a “stay-cation” or a “nay-cation” mood). That mood is reflected in the drop in average gross dollars per booking. Average dollars per booking were down 10% in the first quarter and 3% in the second. As the year progressed, pricing firmed up. And by the fourth quarter, pricing had improved compared to the time of the 2008 financial crash.
As with the comments earlier about comparisons to hotels, it is worth noting what was happening with hotel average daily rates in 2009. During the first and second quarter of 2009, Smith Travel Research was reporting that budget hotel ADRs were down 5-10% and luxury hotel ADRs were down 20-25%. And while full year results haven’t been released for hotels yet, ADRs have continued to be lower during the second half of the year as well.
Whether vacation rentals were fortunate to be able to hold price in a challenging environment or were too hesitant to respond to consumer pricing expectations is a matter of opinion. But it is clear that their prices stayed firmer than did most hotel chains.
The full national report, which is available for free from Escapia.com, is packed with additional data on the U.S. vacation rental business, including:
- Did travelers respond to the Great Recession by taking shorter trips?
- See when the rentals associated with a given month of bookings happened. And see when the bookings associated with a given month of rental arrivals came in. (You have to be a vacation rental manager to appreciate this one!).
- Which size of homes were rented for the most days per year – 1 bedroom homes, 2 bedroom homes or 3/4/5 or more bedroom homes. You might be surprised by the results.
- How much more did renters pay for a typical 1 bedroom than a 4 bedroom home?
- What days of the week matter the most? What percent of bookings happen on the weekend? What percent of arrivals happen on the weekend?
- And much, much more.
Click here to visit Escapia.com and download your copy of the full report.
Finally, a bit about the data. Since our inception over five years ago, Escapia has powered nearly a billion dollars of vacation rental bookings. Last year alone our software processed nearly $300 million of bookings. The analysis above is based on data covering over a million booking days in 2009 across tens of thousands of vacation homes from coast to coast.
As we have passed the half way point of the year, are you planning on updating this with more current information?
Thanks,
Terry
Vacation-Rental-Info
Posted by: Terry Gronenthal | July 25, 2010 at 11:27 AM
I would be interested in knowing how many vacationers that usually go to the gulf have headed over to the Carolina's this year? Here in Myrtle Beach we have seen an influx in visitors.
Posted by: Myrtle Beach Real Estate | July 27, 2010 at 11:46 AM
Rentals have been extremely slow on the Texas gulf coast where there has been no oil from the spill at all, so people have to be going somewhere. Those I know from the Florida gulf coast had cancellations, and unfilled weeks stayed empty even in areas where there was little evidence of the spill. Again, the people who normally head to those beautiful beaches probably went to places like Myrtle Beach. Our loss was your gain.
Posted by: Merilou Athens-Barnekow | July 27, 2010 at 09:25 PM
Southeast like Florida had the smallest declines in bookings in 2009. This was before the oil spill. I imagine the Southeast will have the largest declines in bookings due to the Oil Spill in the Gulf of Mexico.
Its July 2010 now. Any updates for 2010?
Posted by: Brian Rents Tampa | July 28, 2010 at 06:10 PM
We have seen a decline in books around the gulf area any updates that can verify this?
Posted by: Vacation Rentals | August 05, 2010 at 05:21 AM