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Where Is the Vacation Rental Property Market Going

Whether you’re considering a Fort Collins home loan to become part of its mad grab, or renting a luxury vacation rental property in Sedona, AZ, you should understand the potential for the vacation rental property market.

In this article, we’re looking at some shocking statistics that can help you decide whether investing in the current housing market is a safe option for you. Every financial decision is fraught with risk, and this is by no means meant to be advice. However, statistics can give some clarity around the potential behind market shifts and they are useful to make a decision you can be comfortable with. 

Vacation Rental Property Statistics 

  1. The US vacation rental industry is projected to reach $107 billion by the year 2028. In comparison, the hotel industry is expected to reach 238.49 Billion by 2028
  2. One in five people is expected to have stayed in a hotel by 2025. 
  3. According to a 2016 study, people choose vacation rentals because they want access to a full rental at a similar price as they would see in a hotel. They also see vacation rentals as having more privacy. 
  4. The average hotel room is around 325 square feet while the average vacation rental is around 1,300. This is considered a contributing factor to the reasons why people prefer vacation rentals over hotels. 
  5. Airbnb had 12.7 million listings as of December 2022, which was down from 14.1 million listings in 2020. 
  6. Airbnb had the largest IPO in 2020 at more than $100 billion. This happened even as the company’s revenue was down 30% due to the pandemic. 
  7. Vacation rentals also showed more resiliency than hotels during the pandemic. Global occupancy in hotels had dropped to 17.5% from 77%. This was a 77% more significant drop than the previous year. 
  8. An average of 200 guests worldwide check in to Airbnb 
  9. Hotel companies are trying to enter the vacation rental industry. In 2019, Marriott debuted Homes and Villas by Marriott International, which had 2,000 properties when it went live. 
  10. Properties in rural destinations are experiencing surges in popularity. New York’s Hudson Valley, Big Bear California, and Lake Tahoe, California are up 67% 
  11. Vacation rental guests are staying longer on their vacations than pre-pandemic. 

Pros and Cons of Airbnb

As the vacation rental industry continues to grow, it’s helpful to look at the pros and cons of what they provide to understand how the competition will play a role in the future. The following represents a list of pros for the vacation rental industry as a whole: 

1. Pros

  • Flexible service. 
  • Property owners can list separate rooms, saving time in regard to visibility. 
  • Affordability – If you own a property and you list it on Airbnb, you simply need to register the property and place the ad. The booking fee is typically 3%. 
  • You can establish your rules for your property. If your guests don’t follow them, you can cancel without paying fines.
  • There are adequate security features on the platform. 
  • Airbnb customer support is available 24/7 and you can access it through various channels, such as phone, live chat, and email. 

2. Cons 

  • If you list your properties on Airbnb, you will have to check online to see if anyone wants to book. The company doesn’t honor bookings when the owner doesn’t reply to the request within 24 hours. If you neglect to respond to the booking, it expires and you lose the client. 
  • You can experience suspended listings if you receive lower ratings. If you fail to provide the essential times your guests should check in or out, you can also risk suspension. You also need to provide essentials, such as toilet paper, towels, and soap. 
  • You don’t receive the money from your booking because Airbnb holds it for a day as a security measure. 
  • If your guest damages your home, you won’t have complete coverage, especially if something is stolen. 
  • The price visitors see on Airbnb is lower than the final price because the company adds fees. 

Rental Market Trends 

1. Online, Contact-Free Rent Payments 

Before the pandemic, about half of the tenants in the US had already embraced the marvel of fintech. Processes such as online rent payments and Venmo have helped companies and individuals all over the world improve their offerings. The vacation rental market is an example of an industry that could permanently change as a result of the COVID-19 pandemic. During the pandemic, the government encouraged both tenants and landlords to adopt modern technology and utilize various payment methods. These methods are easily accessible and free for both the tenant and the landlord outside of nominal fees 

2. Tenant Screening

Federal and state eviction moratoriums meant landlords found themselves in sticky lease situations. Some landlords didn’t receive income for nearly two years. In the future, landlords might be more cautious about their tenants, and qualified tenants with secure employment options and responsible financial habits will be favored.  

3. Migration from Short-Term and Long-Term Rentals

As remote working increases, more short-term rentals are becoming available as long-term units to those who can work remotely. These contracts typically carry terms of around 2-3 years on them. This shift will result in some pent-up demand for short-term rentals. Until demand catches up, vacation rental owners will have to increase their occupancy and revenues. 

Fading Rental Trends 

1. Tenant Turnover Rates

Tenant turnover has been lower than ever as a result of the pandemic. Typically, when a tenant can’t pay their rent, they must move out and find a property they can afford. The moratoriums affected this. Since the moratoriums’ lifting, landlords have been seeking eviction quicker and there will be a higher turnover in the future. 

2. Limited In-Person Contact 

Many landlords postponed property inspections and viewings during the pandemic. That won’t continue. 

Bottom Line

The pandemic might have hit the vacation rental industry hard in the short term but it doesn’t look like the effects are going to hold up down the road. As these statistics and trends show, the vacation rental industry is here to stay.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


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