August 11, 2022
The Vacation Rental Demand: Year Over Year Comparison from 2019 to 2022
The last few years have been a blur for many of us, and when we look at where the vacation rental industry is today, it can feel like whiplash. How did we get here, when, for a moment, it looked like the end of traveling forever? And with the scariest days of the pandemic behind us and the vacation rental industry’s comeback (spoiler alert: it was rather extraordinary), what does the future hold?
To fully understand where we are and where we’re headed, it helps to understand what got us here. Let’s jump in the way-back machine and take a look at vacation rental demand back in 2019.
2019, The year of plenty ups and downs
The vacation rental industry saw some serious ups and downs in 2019. According to our friends at AirDNA, the STR index showed a 14.3 point decrease across the entire 12-month period, well before the pandemic began.
Part of this slide was sheer inconsistency in the market. Contractions were fleeting, but so were periods of high revenue growth, as you can see by this graph from AirDNA.
Still, Growth Continued
Despite the rocky showing, the vacation rental industry still grew by 6.9% from the previous year and exceeded the previous year’s revenue projection by $29 billion. In fact, at least 10% of bookings in the US were for short-term rentals before March 2020.
Urban Markets (and Shorter Stays) Were Hot
One of the most interesting stats from 2019 was how the revenue in urban markets overtook that of destination vacation spots with a two-point boost in the STR index.
Perhaps coincidentally, short reservations (between one and seven days) were some of the most popular, making up 79% of bookings prior to March 2020.
Millennial Travelers Were Setting the Pace
2019 was one of the first years where millennials were defining the trends of the vacation rental industry, which made sense: according to one report, 60% of Airbnb bookings are made by millennials.
The Heartbreak (and Hope) of 2020
The onset of the pandemic was a painful blow to the vacation rental industry—as lockdowns began and the virus spread, vacation rental booking cancellations went up over 500%. This sudden halt to travel can be seen in annual revenue as well: the vacation rental industry’s revenue growth dropped over 30%, from $17.5B to just over $12B.
Like so many industries, the short-term rental industry suffered from massive layoffs and unemployment skyrocketed by almost 50%.
Traveling Habits Shifted
COVID-19 changed the way the average person led their day-to-day life. But even though travel plans and major events were canceled or rebooked for a later date, potential guests engaged with short-term rentals more often, and online searches for vacation rentals went up by 100%.
Work-from-home, involuntary homeschooling, and the cancellation of in-person business events like conferences brought out interesting travel adaptations—specifically when it came to travel planning, location, and length of stay.
For example, while urban and destination markets struggled, drive-to markets and more rural destinations persevered. Guests were less likely to get on a plane, but were happy to drive to a destination, somewhere with fewer people. Vacation rental properties—whole houses with full kitchens and amenities like WiFi and office spaces—became increasingly popular options for those desperate to get out of their own house.
The ability for some to work and take classes from anywhere turned vacations into work-cations. The average stay in November of 2019 was just over three days. A year later, that average inched closer to five days.
The Comeback (and Challenges) of 2021
By the time we reached year two of the COVID-19 pandemic, the short-term rental industry was beginning to make a slow but steady recovery. In fact, by the end of Q1, booking rates had exceeded those from 2019. April was a particularly astonishing month in the industry, when bookings in rural areas and smaller cities jumped 67% from 2019.
And the forecast for that summer was staggering: our friends at AirDNA noted that June 2021 had 25% more bookings than the same time in 2019.
What Shoulder Season?
These record-breaking numbers weren’t just for the traditional peak season, either. Some markets saw an overall increase in demand, including during the typical shoulder season. Back in 2020, 58% of travelers said they would prefer to travel during the off-season, according to a survey by Booking.com. However, by 2021, that number had increased to almost 70%.
In a real world example, Aspen, Colorado, saw 69% occupancy in September of 2021, a nearly 20% increase from 2019.
Demand Soared, Supply Tanked
Even while demand for vacation rentals soared, supply chain issues in new home construction put a major strain on vacation rental managers looking to increase their inventory, as well as homebuyers looking to invest in a second property.
AirDNA predicted about 9% increase in inventory over 2021. However, overall short-term rental supply increased by just over 2%. But it was an inconsistent experience depending on which market you looked at. According to our friends at Xplorie, rural and destination areas saw increases in their inventory (34% and 12%, respectively). Major cities, on the other hand, actually saw a decrease at a whooping 25%.
The Vacation Rental Demand of Today—and Tomorrow
So far, 2022 has been another record-smashing year. Demand has surpassed 2021 levels by almost 27%. In May of 2022, there was a sudden influx of supply with an additional 88,000 short-term rentals.
However, 2022 hasn’t been without its hiccups. The war in Ukraine and rising inflation have hit the travel industry, increasing the price of domestic air travel by 50% from summer 2021. And even with that influx of new listings, the number of available short-term rentals are still 9% lower than they were in 2019. While that means sold-out nights for many markets, it’s unclear how long demand will last if there’s little or no supply to meet it.
Is Demand Leveling Off?
There’s been concern since late 2021 that vacation rental demand has begun to dry up. But given how demand regularly hits highs and lows, even before the pandemic, it’s hard to tell if this slowing down in bookings means we’ve seen the last of the record-breaking numbers we were seeing in 2021.
Experts say that it’s more likely that the vacation rental industry is starting to fall back into a normal pattern. This includes an increase in booking windows from 2021 and a more regular peak and should season.
Despite Questions About Demand, RevPAR and ADR are Up
Even with the perceived slowing down of demand, vacation rental homeowners and managers are still making more revenue than they were before the pandemic. Average daily rates remain higher than 2019 numbers: according to our friends at Key Data, ADR increased from $290 in 2019 to $413 Memorial Day 2022. And across the country, short-term rental managers are still seeing an increase in RevPAR from 2021.
The Pent-up Demand for International Travel
Some U.S.-based vacation rental homeowners and managers have fretted over the increase in international travel, worried that the desire to travel abroad is what slows down the demand domestically.
It is true that international travel has seen a huge boost—overseas tourism increased by 182% in the first three months of 2022 alone. But the correlation between increased international travel and decreased demand for U.S. vacation rentals does not perfectly coincide. The demand for international travel has many factors: for one thing, many international vacationers are simply taking the trips they would have taken in 2020. It’s also become much easier to travel, particularly to Europe. The European Union was in full lockdown for much longer than other parts of the world and had strict testing and quarantine procedures that made traveling difficult and unappealing. With so many people vaccinated and testing requirements lessened, European destinations feel much more accessible. It doesn’t hurt that the Euro and the dollar are also about 1:1 right now, giving U.S. travelers “more bang for their buck” when visiting Europe.
Comparing Markets 2019 vs 2021 vs 2022
Changes in vacation rental demand often impacted individual markets differently. However, in examining top KPIs across key destinations, we found promising overarching trends. Let’s take a look.
Across these destinations, ADR is up or hovering close to numbers similar to this time in 2021. Showing that even if demand has slowed and booking windows have widened, vacation rental property managers are still seeing an increase in revenue from 2019. It is also clear that market fluctuations are not being felt evenly across locations. While there are certainly some destinations doing even better in 2022 than in 2021, these tend to be those larger Urban markets that did not experience the same boost in 2021 as the more traditional vacation rental markets did. They have more room to catch up. For other markets, even when you are up on 2019, after a record 2021 it can still feel like you are going backwards, even as you are long term ahead of the trend line.
What should all this mean for your pricing and revenue management strategy going forward? Namely that past performance is no predictor of future performance. The market changes, and you and your business must change with it.
The last three years have shown how important it is to continually work on your vacation rental occupancy rates and business profitability. Rented’s experts are here to help. They’ll walk you through the ins and outs of dynamic pricing, and how to prepare your short-term rental business for success—now and in the future.