Vacation Rental Owners Profit from Strong Bookings and Increased Rates
2014 Forecast a Strong Start to Peak Rental Season
In the latest industry research from the “HomeAway Vacation Rental Report: Owner Edition,” HomeAway, Inc. (NASDAQ: AWAY), the world’s leading online marketplace for vacation rentals, highlights the strong performance of its vacation rental owners during the 2013/2014 winter season and previews a successful 2014 summer season.
A Strong 2013/2014 Winter Season
Just as HomeAway reported for summer 2013, nearly nine in 10 vacation rental owners (84 percent) report this year’s bookings are about the same or better than the previous year. In addition, 93 percent of owners report they did not lower rental rates from last winter, and 21 percent of owners even raised their rates.
Owners who report the winter season as their peak rental season experienced a 70 percent occupancy rate. In comparison, Smith Travel Research reports that U.S. hotel occupancy rates averaged 57.5 percent booked in the fourth quarter of 2013 and 60.2 percent thus far in 2014[i].
For perspective on how impactful maintaining a strong rental season can be, more than half (54 percent) of owners surveyed with a mortgage are able to cover at least three quarters of their mortgage payment from renting their home—an increase of nine percent year-over-year from 2012. Additionally, approximately two-thirds (65 percent) cover at least half of their mortgage payment.
“What stands out to me from this year’s survey the most is not only the consistency we see year-over-year with successful bookings, but those bookings are taking place at gradually higher rental rates each year—a true testament to the inherent value of the vacation rental experience to our travelers,” says Brian Sharples, co-founder and chief executive officer of HomeAway.
Profit from Vacation Rentals Remains Strong
On average, HomeAway vacation rental owners charge a weekly rental rate of $1,520 ($217/night) and make their home available to guests for an average of 36 weeks each year[i]. The rental of vacation homes thus grosses an annual income of $27,360 for these owners.
The annual rental income is vital to those 65 percent owners who cite their goal for renting their vacation home is to “cover some” or “all of my expenses;” and especially important to those 19 percent of owners who “wanted to generate a profit.”
The ROI of DIY
The average owner spends $961 per year to market their vacation rental—including costs for listing site subscriptions, local print advertising, property manager fees and paid search efforts. With an average annual income of $27,360 each year, the cost to market a vacation rental is only 3.5 percent of total rental revenue and grosses a nearly 3,000 percent return on investment for the owner.
Vacation rental owners spend an average of nine hours per week marketing and managing their vacation rental properties. With an average weekly rate of $1,520, a vacation rental owner is earning a “salary” of approximately $84 per hour of work.
“It’s interesting to note just how much profit is made from the work our owners put into their vacation rental operations,” says Sharples. “With ROI as strong as $84 per hour, the efforts you’re putting into the marketing and management of your property reflect in your bottom line.”
Rent Your Way to a Mortgage-Free Retirement
Fourteen percent of survey respondents said they purchased their vacation rental as a future retirement home. The average age in which owners purchased their vacation home was 47 years old—seven years younger than owners just two years ago. The average age in which owners began renting their vacation homes was 50 years old—the same as in 2013 but six years younger than owners in 2012.
In advance of retirement, younger buyers are entering the vacation rental market, consistent with the National Association of Realtors Investment and Home Buyers Survey[i], which also shows 47 years old as the average age of vacation home buyer.
Sixty-five percent of owners spent more than two weeks in their vacation home over the last year, encouraging news to new owners who originally purchased their vacation home for personal use (35 percent) but still intend to rent for revenue.
“More families and groups are traveling each year to stay in vacation rentals across the world,” says Sharples. “Younger buyers are wise to invest in a property as early as possible to take advantage of the rising profile of vacation rentals. The mutually beneficial notion of paying for a house by renting to others is a concept that I am proud to help champion for our owners and travelers, alike.
A Positive Summer Outlook
With 59 percent of owners citing the location of their homes in beach communities, the peak season for traveler bookings has only just begun for the summer of 2014. Guests typically book a vacation rental ninety days before their trip, making March and April the prime summer booking months for HomeAway vacation rental owners. Currently, more than half (52 percent) of owners are already booked 50 percent or more of the upcoming summer season.
The top vacation markets with the highest traveler demand are, not surprisingly, in Florida. However, a few smaller, yet formidable Florida vacation markets have emerged on this summer’s list including, Mexico Beach, Cape San Blas and the space-enthusiast favorite, Cape Canaveral, are all favored for families and groups this summer. Though dominated by east coast, beach town-centric destinations, the ski towns of Moonridge, Calif. and Crested Butte, Colo. also appear as the go-to ski slopes for late season skiing.
This summer’s top growth markets for increases in vacation rentals stretch from coast to coast. Appearing on both the top markets for travelers and for increased vacation rental listings is Cape San Blas, Fla. and Lavallette, N.J, showing a strong rebound from Hurricane Sandy nearly a year-and-a-half ago. Beach destinations are a given, however there is a strong showing of more vacation rental listings in more rugged, outdoors-focused markets such as Moab, Utah and Bryson City, N.C., bucking the trend of choosing a beach or ski destination for U.S. travelers.
The top 10 markets where traveler demand is on the rise, based on a year-over-year analysis (Q1 2013 vs. Q1 2014) of inquiries from travelers looking to rent a vacation home, include:
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Data for the HomeAway Vacation Rental Marketplace Report was collected via surveys that polled HomeAway customers who own vacation rentals. Based on HomeAway, Inc. internal customer satisfaction research, owner results are based on 462 responses received between Feb. 18 and Feb. 25, 2014. Market trends were based on a combination of in-depth research of renter and traveler information from the HomeAway, Inc. database.
[i] Source: Smith Travel Research, Inc.
[i] Source: HomeAway Customer Satisfaction Survey, Q4 2013, of 2,523 owners listing on HomeAway.com, VRBO.com & VacationRentals.com; Average owner rents his/her home to travelers 18 weeks per year.
[i] Source: 2013 National Association of Realtors Investment and Vacation Home Buyers Survey; Average vacation home buyer age: 47 years old