Adapting to the VR Industry’s New Normal

As the 2021 vacation rental season on the Cape and Islands draws to a close, the vast majority of homeowners report that they enjoyed tremendous success. What are some of the changes that have taken place in the vacation rental industry during the pandemic? What’s going to remain the same, and what’s going to revert back, if anything? And, with all these changes, how do we adapt to remain successful?

A Look Back

The challenge of the lodging tax in 2019 took a toll on the Cape and Islands vacation rental business. Then in early 2020, we were hit with the pandemic and wondered if there would be a summer season. We soon discovered that the Cape and Islands were such attractive destinations that we couldn’t keep up with the demand for both short term and longer-term rentals – and this at a time when some homeowners decided not to rent their homes at all that summer. So inventory was lower than usual while the high demand continued straight through the summer of 2020 and on into 2021.

One day we will look back and remember those times during the pandemic when we could raise our prices so easily, and if someone canceled, we didn’t worry because we could re-rent our home the next day. Surely, those conditions will decrease quite a bit. We’re not going be able to raise prices as we have the past couple of years, and cancellations are not going to be filled as quickly. But the demand for vacation rentals in comparison to hotels, especially on the Cape and Islands, is going to strengthen the STR industry for us long-term.

Why are STRs so popular?

What drove the increased popularity of vacation rentals during the pandemic, especially on the Cape and Islands?

The Cape and Islands are within an 8-hour drive for 46% of the U.S., and people weren’t flying.

Vacationers focused on the opportunity to not only gather together with friends and family, but to do so outside and safely. They were attracted to outdoor experiences like beach going, boating, hiking, and fishing. The idea of entertaining and relaxing on a deck, patio, or porch or in a back yard around a fire pit was very appealing to them.

Many families canceled their winter or spring vacations due to the pandemic and concentrated more on their one summertime Cape and Islands vacation, often staying for longer than a week. Home rentals are also ideal for longer stays, which increased significantly.

STRs offer privacy and control of the environment. There are no worries about having to share a space in common areas of a hotel. Vacationers enjoy their own space, allowing them to spread out and still control their exposure to others.

Once the pandemic subsides, these factors won’t be quite as much of a concern. But what does remain, of course, is the value of privacy.

Explosion of vacationer demand

Looking back over six years, the graph above clearly shows that the past two years are the outliers, showing a demand that has been well above previous years. We see the first year of the pandemic in blue, with the spike that occurred in June and July, and then it never really let up.

The green line (2021) indicates levels well above 2016 through 2019. We see the peak that occurred in March, and then each month since has also seen increases over previous years. Even September and October were a little busier than last year, which saw very high booking rates in the fall. So, it is likely going to lead to another busy season, and the demand for early bookings is clearly there.

Huge increase in new vacationers to our site

New vacationers to our site have grown again this year compared to last year, and the numbers are significantly greater than two years ago. We’re also seeing a tremendous jump in the number of new vacationers who actually inquire about properties. In terms of volume, this represents tens of thousands of vacationers who have never used our site before.

It’s our job to bring those new vacationers back to our site year after year. We want to make sure they have the best USER experience on our site so that they will come back and find one of your homes.

Prices rose – and never softened

There are two sets of percentages shown. Not surprisingly, there were big price increases across the region at the outset of the 2021 season. And then, for the first time ever, there actually was an additional increase when the booking season continued. So, as we hit the summer, we always watch to see if homeowners are forced to drop their prices a bit to fill last-minute availability. But this summer, with demand so high, there was no need to offer price reductions. We saw that every region actually increased their prices, even as we got into the summer.

Although rental rates themselves won’t be going down, the rate of price increases will surely slow down, and last-minute prices will undoubtedly return to softening in order to fill vacancies.

A Look Ahead to 2022

Pricing

In a survey this fall of approximately 600 listers, homeowners are overwhelmingly (71%) raising their rates for 2022.

Stats are interesting, but it’s more important that you reassess your prices every year and check out your competition. Be sure that, if you do raise your prices, you are aware of your competition and of your own home’s potential – and that you’re not just raising your prices because you’ve heard that everyone else is doing it. And remember that, as prices increase, so do vacationers’ expectations of the homes they’re renting.

In our Deep-Dive Webinar session about pricing, we explored pricing issues in greater depth and provided advice about how to price your home accurately.

A look at early bookings

Despite the widespread increase in prices for next year, bookings for 2022 are up significantly.

As of mid-November, advance bookings are honestly hard to believe. We suspect that it’s a combination of a record number of repeat renters and a lot of new business coming in. The demand is there. Many vacationers had a hard time finding a rental last year, maybe even the last two years. If they waited until after February or March last year, they likely struggled. So, we expect early bookings to continue well into the holiday season.

What’s on the horizon?

Due to both the lodging tax in 2019 and then the pandemic over the past two years, the inventory of rental homes and of available weeks took a dip. Some homeowners chose to stay in their homes themselves, some chose to limit their number of available weeks or to only rent long-term to avoid turnovers, and some chose not to rent at all.

We expect a return of the supply, however, and although it creates more competition for you, we don’t think it will have a huge impact on your ability to rent next year, as we expect the demand to continue to stay above pre-pandemic levels. The pace does not need to continue for you to remain successful.

How to adapt

The vacationer experience continues to evolve. What are vacationer expectations? Are today’s vacationers more demanding? Are they looking for a more hotel-like experience? How do you need to adapt?

Vacationers are spending more time at vacation homes, and many are working while on vacation. Here are some easy upgrades you can make to your home to improve their stays:

• Consider beefing up your kitchen and providing better outdoor grilling options.
• Offer as many entertainment options as possible, inside and out.
• Provide a small, separate work space if possible and greater Internet speed.
• Install some modern technology devices: SmartLock, Minut, Smart TV’s.

Most popular amenities

• The top 4 are location-related: walk to beach, water view, on water, and on the beach.
• Air conditioning: More than 75% of homes have some form of a/c.
• Pets considered: 28% of searches include this, while only 20% of homes allow them.
• Pools: 12% of searches include them, but only 2% of homes have one.
• Linens: 41% of homes provide them.

Note: This data includes only what vacationers have actively searched for using the Advanced Options feature. It’s possible they either assume some amenities are included or are reluctant to restrict their search results too much.

Managing your Guests’ Experience

Keep in mind that the all-important Guest Experience isn’t provided by just material objects like amenities. It’s your guests’ overall happiness that should be your top priority: how you manage your rentals, how you communicate, and how attentive you are to your guests’ happiness before, during, and after their stay in your home.

Here’s some other advice:

• Expect greater wear and tear.
• With more in-home use by your guests than usual, don’t be surprised that your grill and oven have been used more. Perhaps the house requires more cleaning, or your games supply has been used more often. Presumably you require a security deposit, but unless damage or excessive cleaning is really significant, we recommend you chock it up to normal wear and tear.
• Vacationers are booking earlier. So, get your pricing and availability set up earlier!
• In our survey this fall, 25% of homeowners told us they set up their calendars earlier than usual this year. And with the tremendous increase in demand already for next season, why wait? You can tentatively reserve some weeks for repeats if you’re concerned about protecting them. And keep in mind that you are much more apt to get your highest rates earlier in the booking season.
• Respond quickly and consistently to every inquiry. The Listing Rating now impacts the sort order in our Search Results – and Response Time and Rates weigh heavily in the rating. Learn more about the Listing Rating and how to optimize your listing in our Deep-Dive Webinar.

And finally, don’t underestimate the value of repeat business. Make your guests’ experience in your home your top priority – and they will return.

As we look toward 2022 and beyond, think about how you can take advantage of the historically high demand for vacation rentals – and particularly the tremendous growth in NEW vacationers. Like those who have rented for years, they, too, have come to enjoy the many benefits of a home that offers plenty of both indoor and outdoor space, amenities, savings, and privacy.