Rate Affecters, Mish Mash - Lodging Newsletter March 31, 2022

By Wm, May
Published: 03/31/22 Topics: Lodging Newsletter Comments: 0

Summer may not actually be here, but with advance bookings, changes in the marketplace, and better weather, your handy vacation rental managers are deep into summer already. It will be fun.

In April 2020, I concluded that maybe for the first time ever, the world began to truly understand the definition of the word "Unpredictable." First, Covid plunged travel, but then travel unexpectedly surged.

Prior to Covid, perhaps 40% of the traveling public had ever stayed at a vacation rental home. We then began to notice what was later proven by industry statistics that the number surged to over 60%. Doing that math, it’s a 50% increase in market size.

But be warned - there are management companies promoting that owning a vacation rental home is a "Get Rich Scheme." Of course, they don’t say that and, in many cases, it can be true.

But with real estate prices jumping, with bidding on homes driving up prices, and with so many people buying vacation homes, will supply outstrip demand? So far, the answer is no.

But profiting handsomely with a vacation rental should never be a home buyer’s primary goal. For many decades, families have sought a second home to love it, enjoy it, outfit it as they want, get first pick of dates, vacation where they most want. And then - and only then - yes, they can get guests to help pay for some or all of the costs.

With our kind of comprehensive management, many owners make an actual profit on the cash it takes to buy the home. Unfortunately, we hear from do-it-yourself owners and even owners from other companies who bought into the market recently with homes that are underperforming.

In short, vacation rentals are not a get-rich-scheme, unless hundreds of big and small things are done well every day. Those include selecting the right home, outfitting it fully, managing it tightly, providing 24-7-365 guest services, and then advertising it far and wide. And then, the financial outcome will be the outcome.

In other words, no one can promise you profit. But picking a manager who outlines and then performs as promised is the only way to be a vacation rental owner.

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On January of 2020, our ace programming staff completed version 3.0 of our technology-driven Strategic Seasonal, Dynamic and Distributed (S2D2) yield management software that revises rates every day, looking forward up to 15 months.

We receive new telemetry about local, regional, national and global supply and demand overnight every day and the technology has been proven in two very different ways. (1) In February and March of 2020 every morning the computers were screaming "Where the hell did the guests go?" (Those days seem like a dream or nightmare.) (2) But by April, the software’s artificial intelligence (AI) began to raise rates, which it did over and over through Summer of 2020.

We let the suggested prices "ride" and that resulted in far higher income for houses in almost every jurisdiction (except those affected by airline shutdowns, border closing and catastrophes).

Competitors who relied on seat-of-the pants for rates, lost massive income for owners. Competitors with technology similar to ours, laid off 90% of the staff. With no one at the wheel to oversee the business, their rates stagnated and their sales plummeted.

As we approach summer of 2022, the question on everyone’s mind is, will the industry growth be maintained? Will guests continue to flock to private home rentals? What other factors may cause income to grow or shrink?

Yes, the Covid factors that exploded income, may indeed soften or reverse. And ups and downs will again be affected by things that have always affected income, such as:

Weather - At the home locations or at the guest’s primary home. When it rains in Seattle, guests presume the weather is crappy at the beach, even if it’s not. In winter, a big snowfall means giant crowds at the ski resorts. Low snow means a ghost town.

Events - Now that fairs, conferences and celebrations are returning, is your destination ramping up? Guests love to have a reason to visit.

On the coast of Washington, out-of-staters are perplexed to learn that a "Razor Clam" digging season on a weekend can double visitorship, or more.

Competition - If the number of rental homes continues to grow, will supply exceed demand?

Rate Panic - DIY owners always price their rentals too low, desperate for any bookings. They work twice as hard with half as much income. Will plummeting rates keep up if demand slows?

Booking Service - If guests book with us because you have a great house, we are all happy. If they book with us because we are the only managers answering the phone that is fine, too. (Of course!)

Big News - Wars, pestilence, protests - even if far away - cause people to pause their planning and travel can decrease.

We think of these variables every day. But the only solution is to love dynamic rates, react quickly, advertise massively, answer phones, emails and texts religiously and work like hell.

Author: Wm, May – Contributor, Vortex VIP
Blog #: 0909 – 03/31/22

Sponsor: Vortex VIP – – VortexVIP.com