How Inflation is Impacting Your Vacation Rental Business

We thought we were heading into calmer waters after a significant reduction of COVID-19 cases. Now, news outlets are talking about inflation and the possibility of a recession. While we’ve already experienced inflation through gas prices and rent increases, here’s what vacation rental owners need to pay attention to.

The Facts

The Bureau of Labor Statistics announced in July 2022 that the U.S. consumer price index (CPI) rose 8.5% year over year, a slightly slower pace from last month’s record 9.1% reading. This latest CPI number indicates that inflation pressures are somewhat easing, but it remains at near record-high levels. Data from the Bureau of Economic Analysis also tells us that personal consumption expenditures have increased by 3.7% since January 2022.

It seems as if everything is going up—even clean fees. With the cost of cleaning supplies and labor, the price of setting up your rental for the next guest might be pinching your wallet. Clean fees have jumped 30% higher and nightly booking rates have also increased significantly.

What’s Next?

To reduce inflation to a benchmark target rate of 2%, the Federal Reserve (Fed) has already implemented four rate hikes in 2022, including two consecutive 0.75% rate hikes in June and July. The latest inflation numbers again impacted the Fed’s decision by increasing the rates by 0.75% at their September meeting.

Destination Analyst discovered that 49.5% of travelers reported that the soaring travel prices have impacted their travel plans. High airfare rates, airline strikes and gas prices have travelers rethinking their trips. However, countries with an increase in inflation, such as the U.S., are beginning to see a rise in new vacation rental hosts.

What Vacation Rental Owners Can Do

The off-season is a great time to see where you can cut down on expenses. Maybe that’s achieved by switching to a different vendor for cleaning, cutting down on filling your rental with gifts or re-evaluating your internet and tv streaming provider. While guests may struggle to keep up with the rising inflation costs, finding ways to remain competitive and continue to accommodate their needs on a budget will be key.  

While rates are rising, the amount of income hosts are earning is also soaring. Airbnb reported in 2021 that the typical host in the U.S. made $13,800 in two months—85% higher than in 2019. If you are considering owning another rental, this could be a great time to do it. Airbnb found its footing in 2008 during the Great Recession. At the time, people were searching for ways to make extra income.

Find Light in the Darkness with CBIZ Vacation Rental Insurance

As inflation begins to impact your short-term rental business, have confidence that your insurance policy will cover you through any storm. To learn more about protecting your property with CBIZ Vacation Rental Insurance, request a free quote today!

This blog may contain scenarios that are provided as examples only. Coverage is subject to the terms, conditions and exclusions of the policy issued. The information provided is general in nature and may be affected by changes in law or the interpretation of such laws. The reader is advised to contact a professional prior to taking any action based upon this information.

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