Mid-Year Vacation Rental Market Predictions

As we approach the second half of 2023 and are in the thick of peak season, we’ve already experienced some exciting industry wins. With no COVID travel restrictions, revenge travel taking off and even more short-term rentals entering the market, the next 6 months are predicted to be full of success.

4 Trend Predictions for Vacation Rental Businesses for the Second Half of 2023.

1. Travel is Still Being Prioritized

Even during a time of a possible recession, consumers are still making travel a main priority. In return, short-term rentals are reaping the benefits of increased interest and personal consumption. AirDNA’s report forecasts that demand growth will increase to 10.4% for the remainder of 2023 from 5.5%. The average daily rate is doing better than expected even though those gains have been difficult to come by for hosts. While many have the travel bug, travelers are still sensitive to high costs.

2. Lower Average Length of Stay

AirDNA reported that the average length of stay per booking was lower than in the past two years. The average length of stays is predicted to range between 3.43-3.52 days for the next few months. Surprisingly, when looking at the data for long-stay bookings, more than half of 2023 reservations of 8 days or more are coming from direct booking channels instead of third-party sites like Airbnb or VRBO.

3. Steady Supply of Short-Term Rental Properties

With the economic climate weighing heavily on everyone’s mind, more and more people are entering the short-term rental market. The competition among rental owners is still expected to be high for the second half of 2023 as economic uncertainty may have second homeowners renting to maximize profits. Zillow’s recent report forecasts there will be a surge of first-time landlords; “The record-low mortgage rates of 2020 and 2021 spurred lots of investment in a second house, especially from mom-and-pop investors getting their second property. As rent growth continues its aggressive pace, many of these second homes have an even better potential to yield regular rental income above mortgage payment fixed with record low rates.” Other data has alluded to the fact that homes that may have been sold in a low-interest rate environment are now being rented either as a short-term or long-term rental.

4. 2023’s Economic State Is Not Holding People Back

While some may have panicked when a viral tweet made its rounds last month, more guests are staying in short-term rentals than ever before. The tweet, which claimed there was more than a 40% decline in revenue for owners in U.S. cities, Airbnb disputed the story. Sam Randall, an Airbnb spokesperson stated, “As we said during our first-quarter earnings, more guests are traveling on Airbnb than ever before, with nights and experiences booked growing 19% in the first quarter of 2023 compared to a year ago.”

Aside from Airbnb disputing the story, a few online databases are stating that some areas are experiencing declining revenue, but it’s closer to a 3.6% decline, not 40+. While there might be unforeseeable economic trouble ahead of us, it shouldn’t dampen travel plans. There has been a consistent demand over the past 6 months that we can expect to stay through the rest of 2023.

We’re Here to Help

Demand and supply of vacation rentals have both increased, meaning there will be even more travelers who are ready to book! Whether you own a cabin that sits high in the tree-covered mountains or is a quiet cottage near the beach, we have you covered. To learn more about protecting your vacation rental business through 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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