The past two years have pushed short-term rentals into the hospitality sector mainstream due to changing travel patterns and vacation rental owners and property managers can look forward to healthy growth in the runup to the peak season as vacationers adapt to the new normal.
Here are some key insights to boost your pre-season profits from our U.S. Vacation Rental Industry Report: Q2 2022 Forecast.
Don’t see the form to download our Short Term Rental Industry Report? Click here.
The future’s looking bright for short term rentals
As travelers rush to make up for the lost time, they continue to seek out offbeat and better travel experiences, as an extension of COVID pandemic trends. What’s more, they are cash-flush and willing to spend more U.S. dollars per night for the right holidays that meet their higher expectations.
These industry trends are borne out by our data, which predicts a 23% increase in the average daily rate (ADR) during the second quarter of 2022 (April, May and June), compared to the same period last year. This amounts to the highest expected average ADR in June at $295.
What’s more, owners can look forward to longer stays – up 18% – in the second quarter, compared to last year. Mid-length stays 4 to 7 days show the biggest jump to represent nearly half of the total number of bookings during this period.
Further good news for vacation rental owners and property managers is that direct bookings are on the up and up and are expected to become even more popular in the future. The direct booking slice of the vacation rental pie is increasing every year.
The bottom line is that savvy vacation rental owners who combine their own websites with listings on other channels will be able to capitalize on the expected growth in the sector. If you haven’t got your own website yet, we recommend you get one now to boost profits!
1. Higher ADR to boost your rental profits
ADR to rise by 23%
Vacation rental owners and property managers who benefited from healthy returns during 2021, as many travelers shunned hotels in favor of private and better-isolated spaces, can look forward to more good fortunes as the average daily rates are set to rise by 23% in Q2 this year.
This means you can afford to be bullish about profits in the second quarter and could consider raising your prices to make the most of this expected growth period, while keeping a watchful eye on your competitor rates, of course.
Direct bookings ADR set to outperform OTAs
Our data also shows that the direct booking ADR is expected to increase at a significantly steeper rate (+36%) than the ADR of bookings made through OTAs (+21%) in the runup to the summer holidays, compared to Q2 last year.
An increase in direct booking ADR means short term rental owners and PMs with their own websites can expect to boost profits even more than owners who rely on OTAs exclusively for bookings.
Vrbo leads the way
Of the OTAs, Vrbo is expected to see the highest percentage growth in ADR in the U.S year on year for the second quarter at 32%, compared to Expedia at 30%, Airbnb at 17% and Booking at 18% respectively.
One of the explanations for this could be the appeal of short-term rentals that accommodate groups and families, for which there has been an increase in demand during the past 5 years, according to AirDNA.
Vrbo in the last few years has focused more on short-term rentals for families and flexcationers than other channels.
What does it mean for your property?
Get ready to hike your prices
Being price-competitive is essential to turning window shoppers into guests. If your competitors’ ADR is higher, don’t be afraid to raise your prices to match theirs.
Finding the sweet spot of your particular rental market is crucial. You don’t want to undershoot the market and leave money on the table, yet if you overestimate rental fees you could end up with a high vacancy rate and unhappy customers.
To boost profits, create your own professional website right away to cut out the middleman and save on OTA commissions and allow you to cash in on ongoing growth in direct bookings.
Don’t put all your bookings in one basket
In addition to having your own website, listing on more than one OTA is a good business strategy. Think about your target audience and where they usually book their stays. Airbnb is still one of the most popular sites, but Vrbo has grown faster in Q2.
2. Travelers plan to stay longer
Guests expected to stay longer at your property
Our data shows travelers are booking extended stays in the months leading up to the summer, with the lengthiest stays being those closest to the holiday period. These findings are in line with industry trends which show remote workers and digital nomads are booking longer stays and have greater flexibility when planning their breaks.
The average length of stay (LOS) in U.S. vacation rentals is expected to increase by 18% from 3.5 to 4.2 days during April, May and June 2022 compared to the same period last year.
Lock in longer stays with direct bookings
Travelers who book directly are expected to stay longer with a 20% increase in LOS compared to 18% for OTAs during Q2. The expected rise in the average length of stay is an opportunity for property managers with their own websites to increase occupancy rates by locking in longer stays.
Mid-stays represent nearly 50% of all bookings
Mid-stays between 4 and 7 days have been growing steadily over the past year and this segment is expected to rise sharply from 29% of the total number of bookings in June 2021 to 47% in June 2022.
This shows greater flexibility in remote workers’ calendars. This growth will be at the expense of shorter stays between 1 and 3 days, which are expected to drop from 66% of the total number of bookings to 48% in June.
Note that the metrics might be affected by last-minute bookings that tend to have a lower LOS.
What does it mean for your property?
Promote longer stays
Be sure to mention your property’s suitability for remote working and longer stays in your online and offline marketing materials to appeal to this significant market segment.
Add work essentials to your property
Ensure your property is well-equipped for “e-ployees” and digital nomads by adding working essentials such as high-speed internet and an ergonomic desk and chair.
Highlight healthy living options nearby
Highlight home-cooking facilities, nearby restaurants and food delivery options, sports facilities or scenic walking or running trails nearby.
3. Guests book longer in advance
Booking window stretches as travelers regain confidence
As holiday goers become more confident that their plans won’t be ruined by a last-minute change in regulations, they are expected to book their getaways much longer in advance.
If what we’ve seen at the beginning of the year is an indicator of things to come, owners can expect a booking window 8% larger than in 2021 – which translates into getting their bookings about a week earlier than last year.
Reservations made via direct bookings created earlier than OTAs
If you have your own website, expect to see direct bookings a month earlier than the bookings made via OTAs. The average booking window for direct bookings made during the first months of 2022 was 92 days, compared to an average booking window of 57 days for OTA bookings made during the same period.
This is not limited to the beginning of the year though, as direct bookings tend to have a larger booking window than OTAs throughout the whole year.
Reservations made more than 3 months in advance, higher than ever
Bookings made more than 3 months in advance
One in every 3 bookings will be made at least 60 days in advance during the shoulder season. Our data also shows that bookings made more than 3 months in advance represented 27% of the total at the beginning of the year, 4 points more than in 2021. This means your bookings for peak season should start appearing in your inbox right about now.
In other words, there’s no time to waste! If your reservation calendar is looking empty for the next few months, and your summer holiday bookings don’t start rolling in soon, it’s time to take action. Don’t wait until it’s too late.
What does it mean for your property?
Update your website and listings now
Ensure your listings are up to date and as appealing as they can be to guests right now to cash in on expected early bookings. Do you need to spruce up your listings with quality images and more enticing descriptions? Now is the time to do it. Compare your information with similar listed properties and highlight the features your guests will appreciate most.
Is your rental out of date with modern trends and guest expectations? For example, did you know that homes with Scandi interiors are some of the most popular listings on Airbnb?
Go for simplicity and style. No need to break into your savings – a good decluttering and a few simple accessories can boost your online appeal on a modest budget.
Outdoor spaces are increasingly important. Make the most of any outdoor spaces by adding a few small touches to make them more inviting. Read our post about Airbnb interior design trends to make your rental more stylish and inviting for inspiration.
Up your marketing and social media game
If you don’t already have a marketing plan, create a vacation rental marketing plan to help you understand who your target audience is and how best you can reach them.
Invest time in marketing your rentals on social media channels such as Facebook and Instagram, with attractive images and engaging content, including testimonials from guests and tips about interesting things to do and see around your property.
4. Boost profits with direct bookings
Direct bookings gain ground
Direct bookings are slowly but surely gaining ground on OTA bookings, a trend that is not expected to change any time soon as guests continue to seek authentic experiences and personal contact with their hosts to ensure the best holiday experience, according to industry reports.
Direct bookings represent an ever-bigger slice of the pie
Our data shows that direct bookings will make up 23% of the total number of bookings in Q2 this year, an increase of 2% compared to the same period last year.
This might not seem like much at first glance, but if we compare this with the whole of 2021, it represents an increase of 5% – and growing!
What does it mean for your property?
Make sure your website has a powerful booking engine
To ensure you make the most of the uptick in direct bookings, create your own professional website and include a powerful booking engine, which allows you to manage your own bookings. With direct bookings you lose the middleman and pay less in commission, boosting your overall profit. Let guests know about your website to entice return visitors.
Offer a personalized experience
Focus on giving guests the personal touches they want by offering efficient guest communications. A unified inbox could help you keep track of guest conversations.
Promote the authenticity of your rental
Highlight the features and nearby attractions which make your location an authentic experience for guests. Also, consider collaborations with local service providers to offer authentic guest experiences, such as hot air balloon rides, local cooking workshops and yoga classes on the beach.
The bottom line
Expect an increase in ADR in the coming months, with the highest growth in direct booking ADR. Consider raising your prices to match with your competitors’.
Promote your property for longer getaways – to appeal to guests looking for lengthier stays.
If your calendar shows no summer bookings yet, you could be missing out as guests are booking longer in advance, particularly for direct bookings. Spruce up listings and up your marketing game.
Boost your profits through direct bookings as they continue to gain ground on OTAs year on year.
Prepare your business by investing in new vacation rental software to streamline operations. The right software will make it easy to manage your calendars, bookings and payments for all your rentals. Make sure it comes with a channel manager integrated with the top-leading OTAs, a reservation system, and a fully-functioning website builder to make the most of the expected growth in the sector.
Methodology – How we created this report
We’ve analyzed more than 400,000 bookings of internal Lodgify data, including direct and OTA bookings, and compared specific data points with previous reports. We’ve gathered data on bookings created until February 28th of 2022, with a date of arrival up to one year later (February 28th, 2023).
Our data has allowed us to make forecasts for the second quarter of 2022, based on the bookings that our clients had already registered for April, May and June of this year. However, as previously mentioned, the report doesn’t account for bookings created after February 28th, which means that last-minute bookings may ultimately alter the end results.
For statistical purposes, we’ve also filtered out outliers that would have impacted the final results.
Don’t see the form to download our Short Term Rental Industry Report? Click here.
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