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What Is a Vacation Rental?

A vacation rental refers to private accommodation rented by tourists for a short-term stay. It is often the preferred alternative to a hotel or hostel for many travelers and usually consists of a furnished apartment, house, cottage, cabin or lodge. 

Vacation Rental

The reason for its growing popularity can be attributed to the desire for local experiences. Because vacation rentals tend to be more unique and personal, travelers are able to immerse themselves in the culture of an area, feeling authentic and “at home” all at once. While most countries offer a version of vacation rentals, the term is primarily used in the United States. 

What Is Considered “Personal Use” of a Vacation Rental Property?

If you own a vacation rental home and occasionally want to use it, you should know that the number of days you stay there will affect how the IRS views your taxes.

When you rent out your home for more than 14 days of the year, you are considered a landlord and must report your rental income. If you use your property for personal use more than 10% of the number of days it is rented, your rental home will be considered your personal residence. This also means you can’t deduct expenses because it will no longer be considered a business. 

Anytime you or a family member stays in the home, even if that person is paying rent, it is considered personal use. Days that you offer the property as shelter or rent it out for less than the fair market value are also counted. However, maintenance days or fix-up days do not count against your personal use limit. 

Vacation Rentals vs. Hotels

Vacation rentals give guests more privacy and space than traditional hotels. Because guests are usually the only ones staying at the property, they can often enjoy the private use of a kitchen, pool, and outdoor space. 

According to AirDNA, global hotel occupancy in 2020 was at 17.5% while vacation rentals were at 36.4%. Because of the pandemic, guests have gravitated towards vacation rentals that are outside of city centers, with more options for social distancing and contactless check-ins. Since hotels tend to be more crowded and located in touristic areas, vacation rentals have become a more comfortable alternative.

Global Vacation Rental Market Size

In 2019, the global vacation rental market size was valued at $87.09 billion and was expected to reach $87.61 billion by 2020. From 2020 to 2027, the global market size is predicted to increase at a compound annual growth rate of 3.4%. 

Despite restrictions and shifts in travel, global user penetration will continue to increase to approximately 11.1% in 2025. 

US Vacation Rental Market Size

The US makes up 20% of the world’s vacation rental companies. Currently, there are over 23,000 vacation rental companies in the United States. While the total revenue in the vacation rental industry will be around $66,901 million in 2021, the US alone is projected to reach $13,324 million.