As we bid farewell to 2023 and welcome 2024, understanding the dynamics of the past and anticipating future trends becomes vital for short-term rental hosts. ‘Your Most Lucrative Year Yet: 2023 Review and 2024 Planning’ was our recent free online conference that strived to answer these pertinent questions: What shaped the reality of 2023? How is 2024 set to unfold? And how do significant events influence it all?
Leveraging latest data, we extracted essential insights from 2023 and offered exclusive forecasts for 2024 with help of data from PriceLabs. Moreover, we had the privilege of hearing from three prolific short-term rental managers who generously shared their successful strategies from 2023 and their visionary plans for 2024. This article aims to encapsulate the key takeaways from this event, arming you with actionable insights to navigate through the exciting year ahead.
Meet the Panelists: Real-World Experience from Diverse Short-Term Rental Markets
In the spirit of providing real-world, on-ground insights to our audience of short-term rental (STR) managers, we invited three professional short-term rental managers to share their stories at our recent conference. Each speaker was selected for their unique approach to the industry, catering to different markets, guest profiles, and challenges.
Daniela Derin: Thriving in a Non-Luxury Segment within a Luxury Destination
Operating in Marbella, Daniela’s business caters to the non-luxury segment within a luxury destination, a stark contrast to typical luxury markets like Monte Carlo or Ibiza. Her unique aspect? A whopping 65% repeat guest rate, often spanning multiple generations, proving that her broader appeal is resonating with travelers.
Heather M Brown: Standing Out in a Saturated Market with High-Touch Experiences
StayLuxe Properties, Utah
Heather runs her business in Park City, Utah, a market saturated with 70% vacation rentals or vacant properties. Unlike most, she overcomes this challenge by offering high-touch experiences beyond just homes. Her business model focuses on exceptional service to guests and owners alike, including concierge services and personal communication.
Stacey St. John: Managing Different Markets with a Dual Approach
Kozy Getaways, Ohio and South Carolina
With properties in two distinctly different markets, Stacey’s business has a dual approach. In Myrtle Beach, SC, a highly seasonal vacation market, she competes with a wide array of inventory. On the other hand, Hocking Hills, OH, is a year-round regional vacation destination. As a real estate investor, her company manages properties to the standards she wants for her own properties and positions each to attract the ideal guest for that specific unit.
The diversity of these three businesses underscores the adaptability and innovation needed to succeed in the STR market. Their firsthand experiences provide valuable lessons for all STR managers looking to scale and optimize their businesses.
2023: The Year of An Industry Seeking Both Growth and Stability
Fausto Vieira da Silva, Strategic Partnerships Lead at PriceLabs, graced our conference with his invaluable insights. Drawing from years of revenue management experience for large property managers and data courtesy of PriceLabs, he provided a snapshot of 2023 for the short-term rental industry in the US and Spain.
The Boom in Listings
An important trend to note is the significant increase in the number of Airbnb listings over the past two years in the US market, marking a 50% rise. This surge in supply could be a contributing factor to some operators experiencing a decrease in occupancy, despite the market remaining robust.
The Occupancy Conundrum
While the occupancy rate in the US market appears to have dipped slightly compared to 2021, it’s crucial to understand this within its context. The seasonal trend seems to have become more consistent post-COVID, but the overall occupancy rate is still lower than in 2021. However, according to Fausto, this doesn’t necessarily indicate a lack of demand. Instead, it may be a natural outcome of the increased supply. If the number of tourists only increases by 10-15%, but the supply surges by 30-50%, it’s expected that the average occupancy would be lower.
Average Daily Rates (ADR): Heading to a More Sustainable Place?
In terms of Average Daily Rates (ADR), there’s good news. After a period of dramatic increase, ADR appears to have stabilized, slightly higher than in 2022. This stabilization is seen as a positive sign, as continuous growth of 10-15% or 30% annually in ADR is not sustainable.
It’s crucial to remember these are country-level trends and individual markets may behave differently. However, these insights provide a useful lens to understand the broader patterns that shaped 2023 for the short-term rental industry.
Does The Data Correlate With Real-World Experience of STR Managers?
The experiences of Daniela, Heather, and Stacey highlight the importance of strategic planning, market understanding, and adaptability in managing and growing short-term rental businesses.
Daniela’s Journey in 2023: Breaking Seasonality and Boosting Rates
Daniela experienced an unexpectedly high Average Daily Rate (ADR) in 2023, which was 10% more than the previous year, effectively breaking the cycle of seasonality. She attributes her success to repeat guests and effective market positioning. By leveraging platforms like WhatsApp, Instagram, and Facebook, she managed to stay in front of her ideal guest all year long, leading to increased bookings and revenue.
Heather’s 2023: A Return to Normal Seasonality Amidst Challenges
For Heather, 2023 brought with it a decrease in business in the U.S. and a return to “normal” seasonality locally. The opening of international borders and an unstable economy created a shift in US traveler sentiment, necessitating a more strategic approach to major KPIs like rates, occupancy, and RevPAR. Her year was notable for effective pacing and preparation, and she spent considerable effort educating property owners about market changes.
Stacey’s 2023: A Year of Growth Amid Changing Trends
Stacey had a year of growth, with her portfolio growing by 61% and revenue increasing by 123% over 2022. However, it wasn’t without its challenges. She noted a significant increase in last-minute bookings compared to 2022, combined with pricing decay within the last 30 days. This necessitated a solid strategy to maintain a lengthy booking window. Additionally, the average length of stay was down in the Myrtle Beach market during the slow season (Nov-Feb). This shift in what was traditionally a snowbird haven forced Stacey to make adjustments to her early 2024 strategies.
How is 2024 Shaping Up?
US Market: Trailing 2023 with Signs of Improvement
According to Fausto, the occupancy rate in the US is currently following similar patterns to those seen in 2023. However, there are signs of potential improvement, particularly in May, June, and July, with bookings looking slightly higher, around 1%. Conversely, occupancy for January 2024 appears to be slightly lower than the same period in 2023.
From these observations, Fausto suggests that the market is behaving more or less normally, with some months showing improvements and others slight decreases. The overall trend seems to be consistent with last year, with a possible slight upward trend in the longer term.
As of now, about 5% of the potential market has been sold by property managers in the US, but the final occupancy last year was close to 59-60%. This indicates there’s still a lot more to sell, but the early trends are promising.
Spain Market: A Positive Outlook for 2024
In Spain, July 2024’s occupancy is already above 2023’s, which is positive news for this highly seasonal market. The majority of short-term rentals in Spain are located along the coastline, and it seems people are beginning to lose their hesitancy about booking long-term and are trusting that the high season will be good.
Fausto highlighted the importance of considering micro data when interpreting these trends. For instance, the energy crisis in Europe last year led to an increase in bookings in southern regions like Marbella, as people from northern Europe sought to escape the higher energy costs in their home countries.
While it’s still early days, the data suggests a consistent year with potential for growth in 2024. However, Fausto emphasizes the need to continually monitor booking windows and average lengths of stay to accurately gauge market performance and make informed strategic decisions.
2024: Preparations and Strategies from Three STR Managers
As we look ahead to 2024, our panel of short-term rental managers shared their goals, strategies, and visions for the upcoming year. The consensus among them is a focus on quality, growth, and diversification of revenue streams.
Each manager’s approach reflects their unique business model and growth strategy. Their insights offer valuable takeaways for other short-term rental managers planning their strategies for 2024. Whether it’s focusing on quality, diversifying revenue streams, or expanding portfolios, these strategies highlight the importance of adaptability and strategic planning in the ever-evolving short-term rental industry.
Daniela’s Vision for 2024: Quality Over Quantity
Daniela’s goal for 2024 is to manage 100 properties, with her portfolio currently at 95. However, her focus is not solely on expansion but rather on working with the right kind of owners and maintaining a work-life balance. She plans to put less emphasis on expansion and more on quality and personal satisfaction. Daniela also plans to continue pushing alternative revenue streams, such as refurbishments and real estate, as a safety net.
Heather’s 2024 Strategy: Refinement and Direct Bookings
Heather’s priorities for 2024 include refining her property portfolio, focusing on cost-effectiveness, and seeking additional revenue streams. As part of her growth plans, she is emphasizing direct bookings and taking inspiration from Daniela’s business model. Heather’s vision is to manage 40 ideal properties, underscoring her belief in prioritizing quality over quantity.
Stacey’s Ambitions for 2024: Expansion and Shared Services
Stacey’s growth priorities for 2024 are to continue the momentum from 2023, replicate her growth numbers, expand her portfolio by at least 50%, and double her revenue. She plans to grow in her existing markets while expanding her portfolio nationwide through what she calls “shared” services. This model allows her to deliver a 5-star customer experience, keep her owners’ calendars full while maximizing their revenue, and simultaneously give owners control over the care of their properties.
Why Short-Term Rental Managers Should Care About Events in Their Market
Events, whether they’re a global sporting spectacle like the Olympics or a concert by a pop sensation like Taylor Swift, have a profound effect on the short-term rental market. 2023 made it evident that these key events can significantly influence demand, bookings, and pricing, making them crucial factors for short-term rental (STR) managers to consider.
It’s crucial to understand how to price your properties during these events to maximize profits. To shed light on this topic, we turn to Thibault Masson, Founder of Rental Scale-Up and Head of Product Marketing at PriceLabs.
Understanding the Impact of Major Events: The Paris Olympics and Taylor Swift
Thibault highlighted the importance of being aware of major events in your local market. For instance, he presented data showing a significant bump in bookings in Paris towards the end of July and August 2024, which coincides with the Paris Olympics. Compared to the same period last year, there were about five times more nights sold. A lot of these stays were one week to two weeks long, indicating that many people plan to stay for the duration of the Olympics.
However, Thibault also pointed out another bump in May that was initially unclear. Upon investigation, it turned out that this bump coincided with Taylor Swift’s concert dates in France. Interestingly, a lot of Americans were flying to France for the concert due to lower ticket prices. This phenomenon is similar to the “Beyonce effect,” where a country-wide inflation was observed in Sweden when Beyonce started her world tour there due to high demand.
When it Comes to Events in Your Local Market, How Do You Learn About Them? How Do You Price Them?
Daniela’s Approach: Staying Informed and Preparing Accordingly
Daniela relies on various sources to stay updated about local events, including the local town hall, recurring events, and tourism heads, such as the 4-day walk of Marbella. Her strategy is to stay informed about these events so she can prepare and price her properties accordingly. This proactive approach allows her to maximize her revenue during high-demand periods.
Heather’s Approach: Building Relationships and Educating Guests
Heather’s strategy involves building relationships with local Chambers of Commerce, real estate agents, social media posts, and local businesses, particularly housekeeping companies. She also markets her portfolio on visitparkcity.com and mountainbikingparkcity.com.
Heather adapts to changes in events, such as the evolution of the Sundance Film Festival, and focuses on educating her guests about other seasons besides winter for visiting Park City. In terms of pricing, she maintains open calendars year-round and prices higher for advanced bookings.
Stacey’s Approach: Selective Event Participation and Promotion
Stacey is a member of the local Chamber of Commerce in Myrtle Beach and CVB, which helps her stay informed about local events. Initially, her strategy was to steer clear of certain events, like biker week in Myrtle Beach. She would raise rates and extend minimum lengths of stay to avoid attracting guests that don’t align with her target market.
For 2024, Stacey plans to build an events database from the Chamber and CVB events pages and promote the ones that align with her target guests to her email list. She aims to pair each property with its ideal guest avatar, much like pairing a fine wine with steak.
