Market Analysis: Vacation Rental Industry
The vacation rental industry includes all furnished properties that are rented out temporarily to tourists as a hotel alternative. Properties can include condos situated in a luxury golf resort, beach-side cabanas, skyrise penthouses in midtown, cabins that are seemingly lost in the woods, and everything in between—and tourists are flocking to them.
Airbnb alone boasts a vacation rental market size of:
- Over 150 million users worldwide
- 400 million guests
- Over a half a billion stays
These staggering numbers are something to watch, but there are others just as important. The vacation rental industry growth rate is just one that is of particular importance.
Here, Grand Welcome makes a vacation rental market analysis based on some information that you, potential vacation home hosts and franchise owners, need to know. But, before we dive into the data, let’s take a look at some interesting and insightful vacation rental trends.
| You are reading an article from the Franchise section of our Ultimate Vacation Rental Business Guide.
See the other articles in this section below: ➜ Vacation Rental Market Trend & Analysis |
Vacation Rental Trends
Following vacation rental trends is a smart way to learn what offerings people want and are willing to pay for. The travel industry, in general, has changed drastically over the last 10 years, and there are more projected changes to come.
Here’s what’s available now and what you can expect in the future for the vacation rental industry.
High Season, Year-Round
Vacations used to revolve around two seasons–high season and low season. The high season was marked by high crowds and high prices. The low season featured just the opposite. However, things have changed. Seasons are being blurred and travel is happening year-round, no matter what else is going on. People are enjoying wherever they are, whatever the weather. It’s all part of the experience.
What does this mean for vacation rentals? Only good news! You’re looking at more consistent bookings throughout the year and less severe swings in rates.
Dog-Friendly Locations
Owners of furry friends are more interested than ever in bringing their pet along on their vacation . . . and are willing to pay for the privilege. Vacation rentals are a great option for dog lovers because there is more space inside and out to accommodate their needs. Most properties still don’t allow pets, so there is a great niche here waiting to be filled.
Site-Specific Accommodations
Since the world is becoming more and more connected, travelers are seeking unique accommodations that reflect the traditional culture of each specific location, rather than a homogeneous hotel room. For example, a cabin at Lake Tahoe, a mid-century modern rambler in Palm Springs, or a plantation-style home on the Big Island of Hawaii are all options that appeal to today’s jet setters.
Wellness Retreats
The global wellness economy has officially boomed. It is growing at more than twice the rate of overall tourism, and wellness travelers are spending 178% more than the average domestic tourist. Key revenue sectors include:
- Spa Economy = $119 billion
- Thermal/Mineral Springs = $56 billion
- Wellness Lifestyle Real Estate = $134 billion
- Wellness Tourism = $639 billion
These already-high revenues are only projected to increase tremendously over the next few years. If you have a property that caters to this economy, you’re in luck.
Vacation Rental Forecasts
Now that we know what’s trending currently, let’s take a peek at what the next decade’s forecasts may bring.
- Vacation rental properties that come with personal use of a car.
- Partnerships between vacation rental sites and airlines, car services, and attractions.
- Customers who become loyal to a particular vacation rental franchise.
- More cross-border travel among developing countries.
- Properties that will stay in families indefinitely.
Vacation Rental Market Analysis
The vacation rental market has grown to great values recently, and it is projected to continue on that upward trend. Get to know this market better (and its potential) by reviewing this vacation rental market analysis, which includes:
- Industry growth and value
- Customer segments and buying patterns
- Barriers to entry and competition
- Windows of opportunity
Vacation Rental Industry Growth and Vacation Rental Value
When it comes to the vacation rental industry growth rate, user penetration is currently at 18.5%. This means that almost 20% of all estimated travel customers have booked a vacation rental.
The value of the vacation rental industry is hard to comprehend, just because it is so high. Revenue has reached $18 million in the United States alone and is expected to show an annual growth rate of 2.5% by the year 2023. These stats don’t match what the industry is stating. Annual growth rate is 7.2%.
* Source: 1 Statista 2018, “Vacation Rentals Highlights, U.S. Region”
Vacation Rental Customer Segments and Buying Patterns
There are roughly 300 million vacation rental users worldwide. Among this vast number are some specific segments that owners should be aware of in order to better understand who their customers are and how they buy.
Age Groups:
- People ages 25-34 make up the largest group of property renters at 40.4%, followed by ages 35-44 at 23.9%.
- Even though people ages 45-64 make up the fewest renters, it is expected that this group will rent more in the future as younger renters begin to age.
Traveler Type:
- Business travelers are a quickly-growing type of renter.
- 71% of parents said access to kitchens was a major reason for renting.
- 1 in 3 Millennials is willing to spend >$5,000 on their vacations.
- 35% of Gen Z travelers (24 years old and younger) are most likely to travel with friends.
Location:
- 74% of renters prefer to spend their vacations at the beach (83% prefer being near any type of water such as a lake).
- 51% of travelers prefer mountainous regions.
- Cities are the fastest-growing destination.
- More than 60% of the time, younger travelers are staying in cities.
Booking:
- 59% of people read websites, online forums, and reviews before going on a trip.
- People booking travel spend about 59 seconds clicking through photos on a travel website.
Vacation Rental Barriers to Entry and Competition
The barriers to entry of renting out a vacation property have largely diminished over the last few years. Property listing sites are making it very easy for owners to start their own businesses and franchises. However, large hotel corporations have taken notice and are working to try and keep their market share by adding kitchens to rooms, using loyalty programs, and offering plenty of amenities.
The good news is that hotel corporations have a hard time offering what vacation rentals do so readily—personalized home comforts, privacy, space to unwind, and an authentic local experience.
Vacation Rental Windows of Opportunity
We can gather from the above data that there are many windows of opportunity in the vacation rental industry that are waiting to be utilized more fully. Such opportunities include offering:
- Dog-friendly rentals and amenities
- Site-specific and culturally-unique accommodations
- Spa and wellness retreats
- Locations in cities and developing areas
- High-end rentals for younger travelers
- Business features for work travelers
- Vacation rental franchising
Taking hold of the above opportunities will help vacation rental owners better compete with large hotel brands both now and down the road.
Conclusion
With this trending and encouraging vacation rental market analysis and data, it’s no question that investing in this industry is a smart move. So how do you get in on it and make money? There are two main options:
- List your property with Grand Welcome.
- Open a vacation rental management franchise with Grand Welcome.
Why choose Grand Welcome? Because our easy and comprehensive management program covers every aspect of your property, our technology takes care of your back-office work, and our team of experts makes it easy for your business to grow and profit.
Request a FREE Franchise Information Kit and get started today!