As we put a bow on the Summer season of 2021, the short-term & vacation rental market is basking in the glow of record-setting occupancy levels and rates.
Now that the industry is riding high off the bullish summer market, lots of property managers around the country are wondering what’s next as we move into the second half of the year.
While we won’t share our full forward prediction just yet, we wanted to focus on the next major indicator: Fall Break.
ADRs Are High, But Booking Pace Has Slowed Down
Average daily rates (ADRs) have been steadily building through 2021, with summer rates coming in over 20% of what we saw in 2019.
Property managers have kept their Fall prices high—in hopes of continuing the elevated ADR streak from the summer—and the reservations being made are still roughly 25% higher than 2019.
There’s something happening in the market, however, that’s caught our attention: the lag in booking pace.
Overall booking pace, using the number of reservations per listing as an indicator of demand, has fallen below the same time last year in almost every major market. While demand is not extending into the Fall months the same way it did in 2020, the vast majority of property managers are keeping their “optimistic” rates in place.
This, in turn, is causing a slowdown in the number of reservations being made.
No Need to Panic, But Be Smart About Your Pricing
This isn’t meant to cause fear or panic; as we’ve stated all year long, the short-term rental market is, and continues to be, strong. This is simply meant to be a cautionary flag raised for savvy and proactive property managers to take note and act accordingly to ensure their portfolios are performing at peak efficiency.
The most successful property managers this year were the ones who were able to strategically raise rates yet not sell out too early. Those managers who will continue to see success in 2021 will be the ones who notice the falling booking pace in their market and are lowering rates to match the market demand.
All of this will be a test of not just your revenue management skills but also owner communications, as owner expectations will also play a pivotal role.
While they won’t get as high ADRs as they’d hoped for, they will more than make it up with higher occupancy rates.
Lowering rates is not as fun as raising them, but it’s going to be necessary to finish off 2021 strong. If you aren’t monitoring your bookings pace and forward occupancy in Insights or other tools, start now.
Booking Pace In Real-Time: Florida Panhandle and Smoky Mountains
When markets change, like declining relative demand from Summer to Fall, it tends to separate the pack into winners and losers. Not everyone notices a slowing booking pace or lower occupancy, even when the overall market is slowing down.
Below is a chart showing five mid-size property managers based in the Florida Panhandle and their corresponding occupancy rates for October 2021:
As the chart clearly demonstrates, the volatility of performance is staggering. Mid-early October occupancy ranges from 25% to 95% by property manager!
Property managers who didn’t adjust prices are already sold out for the upcoming Fall Break at lower rates than they could have gotten, and those who have held true to charging summer premiums are getting very few leads.
And this divergence in performance is happening everywhere. Above we can see the same chart but for the Smoky Mountains. We’re still seeing a 20% to 50% spread in occupancy for the same days, and remember, these are professional property managers!
The Key Takeaway: Revenue Performance Requires Nimbleness
The lesson you should take from this post is that while we’re coming off an amazing performance high this Summer, adjustments have to be made relative to the demand in your market.
Many property managers are doing this, but sadly a lot aren’t, and are sticking with their “optimistic” rates, risking empty beds from now until the holidays. If you want to be the best in your market, then follow the market trends when they go up and—more importantly—when they go down. Being accurate on a downturn actually has a pretty big upside for the bottom line.
Want to see how your portfolio stacks up against the competition? Request a free demo of our Insights tool today!