The short-term rental market saw unprecedented growth in 2022, with supply and demand reaching all-time highs. Now more than ever, vacation rental owners are worried about demand shifts in this post-pandemic environment. Is market saturation something to worry about? And how can owners drive strong rental performance in the midst of these changes? Our team got together to discuss what makes this market so uncertain and how vacation rental owners can stay competitive.

The current state of the short-term rental market

2022 was a whirlwind for the real estate and short-term rental markets. Here are our key observations:   

  • Interest rates have more than doubled in the last 6-7 months, and as a result, prices are plateauing, homes are trading less frequently, and buyers are struggling to obtain preferential financing.
  • Short-term rental demand remains strong. Investors that are on top of their game can continue to see strong returns on their homes and can acquire properties at lower rates. 
  • Supply growth is up YoY in most markets. We need to look at trends in each market to adjust to the new environment (Scottsdale supply is up 47% YoY and the Smoky Mountains supply is up 29% YoY). 
  • Owners and property managers are becoming increasingly sophisticated and progressing the industry forward. The end-to-end process in management is unrecognizable from 5-6 years ago. This creates an opportunity for those that approach the competitive market and play offense to see great returns.   

Revenue management and how it drives rental performance 

Emre Ilgaz, AvantStay’s Associate Director of Revenue Management, defines this process as selling the right home, to the right customer, at the right time, via the right channel, for the right price. 

“We often have the debate, ‘is revenue management an art or a science,’” says Emre, “but it’s a combination of both.” 

He also notes that while most people view pricing as the core focus of revenue management, it’s not sufficient by itself to optimize revenue. Pricing needs to be supported with effective availability strategies, marketing, and listing and channel optimization, and they all require a strong understanding of demand and booking trends. 

Vacation rental owners should keep the following in mind when pricing their homes for success: 

1. Revenue management goes beyond pricing; it must be paired with: 

  • Strong listings and photos
  • Distribution channel optimization 
  • Effective marketing strategies 
  • Strong understanding of demand and booking trends

2. Focus on RevPAR, not ADR or occupancy alone 

At AvantStay, we optimize for the amount of revenue we give back to owners so they can make the most of their investment. The two components that go into that are the average daily rate (ADR) and occupancy. It may be tempting to either optimize for occupancy or for higher daily rates, but you need to optimize for both. Focus on RevPAR (revenue per available room), not ADR or occupancy alone. 

3. Forward-looking, real-time data drives success in a fast-changing market

Use historical data as a guide, but focus on how the market is currently pacing. Monitor demand shifts in real-time and focus on forward-looking, real-time pricing.

4. Every market is different and requires a different approach 

Understand that each market is different, and one blanket strategy isn’t applicable to all. This also goes for homes. Effective revenue management should look at the unique features of a home along with its location and proximity to local attractions, and back that with data. 

Other ways short-term rental owners can stay ahead of the market

Revenue management is key to strong rental performance, but consider these strategies to make your home shine among the competition. 

Differentiate your home 

In a competitive market, the homes that are going to get bookings and drive strong returns are the unique and exciting homes that stand out from the rest. Have the experiential amenities that guests are looking for—folks traveling to Scottsdale will be looking for rentals with a pool and lawn games, while those traveling to the Smoky Mountains in the winter will prefer a hot tub. If you have unique amenities, like a game room or putting green, showcase these in some of the first photos on your listing page to grab guests’ attention. 

Optimize your marketing and reach 

Expand your reach beyond the two main online travel agencies (OTAs): Airbnb and Vrbo. There are a ton of other websites that can help you reach new guests. First, make sure your listing is optimized with relevant keywords and professional photos to reach the right people, at the right time, and drive bookings. 

Foster five-star ratings 

There’s a direct correlation between positive reviews and bookings. Homes with higher ratings will see better performance compared to nearly identical homes with lower ratings. Create an exceptional guest experience and care for your property to encourage more five-star reviews. 

Understand market regulations 

Stay on top of your local short-term rental regulations and keep your permit up to date to avoid hefty fines and legal repercussions. These regulations can also limit your revenue management strategy as some jurisdictions track and enforce nightly-minimum restrictions or the total number of reservations you can have during the year. 

Work with a professional vacation rental manager

As the market gets more competitive, the value of professional property management continues to grow. There’s a lot of complexity to optimizing a vacation rental. Working with a property manager that understands where price points are while also supporting interior design, permitting and compliance, listing creation, distribution, and more can help drive great returns. 

That’s where AvantStay comes in. We offer end-to-end management services to give you peace of mind. From financials to design to maintenance, we take care of your home as if it were our own. Our proprietary tech suite powers bookings, operationalizes in-field management, and activates an elevated guest experience. We take care of all the work to maximize your home’s income so you can sit back and relax—it’s that simple.

Interested in learning more about what it means to partner with AvantStay? Our team is ready to help. Get started with our vacation rental management experts today!

Published by Anna Ellison

With over six years of content marketing experience, Anna is a writer on the AvantStay team. Throughout her career, she’s given brands a voice and told stories across diverse industries including broadband, fintech, hospitality, mobile apps, and real estate.

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