As you probably already know, this is an industry that has seen tremendous growth for more than a decade – nearly doubling in size from 1999-2011 (98 percent growth). And that rocket-like trajectory looks to continue if the travel trends are any indication.
That’s right, the way people are traveling is changing, and most of these changes are only good news for the vacation rental industry. Recent data released by Sojern point to Americans planning their trips further ahead of time, staying longer on those trips, and making those trips in larger groups. Unpacking each of these trends further demonstrates why the vacation rental industry is primed for continued strong growth.
Planning ahead of time
Q3 2013 saw over a third of travelers booking their vacations more than 30-days in advance (35 percent). This is compared to less than a quarter in Q2 (24 percent), and even fewer in Q1 of this year (23 percent). This is great news for vacation rentals.
Whereas a rushed traveler booking at the last minute is more likely to go with the more traditional option, i.e., a hotel, travelers with more time to plan can be more creative. No doubt this trend has contributed to the ever-increasing number of Americans who stay in vacation rentals each year. As this trend continues, it should only mean more people considering and booking vacation rentals.
Over 60 percent of leisure travelers searched for vacation stays of six days or longer in the third quarter of 2013. This is an obvious boon to the vacation rental industry. The economics of vacation rentals, and their superior convenience with all the amenities of home, become more pronounced the longer the stay.
Not only that, but over 40 percent of business travelers over the same period stayed at their destination for 6 days or longer (44 percent compared to 38 percent in Q2). This opens the door to more, and new types of renters. Though not always in traditional vacation destinations, business travelers are attracted to many of the same benefits offered by rentals as opposed to hotels, and the longer the stay, the more pronounced they become.
This may be the single most helpful trend for the industry. The number of trips that included 4 or more people doubled between Q2 and Q3. Much of this bump can be attributed to summer vacations, but regardless, the larger the group, the better vacation rentals look.
Hotels simply cannot compete when it comes to the convenience offered by vacation rentals for larger groups. Families staying in hotels struggle to find rooms that are connecting, or at least are located near each other, and then they have to deal with the ever-contentious decision of who should sleep in which room. Vacation rentals offer large groups, and especially families with young children, the opportunity to all stay under one roof, without the headache or hassle of room roulette.
And the growth continues
All of this is great news for the $85 billion vacation rental industry. While $85 billion may seem like a lot, it is tiny compared to the $593 billion generated by the hotel industry each year. But there is no reason the gap between the two should be so large. It is estimated that there is actually more inventory in vacation rentals than in hotels globally.
If that is true, then you can look at the combined numbers of the two, nearly $680 billion annually, as dollars spent on a place to stay that is not someone’s primary residence. That being the case, there is no telling how that $680 billion pie will be split in 10-20 years time. If you add to this the increased affluence of much of Asia and the rest of the developing world, and how that contributes to more people traveling more often, even that $680 billion pie appears ripe for strong growth over the next few decades.
In sum, all signs point to the vacation rental industry being at a point where it is ready to take a bigger slice of a bigger pie. Stay tuned: Next week’s article will discuss how you can ensure that you get your fair share of it.