VRMA Administrator
Sponsored by Generali Global Assistance
By now, we have all heard that this year will be the year that the travel industry as a whole makes its long-awaited comeback. According to the World Travel & Tourism Council, travel and tourism in the US is expected to “reach pre-pandemic levels in 2022, contributing nearly $2 trillion to the US economy.” Summer flight bookings increased by 600 percent from January to February, and most Americans are planning to travel this year, with 70 percent planning a leisure trip and 47 percent planning two or more vacations. With so much promise on the horizon, I want to take a moment to review what we can expect from the months ahead and where vacation rental companies might want to look for more opportunities in the coming years.
Rebounding Travel
Masks Off
2022 does seem promising. With recent increases in COVID-19 case counts failing to result in the subsequent rise in hospitalizations that we’ve come to expect from a surge, and the mid-April lift of nationwide mask mandates for airlines and public transport, it has never seemed more likely since the pandemic began that we have truly turned a corner. Following the rise of the Omicron variant in late 2021 and early this year, US air traffic has averaged around 89 percent of pre-COVID-19 numbers since mid-February. While it’s still uncertain if the lift will hold up or not and, if it does, if it will encourage or discourage potential travelers (only 36 percent of Americans are ready to do away with masks and quarantines altogether, according to a February poll conducted by Reuters and Ipsos), the April ruling and quick response from major airlines that followed suggests that, this year, travel is ready to move forward.
Vacation Rental Momentum
All in all, the vacation rental market continues to thrive. AirDNA recently reported that the demand for short-term rentals is higher than ever, and average daily rates continue to climb, citing in March that, “record-setting momentum continued for the American short-term rental (STR) industry in February, with year-over-year bookings not only exceeding 2021’s numbers but 2020 and 2019’s pre-pandemic numbers as well.” Looking ahead at the summer high season, 46 percent more nights have been booked compared to 2021. Higher average daily rates, which have increased by 13.2 percent since last year, are resulting in about 16 percent more revenue per listing.
Supply Recovery Continues
As demand remains high, supply is also expected to grow throughout the year. A whopping 55,000 listings were added from January to February, resulting in about 1.5 million platform listings total. This number is “14.7% higher than last February and 2.5% higher than the pre-pandemic supply peak,” according to the AirDNA report. However, despite these supply increases and record-high occupancy in February (56.5 percent, 2.5 percent more than 2021), industrywide demand remains dampened by the delayed recovery of major cities.
Opportunities Ahead
There are predictions that hotels will be “fighting back” this year, working to attract leisure travelers with fashionable amenities like fitness studios and yoga classes, new sustainability efforts and high-tech options like keyless rooms and contactless check-ins. As hotels work to bring their customers back, vacation rentals are in a position to compete. Demand is slowly coming back to big cities and, as a result, urban and suburban markets now have the highest growth in terms of ADR. These higher ADRs in urban markets align with February data from the Bureau of Labor Statistics, which reported that lodging costs for US hotels and motels have already exceeded pre-pandemic rates.
Urban Markets
In the past two years, destinations that have experienced the most significant listing site growth have been those in coastal, mountain, and rural destinations: Myrtle Beach, South Carolina; Gatlinburg/Pigeon Forge, Tennessee; The Ozark Mountains, Missouri; Panama City, Florida; and Wilmington, North Carolina. While bookings for these and similar destinations have been up “between 30 and 60 percent” compared to pre-pandemic times, larger metropolitan destinations remain “down about 25 percent.”1 Major cities like Boston, New York, Los Angeles, and San Francisco remain short in both supply and demand compared to their 2019 levels, with AirDNA reporting that, “urban areas are now the only location type where demand has yet to recover to pre-pandemic levels.”
International Guests
Historically, travel is an export for the US economy. In a typical year, citizens of foreign nations who are visiting the US spend more than US travelers do while abroad. As we all know, numbers have plummeted on both fronts in the past two years. While both are now trending upward, US outbound spending is now outpacing that of foreign inbound spending by more than the pre-pandemic difference—what was once a $2 billion surplus is currently a $3.5 billion deficit.
To that end, while the percentage of all US short-term rentals booked by international guests averaged around 15-16 percent before the pandemic, that number has struggled to surpass 4 percent since. Based on 2019 numbers, according to AirDNA, destinations that stand to benefit the most from the return of international travel to the US are those that remain in the thick of their recovery (New York, Jersey City/Newark, Oahu, Miami, and San Francisco).
The good news is that some larger, urban destinations are already experiencing increased demand compared to 2019, particularly in Texas and Florida where cities like Dallas, San Antonio, and Orlando are trending upwards and seeing positive changes. On the other hand, cities that were already experiencing pre-pandemic regulatory backlash like Boston, Los Angeles, New York, and Washington, D.C. remain down but heading in the right direction.
As urban markets recover and international travelers return, I believe more opportunities will continue to arise for the vacation rental industry, building on the overall successes of the past two years and providing more guests with more options when experiencing the joy of travel.
George Meshkov is the senior vice president of travel insurance sales at Generali Global Assistance.
About Generali Global Assistance
When you partner with Generali Global Assistance, you’re working with a company with 30 years of experience and backed by one of the world’s largest insurance providers. Our success is built on our reputation for assisting travelers in the most difficult of circumstances and delivering vacation rental protection solutions designed to meet your needs.
Reach out to us to learn more about Generali Global Assistance and the ways we can help protect and grow your business.
