The vacation rental market is projected to grow at a slow pace in 2024. This growth is driven by several factors, including the increasing popularity of millennials as travelers, the rise of online booking platforms, and the growing demand for flexible travel options. Despite facing various challenges, property managers (PMs) benefit from lower property price hikes, diversified revenue streams, and a surge of young travelers and families with predictable accommodation preferences.
Key Takeaways
- Market Growth and Valuation
- The leisure and hospitality industry, especially the vacation rental market, is recovering. The market is expected to grow at a compound annual growth rate (CAGR) of 4.7% from 2023 to 2030.
- The market was valued at US$82.63 billion in 2022 and is projected to reach US$119.01 billion by 2030.
- Demographics and Spending
- Millennials are the largest demographic group in the vacation rental market, spending an estimated US$180 billion on travel annually.
- The age group of 25–34 years comprised the largest share of vacation rental renters in 2022, followed by the 35–44 years age group.
- Short-term Rental Listings
- In Q3–Q4 2022, the number of short-term rental listings peaked at 1.3 million, indicating a rise in property purchases for vacation rentals and more people becoming property managers.
- Concerns in the Industry
- Major concerns for hotel travel professionals in North America include labor supply (78%), labor costs (64%), and customer behavior and confidence (40%).
- Family Vacation Preferences
- Families are increasingly allowing their children to decide vacation destinations, with 50% of families adopting this trend.
Vacation Rental Market’s Global State
The vacation rental market is expected to continue growing, driven by the increasing popularity of short-term rentals, the growing millennial population, and the rising demand for flexible travel options.
- The market is projected to grow at a CAGR of 4.7% from 2023 to 2030, with a valuation increase from US$82.63 billion in 2022 to US$119.01 billion by 2030.
- Annual revenue per unit in the vacation rental industry is expected to be around US$1,550 in 2023.
- The average monthly revenue per listing in the United States was US$1,248 in 2022.
Vacation Rental and Property Management Revenue Growth
While growth in the vacation rental industry is expected to be slow, large property management companies are poised for faster growth due to diversified revenue streams and less impact from rising property prices.
- Large property management companies are projected to grow between 20% and 50%.
- Property prices are expected to rise by only 2.28% in 2023, significantly lower than in previous years.
Occupancy and Rates
The occupancy rate for vacation rentals declined in 2020 but is expected to recover faster than hotels.
- Vacation rentals had a 57.4% occupancy rate for the first five months of 2023.
- Short-term rental demand in the US increased by 130% in Q4 2023 compared to 2019.
Property Managers’ Confidence
Most property managers are confident in the industry’s recovery, though some are unhappy with technology challenges.
- Approximately 50% of global property managers are confident in the industry’s recovery.
- Direct bookings are increasing, with a 51% share in total gross bookings in 2023.
Vacation Rental Demand
Demand is shifting towards beach destinations, chalets, and pet-friendly homes. Families are also more likely to let their kids decide on their vacation destination and disconnect from devices.
- Beach destinations are the top choice for vacation rentals (44.88%), followed by locations near rivers and lakes (31.5%).
- Demand for 21–30 day stays has increased by 68%, though the average stay duration is decreasing slightly.
The vacation rental market is evolving with changing demographics, technology, and consumer preferences. Property managers and industry professionals must adapt to these trends to capitalize on the market’s growth potential.