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Vacation Home Rentals Surging in Popularity

The once maligned vacation home rental business is getting organized and consumers are falling in love with the value proposition.

Thursday, April 09, 2009
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The vacation rental market is poised for explosive growth. After years of disorganization, vacation home property owners and marketers have become extremely sophisticated and are following in the successful footsteps trod by timeshare and residence clubs.

Proponent say the vacation rental business’ time has come, and this niche’s success may put pressure on the traditional hotel business.

According to PhoCusWright vacation rentals accounted for more than 333 million available unit nights in the U.S. market in 2007 (most recent stats available) and nearly $24.3 billion in rental revenue. Approximately 10 percent of all U.S. adults and nearly 20 percent of all online travelers have booked a vacation rental.

Now property owners and vacation rental companies are figuring out how to assuage travel buyers of their concerns while also promoting a pretty strong value proposition.

“Vacation rentals are really starting to catch on,” said Margie ‘Di Guiseppe’ Van Zee, COO/Founder
of Bella Palazzo, a company that markets extremely high end rental homes that can sell for upwards of $50,000 a week. “People are starting to realize they can have the uniqueness of a private venue and have access to the wow factor. This is a more intimate experience and we are also able to offer all the hotel type amenities and services.”

At The Society, a luxury villa rental and marketing organization, co-founder Michael McFadden said the American public in particular is really starting to understand the value proposition of renting a single home rather than staying in a hotel and getting multiple rooms.

“The average 5-star luxury vacation home is less expensive than a mid-range hotel on a cost per person/per night basis,” said McFadden.

It’s a paradigm shift being kicked into high gear as travelers look for ways to not only save money but fosters the ability for multiple generations of a family or a group of friends to spend more intimate time with each other. Plus sharing a house, the argument goes, means everyone cam flop in the living room or kitchen together rather than be sequestered in individual rooms sometime spread throughout an entire resort.

In Virgin Gorda, part of the British Virgin Islands Aquamare, a vacation rental village offers a trio of 8,000 square foot villas that comfortably sleep up to 12 guests. Throw in the included amenities found at five star hotels such as daily housekeeping, laundry service and nightly turn down service, Frette linens, Bulgari bath amenities and access to private yachts, consumers start to feel very compelled to make a stay commitment. The property also features an on-site concierge, a private chef and beach attendants.

The cost: $13,750 per week, or $1,964 per day for up to 12 guests. That equates to just $165 per person, per day. That’s a number sure to make even the most seasoned hotelier a little jittery.

Rob Käll, founder and president of Bookt, sees the potential for that explosive growth. He cites the maturity of new technologies, the emergence of new tourism hubs, the industry's overall shift to online marketing and the need to turn underutilized real estate holdings into profit centers as setting the stage for this emerging business model.

“From a purely macro-economic standpoint people are looking at how they can get the most value out of a trip and asking what does it really cost to bring a family to a resort?,” said Käll, noting that usually requires two or more rooms and the need to eat out every meal. “There has never been a better time for travelers to consider vacation rental properties; there is an enormous online selection for consumers to choose from even 2 or 3 years ago. Changing consumer demand and technology have been contributed to this trend. The world is literally their oyster, and so much cheaper than many hotels or resort options. There are many other added benefits – too many to list here – but flexibility, living space and, of course, price is what is driving more peoples to stay in vacation rental properties vs. hotels. Savings of anywhere from 25 percent to 50 percent from a traditional hotel/resort vacation are not unheard of, and when you offset that against increased airfares, it makes for a much more affordable vacation. Plus you get all the benefits of hotel stays, with a lot more privacy and room to spread out.”

Another reason for the increased interest in vacation rentals is the influx of higher quality properties available. Owners of vacation homes and investment properties are feeling a financial pinch or are unable to resell their real estate. So they’re looking to rent these places to cover their costs or generate some income. Previously many of these homes sat unused.

One home visited by Hotel Interactive® was being rented by the U.S. Olympic volleyball team last fall. That property was in the process of being sold by an owner who rarely used the home, said Van Zee.

These homes are also many times the same quality as ones found in residence clubs such as Exclusive Resorts. But without the massive upfront membership fees that can be as much as $500,000 (a portion of which is refundable if you leave the club). Annual dues for a 10 day plan with Exclusive Resorts is $13,900, which is just about the same as that seven day rental at Aquamare.
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RE: Vacation Home Rentals Surging in Popularity article link
Nice piece. Another relevant PhoCalPoint: Only 1% of vacation rental guests won't rent again because of a bad rental stay http://tinyurl.com/cqzzk7 So much for SNAD!

Twitter: Douglas_Quinby
Posted by: Mr. Douglas Quinby
Email: dquinby@phocuswright.com

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