Tip #4: Research rental statistics for your desired market.
Hopefully by now you've read the previous three parts of this series and have a better sense about the right location for your vacation rental business that will fit your needs as well as those of your guests. You've narrowed down your search to a few destinations and you've checked the boxes we've discussed so far in this series. First, the location is somewhere you and your family will want to visit regularly. Next, the location is attractive to your target guests. Finally, the location has good drive-to proximity. Now it's time to dig a little deeper into the specific markets you're considering and see if they make sense from a numbers and business perspective. The location you've zoned in on may seem like your own field of dreams- but if you build it, will they come?
It's Important to Know Your Numbers
I've discovered a fantastic resource to help you learn about the vacation rental potential for almost any market in the world. This online resource is called AIRDNA and the web address is www.AirDNA.co. Most of the high-level information you'll need is free, however they do have paid subscription side that will yield even more granular data. The site pulls all the rental information from the two largest Online Travel Agencies (OTA) in the world- Airbnb and VRBO/HomeAway. These two booking channels capture nearly every vacation rental property on the market that is worth anything. Let's take a look at some key rental statistics straight from AIRDNA and compare them for a few of the rental markets we've discussed in previous posts.
Number of active rentals
This represents the number of whole-home rentals that are currently listed as available for rent.
Kissimmee, FL- 50,653
Myrtle Beach, SC- 5,999
Destin, FL- 4,032
Cashiers/Sapphire, NC- 316
Our vacation rentals are in Sapphire, NC. As you can see, there isn't a tremendous number of rentals for us to compete with, relatively speaking. We are pretty good at what we do and are ale to make our properties stand out amongst the competition. In general, we are seen on either page one or two of the OTA search results. Don't rule out an area just because there isn't a ton of competition. On the other hand, be cautious about buying in locations that are supersaturated.
Rental Demand Score
This number represents how often rentals are booked throughout the year. By using a combination of annual occupancy and listing growth rate, it predicts the relative demand in a particular market. The higher the score, the higher the demand.
Kissimmee, FL- 69
Myrtle Beach, SC- 68
Destin, FL- 56
Cashiers/Sapphire, NC- 38
Clearly, the Kissimmee area has the highest rental demand because of it's proximity to Walt Disney World and other theme parks, as well as the millions of travelers that head there each year. But, you better be an amazing marketer with deep pockets to get your property found- there are over 50k competitors who are also vying for the same guests. If you plan to use the major OTA's to book your property, the chance that it will actually be seen by prospective guests is low.
Average Daily Rate
This number is based on the average booked nightly rate plus cleaning fees for all booked nights over the past year.
Kissimmee, FL- $244
Myrtle Beach, SC- $175
Destin, FL- $274
Cashiers/Sapphire, NC- $314
Destin has a relatively high average daily rate and for good reason. The property there is very expensive and there are a ton of condos that come with exorbitant monthly association dues. Simply put, it's expensive to operate there. Expand the search to include neighboring beach communities like Santa Rosa Beach, Rosemary Beach, Panama City Beach, Navarre, and Pensacola Beach, and the competition is staggering. Contrast that with Cashiers/Sapphire which also has high average daily rates and much less competition and you start to get a sense of how this tool can be useful.
Occupancy Rate
This rate is calculated by taking the number of booked days divided by the number of days available for rent over the past year for each property. Properties with no reservations are excluded. This occupancy rate represents the median figure for the market (not the average or mean).
Kissimmee, FL- 65%
Myrtle Beach, SC- 54%
Destin, FL- 57%
Cashiers/Sapphire, NC- 45%
Again, Kissimmee has the most attractive occupancy rate as well as the highest rental demand for this group. It's not a seasonal market and there is rental demand year-round. Therefore, my assumption is that the unbooked homes are vacant because they are most likely never found in searches by potential guests. There are just too many homes available for rent which makes it very hard for them all to get noticed. Unless your property appears on one of the first two or three pages for these OTA search engines, the likelihood of it being seen and chosen is very low.
Other Metrics
In addition to the figures listed above, AIRDNA also allows you to drill down by size of the home. You can see how may 1, 2, 3, 4, or 5+ bedroom homes are in the area. Another interesting statistic to look at is the quarterly market growth. It tells you how many rental units are available now and how that number has changed over time. Considering whether or not to add a hot tub for your rental? The tool will show you how many of your competitors have hot tubs and other amenities like internet, cable tv, and a washer and dryer. Having all this information available can be overwhelming. So, don't allow yourself to get caught up in the minutia. Take into consideration the key points I outlined above. This should be more than enough information to help you make a smart decision and choose a location with great rental potential.
Rentalizer
Want to keep things really simple? AIRDNA has a cool tool called RENTALIZER where you can enter any known street address and get a quick estimate of how it will rent. The tool predicts annual revenue, average daily rate, and occupancy rate. It allows you to adjust the number of bedrooms, bathrooms, and how many guests the property can accommodate. While the number of bedrooms and bathrooms for a given property may be fixed, you can always manipulate the number of guests it will sleep. This will depend on how you setup the bedrooms and other sleeping areas. Adjust the number of guests and see how the figures change. This business is all about heads in beds! We'll discuss this in more detail in a future post.
As you can see, AIRDNA provides a lot of very useful market data to help you pick the best location for your vacation rental business. In part-5 of this series, we'll talk about why it's important to examine the rules and regulations surrounding short-term rentals in your area. This factor alone will either squash your dreams or give you reason for hope. It will be the final determining factor as to whether or not you should consider a particular market or neighborhood. If you haven't done so already, please subscribe to the blog and be sure to leave your comments and questions below. I'd also love to hear form you- email me at info@StartAVacationRental.com.
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