The US Vacation Rental Market

The US Vacation Rental Market (by Accommodation Type & Booking Mode): Insights and Forecast with Potential Impact of COVID-19 (2022-2026)

Market Insight:

Vacation rental refers to a situation in which a furnished flat, home or professionally managed resort is offered as a short-term lodging option to hotels to tourists. Vacation rentals are also known as self-catering rentals, holiday homes, holiday lets (in the UK), cottage vacations (for rentals of smaller property in rural areas), and gites (in rural France).

Vacation rentals are popular among young people since they often provide multi-large bedroom apartments or villas with plenty of space, numerous bedrooms and bathrooms, separate living spaces, full-sized kitchens, and other amenities. People like vacation rentals because they provide more flexibility, amenities, independence, and privacy than regular hotel rooms or resorts. Vacation rentals are growing popular due to their low rates; they appear to charge less than hotels and resorts, and operating in a competitive business gives purchasers enough negotiating power. The US vacation rental market is anticipated to reach up to US$16.86 billion in 2023 registering a CAGR of 8.49% over the forecasted period.

Segment Covered:

• By Accommodation Type: In terms of accommodation type, the report provides the market bifurcation into four different categories: Home, Resort/Condominium, Apartments and Others. The home segment held the highest share, owing to the shift in consumer preference in relation to the amenities and level of privacy they want at the accommodation.
• By Booking Mode: The report splits the US vacation rental market into two segments based on the application: Online and Offline. Online segment occupied the largest share due to the growing consumer preference in terms of booking their vacation accommodations to have detailed information of host information through reviews and ratings posted by other guests on the website.

Top Impacting Factors:

Growth Drivers

• Increased Travel and Tourism Activity
• Rise in Internet Users
• Growing Business Leisure Travel
• Cost-Benefits in Staying over a Hotel

Challenges

• Concerns regarding Fraudulent Listing
• Competition for Inventory

Trends

• Rise in Popularity of Countryside and Coastal Vacation
• Quality as a Marketing Tool
• Rise in Flexcation
• Usage of Vacation Rental Tools & Software
• Driver: Increased Travel and Tourism Activity

Increased tourist activity is generating extra cash for the people, and their cost-saving feature has made less-attractive destination more approachable to the tourists. Travel and tourism are also a good way of creating jobs in the country. It has been found that short-term rentals and job creation has positive correlation and they are also helping people in making end meet by letting them let out the unused space of their property. Travel and tourism activity is not only helping vacation rental industry but also positively impacting the economy of the US.

• Challenge: Concerns regarding Fraudulent Listing

As the dependency increases on the internet the risk associate with it also increases and makes people more vulnerable towards the unfair practice happened on the internet. Guests booking their accommodation also have to go through the same risk and have suffered cybercrimes happened against them. Tourists have been victim of fraudulent listing such as houses, apartments, and homestays which has also put online platform such as Airbnb, one home to stay, TripAdvisor, Marriot home & villas, etc. Although, to minimize the risk of fraudulent listing online platform does identity and physical inspection of the property and host itself. Platform also provide ratings and reviews section to provide people with as much as information as possible. But even after all the safety features guests still report fraud cases and financial cases too which end up putting a negative impact on market revenue.

• Trend: Rise in Popularity of Countryside and Coastal Vacation

In coming years, demand for countryside and coastal vacation is intent to rise. The demand for these two destinations is intend to rise due to the pandemic and people are wanting to catch a break from the city life. Less-crowded destinations are witnessing since last years because people went there as these places have low-infection rates. Remote working is one of the major factors driving the demand for the location, as guests are looking for a way to unplug themselves from their stressful routine. As a vacation in outskirt would give them a change of scenery and a much-needed break thus increasing their productivity and work satisfaction. Thus, it can be said that people wanting to catch a break and wanting a enjoy great outdoors would drive demand for these locations which would later drive demand for vacation rental industry as well.

The COVID-19 Analysis:

Vacation rental market industry is among the worst industry to be hit by the pandemic since government cancelled all international and domestic flights and impose a ban on people movement in the country. Corporations working in the industry experience negative cash flow as they have to provide refunds to the guest upon their cancellations of bookings and even close many of their regional offices to contain the spread of the virus. Disruptions caused by the pandemic led to fall in average daily rate and user penetration and presented a lot of uncertainties in the real estate space.

Post-COVID scenario of vacation rental industry is promising as most of the world economy is opened up and people have started travelling overseas. And the demand for vacation rentals has spurred up as people are now more willing than ever to travel. The US vacation rental industry is set for a significant rebound in the wake of the pandemic.

Analysis of Key Players:

The US vacation rental market is highly fragmented. While the four largest companies – Booking Holdings, Expedia, Airbnb and Trip.com – dominate the market, all other competitors generate very less revenue, as compared with the top competitors. The key players of the US vacation rental market are:

• TripAdvisor, Inc.
• Airbnb, Inc.
• Bookings Holdings, Inc.
• Expedia Group, Inc.
• Marriott International, Inc.
• Accor SA
• Interhome Group
• Evolve
• HomeToGo
• Vacasa

The vacation rental market is characterized by a high technological progress and a low market concentration on the supply and demand sides. Even the three major accommodation providers – Booking.com (3%), Expedia/Vrbo (3%) and Airbnb (2%) – only have a combined market share of 8%. The large number of small providers and the resulting low level of concentration in the sector is also evident when looking at the revenues of the 10 largest OTAs/providers of vacation rentals.