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Vacation Rental Management Business Surging

Written by on Monday, 18 July 2005 7:00 pm
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Reflecting the quantum shift in the second home market from a vacation home owners' paradise to manna for real estate investors, the vacation rental management industry is on a growth track.

Over a two year period, the average number of properties managed by vacation rental management companies grew by more than 7.5 percent and the industry is projecting growth of nearly 9 percent in 2005, according to Vacation Rental Managers Association (VRMA).

VRMA's survey of some 150 vacation rental management firms revealed that the number of homes managed in 2004 increased by an average of 7.45 percent, 7.7 percent in 2003. Property management firms surveyed said their inventory of homes will increase in 2005 by an estimated 8.77 percent, the survey found.

Of companies responding, 68.24 percent said their inventory of homes increased in 2004, only 12 companies (9.3 percent) had declining inventories while 22.46 percent reported unchanged inventories.

"A major reason the segment is growing so quickly is the widespread entry of major hotel franchise chains into the suite and condominium space," says Rick Fisher, spokesperson and vice president of vacation rentals for VacationSpot.com, owned and powered by Hotels.com.

A host of other factors are contributing to the growth in the vacation rental market that is driven by individual sales and now considered the largest and fastest growing segment of the second-home market.

Among all home sales last year, 36 percent were second homes purchases, according to the National Association of Realtors "2005 National Association of Realtors Profile of Second-Home Buyers." NAR said 23 percent of all homes purchased in 2004 were investment properties and 13 percent of all homes were purchased as vacation homes.

Among all owned existing second homes, approximately 64 percent are investment properties while 36 percent are vacation homes, NAR said.

Why so large? There are many factors.

The vacation rental market was one of the few sectors in the travel industry to get a boost from 9/11 when a fearful nation of travelers didn't want to curtail vacations and decided to stick closer to home and take more domestic vacations. Studies have shown single-family homes purchased as vacation rental properties are perceived by travelers as being more secure and safer in a world of terrorism, than higher density hotels, motels and similar travel digs.

EscapeHomes.com says even when traveling there's no place like a home that comes with, well, all the trappings of home.

Fully-equipped kitchens, laundry facilities, large shared spaces for families, fireplaces, hot tubs, private swimming pools, greater privacy and related flexibility in terms of rising and turning in for the night, unfettered by turn down service and housekeeping calls, diversity in location, and the opportunity to explore a community for a traveler's own plans to buy a second home later, are among a host of attractions found at vacation home rentals.

Rents on vacation homes -- especially for families and groups -- are often cheap enough to be more attractive to travelers than traditional accommodations. For the investor, the rents are higher than long term conventional rents, and as such, high enough to bring in more than enough cash to pay the investor's mortgage and upkeep costs.

It's no wonder that just as more travelers were being driven to vacation home accommodations, investors were moving into real estate to save their shirts from the dot com soured economy and soft stock market.

The best rental vacation properties also come with enhanced benefits and flexibility for the investor. More than just a positive cash flow vehicle, the tangible investment is a property the investor can use when it isn't occupied, it's a property the investor can use to trade time in with other vacation property owners anywhere in the world, and the investor can retire to the home later -- after the mortgage has been paid by travelers -- provided it and the surrounding community are favorable to the needs of retirees.

"It's interesting to note that there is tremendous untapped potential for more growth, as a significant majority of the travel population has yet to stay in a vacation rental unit," VacationSpot.com's Fisher said.

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  About the author, Broderick Perkins

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.