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Will Domestic Travel Slump Impact Vacation Home Rentals?

Written by Posted On Tuesday, 12 September 2006 00:00

After three years of upward growth, domestic tourism hit a slump this year and while scattered reports indicate the vacation home rental sector may be faring much better, the sector is rolling out winter marketing strategies early, indicating all is not as well as it could be.

Along with the slower growth in domestic tourism, there is also a greater than ever number of vacation home rentals to fill and that means gravy may be harder to ladle this fall and winter, if only in select areas, experts say.

Also, with the general downturn in housing, owners unable to sell condos in saturated buyers' markets may look to renting as a way to cover their carrying costs until selling is more viable.

"Competition is heating up as millions more second homes and investment properties appear on the vacation rental market. In 2005, according to the National Association of Realtors, second home sales accounted for a whopping 40 percent of all transactions, for a total of 3.34 million second home sales. More telling, 16 percent of those sales (2.32 million) were to investors, most of whom count on rental income to pay their expenses while their properties appreciate. This was on top of 2 million investment home sales in 2004," said Yardley, PA-based Alfred Glossbrenner, who along with his wife, Emily, self-published "How To Make Your Vacation Property Work For You", a guide book and CD-ROM for vacation home landlords.

"That much 'product' on the market impacts property owners in at least two ways. It makes it difficult to raise rental rates. And it makes it more important than ever to do everything you can to stand out from the crowd to get your place rented," Alfred said.

Total domestic travel expenditures by U.S. tourists is expected to rise at a rate of only 4.1 percent this year, compared to nearly twice that much, 7.5 percent last year, according to the Travel Industry Association of America..

TIA reported expenditures for domestic tourism by U.S. travelers dropped by 1.1 percent in 2002, the year after the day of infamy when terrorists turned commercial jetliners into missiles used in three U.S. cities.

In 2003, 2004 and 2005, those same expenditures rose, 3.7 percent, 6.8 percent and 7.5 percent, respectively with 2005 revealing the highest growth rate since 911.

TIA forecasts expenditure growth will dwindle further in 2007 growing by 3.7 percent and in 2008, growing only 2.7 percent.

While fear of traveling abroad and by air in general put a crimp on travel it also helped give rise to the a trend in vacation home accommodations. However, higher in-the-tank fuel costs and related fuel costs are putting a damper on all travel expenditures, TIA said.

In December of 2005, the TIA's Traveler Sentiment Index hit an all time low and by it's summer 2006 forecast the industry said "historically high fuel prices are expected to have a negative impact on summer travel and (fuel prices) are accompanied by broader economic concerns for many Americans."

The industry forecast summer travel would grow this year only by 1 percent over last year and the Glossbrenners say vacation home rentals aren't immune to economic conditions.

"Gas prices and travel costs are likely to cause vacationers to think twice from now on. You've got to give them a compelling reason not only to come to your location but also to rent your particular property. You've got to set it apart from the cookie-cutter look of the competition," said Emily Glossbrenner.

William May, director of the Seattle, WA-based Vacation Rental Owners Association agrees the fundamentals apply -- marketing is always key -- but says vacation homes may be more immune to market conditions than more traditional tourist accommodations.

Under the name of Sunspots, May owns or manages more than a dozen properties from single-family homes and condos to inns and resort properties primarily in the Pacific Northwest, but also Hawaii.

"The inns, resorts and vacation rentals we own and or manage have stronger occupancy than last year, but we always advertise heavily and harangue our repeat visitors with reminders to renew," he said.

"As to the we do get reports from members all over. These have to be highly parsed. Looks to me like aggressive marketing and sales focused individuals and managers always do well. Unsophisticated, naive and untrained owners have been pleading for bookings for the three years VROA's been around. I take their reports with a grain of salt. We haven't done a member survey, but it too would be anecdotal," he said.

There's no official, audited, central vacation home rental business registry so it's difficult to tell, beyond anecdotal evidence and in-house surveys, what's really happening to the vacation home rental market.

It is generally accepted, however, that when the general travel industry hit the wall after 911, the vacation home buying sector (as well as the overall second home market) flourished, based on NAR's numbers after 911. Growth was particularly noticeable in investment properties including vacation home rentals.

As travelers left the skies abroad and hit the roads at home, they more and more often sought the security -- perceived or real -- of individual properties and in smaller developments. Resorts, hotels and other areas where tourists traditionally congregated were deemed more likely targets for terrorists.

As domestic travel growth has dwindled in recent years, it appears growth in demand for vacation home rentals has continued, according to one source,, a network of vacation rental listing websites.

"The research shows HomeAway network owners did not see a decrease in occupancy rates since last year, even though vacation rentals inventories increased across the industry," said Eileen Buesing, public relations manager at

In September, reported a 25 percent growth in year-over-year growth in traffic on the online network and a 30.3 percent increase in year-over-year growth in inquiries per property, based on an owners survey.

"The owners surveyed have not experienced any decrease in occupancy rates in year-over-year," Buesing said.

However, in September also released a statement to help vacation rental owners in off-season areas boost rental income, indicating owners could benefit from market conditions squeezing the rest of the market.

"Given the increasing cost of travel and the explosion of the online vacation rental industry second home owners have more ways than ever to appeal to winter renters," said Christine Karpinski,'s director of Owner Community.

Tomorrow: Tips For Vacation Rental Landlords.

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Broderick Perkins

A journalist for more than 35-years, Broderick Perkins parlayed an old-school, daily newspaper career into a digital news service - Silicon Valley, CA-based DeadlineNews.Com. DeadlineNews.Com offers editorial consulting services and editorial content covering real estate, personal finance and consumer news. You can find DeadlineNews.Com on LinkedIn, Facebook, Twitter  and Google+

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