What Do Declining Lodging Occupancy Rates Mean for the Luxury Vacation Rentals Industry?
Aug. 27, 2006. Monthly lodging report data published by Smith Travel Research shows continued strong performance in the lodging industry, but a slowdown from previous months this year. For the month of July, a peak summer travel month, occupancy was one percent lower that for the same month a year ago. However, increased room rates of 6.9% kept revenue per available room kept revenues 5.9% above those of July a year ago.
The year to date numbers have been much stronger, with occupancy up 1.6% , average daily rates up 6.8%, and revenue per available room up 8.5% over the same period a year ago. Nevertheless, we have noticed flat or declining occupancy rates in the last few months. This suggests that the ability for lodging owners to continue to raise rates may have ended.
What does this mean for the luxury vacation rentals industry?
We always watch the data at Smith Travel Research carefully, because there is nothing more important and more difficult in the vacation rental industry that setting rates at the right level. We try to offer a real luxury experience in our vacation rentals and are slow to raise rates. Our philosophy is that the only time we are losing money on a unit is when it is vacant. Therefore we attempt to set our rates appropriately to maximize occupancy. It is extremely important that the guests leave with a feeling that they have received good value. Those who do are likely to return.
