Vacation Rentals Blog

Sept. 27, 2006. As hotels have rebounded from the 9/11 shock of 2001 and business travel has returned to previous levels, many hotels have become decidedly less “family friendly�, thereby creating a great marketing opportunity for luxury vacation rentals that do cater to families.

An article in the New York Times (free registration) reports that, “some hotels that only a few years ago rebranded themselves as “family friendly� resorts have been quietly phasing out promotions and programs meant to attract families with children. One reason is that their rooms have been filling up with more of their core business customers.�

The article by Christopher Elliott goes on to say that analysts also detect a cooling trend toward children. “After a slide in hotel occupancy at the beginning of the decade, which was made worse by the Sept. 11 attacks, many hotels that traditionally catered to business travelers tried to attract families by adding room specials and activities and amenities for children. Now that the economy has strengthened, and business travelers are filling their rooms again, some hotels appear to be having second thoughts.�

As a general rule, being family friendly is what the vacation rental business is about. Since the beginning, we have done everthing we could to make our properties friendly to children, including numerous playgrounds and outdoor games as well as a well-stocked video library. With hotels cooling toward families with children, vacation rental owners have even more of an incentive to demonstrate that they are family friendly.

Posted by VRO at 02:54 PM | Permalink

Sept. 25, 2006. For those vacationers who like to fly to a quick getaway at their favorite vacation rental and hate to check their luggage, life just got easier. Starting tomorrow, Tuesday, September 26, the Transportation Security Administration (TSA) announced today it is adjusting its total ban on liquids, gels and aerosols.

The TSA announced in its press release that there are two significant changes: I) Travelers will be allowed to carry travel-size toiletries (3 ounce or less) that fit comfortably in ONE quart-size, clear plastic, zip-top bag through security checkpoints. 2) Travelers may also bring items, including beverages, purchased in the secure, boarding area on-board the aircraft.

Existing exemptions, including larger amounts of required medications, baby formula and diabetic glucose treatments must be declared to security officers at the entrance of the checkpoint for screening.
“After the initial, total ban, we have learned enough from the UK investigation to say with confidence that small, travel size liquids are safe to bring through security checkpoints in limited numbers,� said Assistant Secretary for TSA Kip Hawley. “We have also taken additional security measures throughout the airport that make us comfortable allowing passengers to bring beverages and other items purchased in the secure area onboard.�

For many short term travelers, for both business and vacation purposes, the new rules are extremely welcome. This should allow travelers to carry just enough essentials such as tooth paste, lotion, and other personal hygiene necessities so as not to be seriously inconvenienced. This should give an added boost to an already robust market for luxury vacation rentals.

Posted by VRO at 08:16 PM | Permalink

Sept. 24, 2006. The condo-hotel boom is still going strong, although it creates special risks for investors. The USA TODAY reports on the reopening of the Plaza Hotel as a condo –hotel after a $350 million renovation.

The article by Noelle Knox points out that this is part of a wide-spread trend in prime destinations, “The Plaza's conversion to a condo-hotel spotlights a real estate phenomenon that is creating new opportunities and risks for people in search of vacation homes. There are nearly 250 condo-hotel projects underway nationwide, representing almost 10% of all hotel rooms in the works, according to Smith Travel Research. Most of the condo-hotels are being built or converted in destination cities, such as Las Vegas, Miami, San Diego and Chicago.�

We agree that the appeal of having you own residence in a famous hotel is great for some wealthy owners. You get room service, maids and other luxuries of hotel living (but also the cost of hotel living). Hotel management cares for the property when you're away. Hopefully, the rental income, which is shared roughly 50-50 with the hotel operator (depending on the contract), can help cover your mortgage, taxes and association fees.

However, the disadvantages are great. You have to reserve your own room well in advance. The restrictions on the amount of time you can use your room vary from city, state and country. The hotel management furnishes all rooms the same.

The contracts and risks are too numerous to describe here. The Securities and Exchange Commission bars developers from marketing condo-hotels to buyers as investments. As a result, the developer can't give out projected occupancy or room rates to potential buyers. It is very difficult for buyers to estimate rental income from the property. If vacancy rates are high, guess who winds up paying the tab.

The problem I have with this kind of investment is this. The hotel management company is generally going to do well if the property is a prime one. You can be sure that the contracts are written to insure that the management does all right in bad times as well as good. The property owner, on the other hand is stuck. If management is sub par, or if there is a high vacancy rate, the owner of an individual unit has no recourse but to try to sell out, usually at a steeply discounted price.

For a much more detailed article on the risks of condo-hotel ownership, check out the article, Condo Hotel World A Boom or A Bomb, by David Arthur Walters.

Posted by VRO at 06:48 PM | Permalink

Sept. 23, 2006. As penny-pinching corporate travel departments have squeezed the per diems of millions of business travelers, a building boom among lower priced lodgings and tough competition among economy chains have lifted the quality of rooms in many budget hotels and motels.

When these business travelers go on vacation, they expect that their lodging will be at better that the budget chains where they stay during their business trips. Thus, the savvy luxury vacation rentals owner will take steps to ensure that they are providing more amenities that the typical economy hotel or motel.

An article by Jeff Bailey in the New York Times (free registration) points out that Super 8, the country’s biggest economy chain, with about 2,000 motels, each of its roughly 124,000 rooms now has a free wireless Internet connection and free breakfasts. Mattresses and towels are being upgraded. They are installing other amenities, such as curved shower rods.

In travels through small cities away from the major urban centers, I have noticed that these amenities are also available in other economy chains. One of my associates who must take frequent over the road trips has made a special point to look for Holiday Inn Express, because they were one of the first chains to offer free wireless internet.

For luxury vacation rental owners, it is not always possible to match the level of amenities and service of the highest –priced hotels and resorts. However, you should certainly match all the amenities of the budget chains, plus throw in some special touches and luxuries that they do not.

Posted by VRO at 03:04 PM | Permalink

Sept. 22, 2006. Really cheap oil prices could be an off-season boon for luxury vacation rentals as well as the rest of the travel industry. A prediction that we published in our Aug, 31 blog---that gasoline pieces would be closer to $2.00 than $3.00 by Thanksgiving—has already come true two months before Thanksgiving

Today oil prices closed at $60.31 per barrel, the fourth straight week that oil prices have declined. Amaranth Advisers, a giant hedge fund, has announced that it has ceased energy trading after having lost $6 billion over the past month in speculating on natural gas. We believe we will see more energy speculators head for the exits as the market loses of a lot of the uncertainly about oil supplies—estimated to account for about $20 per barrel in risk premium.

We are not energy analysts, but we find an article by Christopher Helman in Forbes.com to be very instructive. He quotes oil industry analyst and gadfly Michael Lynch, who says that oil will fall to $45 per barrel by mid-2007 and you are going to see gas at $1.95 per gallon sometime next year. With scattered reports of gas already selling at $1.99 per gallon on special promotions at a few locations around the country, we believe that many people may see $2.00 gas by the end of this year.

We don’t know if Lynch’s projections for the longer term, such as the possibility that oil could dip briefly into the $20 per barrel range in 2008, are correct. However, we are seeing his projections for the short term take place even faster than he had projected when the Forbes article was written. His explanation of the global supply and demand factors driving oil prices are the most logical we have seen. Anyone with an interest in the travel industry would do well to read it carefully.

Posted by VRO at 08:38 PM | Permalink

Sept. 15, 2006. Insuring vacation rentals in Florida is not as bad as once feared, according to an article in TheLedger.com. Initially, the news was all bad for Florida vacation rental owners. But it now appears that property owners are finding insurance, even though they are paying more for policies that have less coverage and higher deductibles

Allstate dropped 95,000 policies in Florida, and State Farm Insurance won regulatory approval to raise rates by 8.6 percent. Nationwide Mutual Insurance is dropping 35,000 Florida customers, not writing new policies in the state, and won approval for a 21 percent rate hike. Real estate transactions throughout the state were canceled because the buyer was unable to find an insurance company to write a new policy.

However, recent news has been more positive. Gary Landry, vice president of the Florida Insurance Council, Florida's largest insurance trade association, is quoted as saying that not enough attention is given to small carriers who are still writing new insurance policies.

"We are hearing about the reduction in writings for certain insurers," he said. "But there are insurers who are writing in most parts of the state, and unfortunately that's not exciting news to anyone. The more exciting news is that an insurer had to stop writing. But homeowners are generally able to get insurance, if not through the private industry, than through Citizens Property Insurance."

The article by Michael W. Freeman cites Ken Toney, owner of the Florida Chartered Insurance Group, who represents 9,000 property managers in the short-term rental industry, and he's seeking new customers. "David (Leather) told me last week that one of his owners said they have no insurance and can't get it," Toney said. "They had it by the end of the day."

Posted by VRO at 01:30 AM | Permalink

Sept. 14, 2006. The “Summer of Hell� for air travelers that some commentators had predicted turned out not to be so bad after all for vacation travelers. Fortunately for most luxury vacation rentals owners, most of their guests travel by land. For those located where air travel is essential, the experience of air travel was not as bad as predicted.

According to a Wall Street Journal (subcription only) article by Scott McCartney, the summer of 2006 stacked ups as follows for travelers:

• Flight delays down

• Complaints up

• Lost baggage down

• Bumped passengers up

• Empty seats down

Sure there were some horror stories in the situation where flights were often overbooked, and there were no backup planes when flights were cancelled. Many passengers were bumped and others were faced with last minute cancellations I had my own horror story to report when I was stuck in the Atlanta Airport on Aug. 10, the day the news of the foiled London terrorist plot was disclosed. A business partner had to cancel an important business trip to the West Coast entirely when his flight was inexplicably cancelled.

Still, as McCartney points out, airlines were more punctual. “In June, July and August, the 10 biggest airlines got 75.7% of their flights to arrival gates within 15 minutes of schedule time, according to data compiled by FlightStats, which tracks on-time performance of airlines, airports and individual flights. That is better than 73.2% last summer�.

In addition as we pointed out in previous editions of this blog, it was possible for vacationers to avoid some of the worst hassles by booking far in advance and by traveling on days when the airlines are least likely to be crammed with weekend travelers. Moreover, overcrowded flights have already become less crowded as we head into the fall season. As a frequent traveler, I have witnessed this development starting in mid -August.

Fro the owners of luxury vacation properties in such places as the Carrilbean and the Hawaiian Islands, the recent trend in air travel is welcome news indeed. You have survived a problematic summer and should expect smoother sailing (and good occupancy rates) in the months ahead.

Posted by VRO at 04:32 PM | Permalink

Sept. 11, 2006. Luxury vacation rentals are not the only lodging that has difficulty in maintaining brand consistency. From Manhattan to San Diego, hotels are switching brands and getting upgrades, but the guests cannot always expect brand consistency, according to an article in the Wall Street Journal (subscription required).

The article by Candace Jackson and Peter Sanders says, “Making sure travelers get the same kind of experience at all of a chain's locations is a growing challenge for the hotel industry, which is going through a big shift. Chains from Marriott to Hilton are selling off properties to third-party owners so they can focus on making more money from management fees. That's putting greater responsibility for the brands' reputations in the hands of outsiders.�

Smith Travel Research reports that since 2001, the name plates on 7,600 U.S. properties have changed -- that's about one in every six hotels, compared with one in every seven during the previous five years.

The Wall Street Journal reporters found widely varying practices and amenities in different hotels with the same brand, from different levels of charges for internet connections to different quality of televisions. Some had the new flat screens while others had the traditional bulky TVs. Obviously the chains will try to work most of these differences out over time. They must do so in order of to protect the integrity of the brand.

This article on hotel branding does illustrates the importance of meeting customers’ expectations in luxury lodging. As you develop loyalty for your own brand, your own vacation rentals, you must be able to build customer loyalty by meeting and exceeding their expectations each time they visit you.

Posted by VRO at 03:35 PM | Permalink

Sept. 7, 2006. The latest lodging numbers published by Smith Travel Research indicate that the summer travel season continued as it has been in the last several weeks, with flat or declining occupancy rates and increased revenues as a result of higher room rates.

For the week of Aug. 27 to Sept. 2, which includes part of Labor Day weekend, occupancy rates were down a half percent from the same week a year ago. However, a 7.2 percent increase in room rates gave the industry an increase in revenues of 6.6 percent over a year ago.

These numbers are a national average. They don’t necessarily reflect what has happened in certain areas of the country and certain sectors of the lodging industry. I know of some operators of luxury vacation rentals that have had much better occupancy this year than last. However, as a general rule, these numbers suggest that the lodging industry a whole can continue to raise rates only at they are willing to suffer declining occupancy rates.

Posted by VRO at 02:10 PM | Permalink

Sept. 6, 2006. An article by staff of the Boston Globe reports that resort operators on the Cape Cod and the Islands rue a generally mediocre season. – “It has been a summer of bad tidings for Cape Cod tourism: record rains, Portuguese man-of-war sightings, and high gas prices. As Labor Day yesterday marked the traditional end of the high season, merchants and hotel operators were reporting lackluster trade this summer on the Cape and the Islands.�

However, there is still some hope that a strong September might help to make up for May and June, which was the wettest two-month period in Boston since record-keeping began in 1872, and also dreary on the Cape.

It is clear that the experience of the Cape area was unique to the weather problems it experienced. The mediocre Cape numbers contrasted with those in the state as a whole. Figures released last week said that occupancy rates for June and July were up 3.2 percent, according to Massachusetts tourism officials.

We have always had one of our strongest months in our mountain cabins in September. We hope our property owners on the Cape have the same experience this year.There are a lot of nice luxury vacation rentals in the Cape and the Islands. If the weather is nice they should benefit from the growing popularity of the beaches when they are a bit quieter that in the summer months. The Cape Cod Chamber of Commerce is running an ad campaign showing an empty beach with the words: ``Psssst. The Coast Is Clear."

Posted by VRO at 02:05 PM | Permalink

Sept. 5, 2006. If September is an off-peak period time in your luxury vacation rental it might be a good idea to check your bedding. In our own vacation rental development, we have found that mattresses wear out a lot quicker in vacation rentals than in your own home. Moreover, Westin’s advertising campaign built around its “Heavenly Bed� changed forever the expectations of lodging guests as to the comfort of their bedding.

An article by James Gilden in the LA Times confirms something that we have predicted in earlier editions of our vacation rentals newsletter—the competition among the elite hotels for the claim to have the best bedding has trickled own to less expensive hotels. Gilden reports that these days, beds are on the minds of guests as well as hotel chain marketers. According to Linda Hirneise, executive director of global travel practice for J.D. Power, in the last three years, "comfort of bed" has moved into the top two criteria of guest satisfaction, beating onetime front-runner "cleanliness�. Bed comfort competes with "quietness" or "quality of bathroom" for the top spot, depending on the level of the hotel.

Gilden points out that a number of mid-priced hotels are touting their own luxury beds. If vacationers are accustomed to getting this kind of bedding at their hotels, they will certainly expect it when they pay the price for luxury vacation rentals. We took a cue from Westin years ago when their first started the “bedding wars�. All owners of a luxury vacation rental should carefully judge whether their bedding measures up.

Posted by VRO at 09:45 PM | Permalink

Sept. 3, 2006. Noise has become a problem for both the hotel industry and the vacation rentals industry. In the case of hotels, it is usually the result of the cheap construction that did not include proper sound proofing and inconsiderate guests who don’t realize how certain noises carry through the walls. In the case of vacation rentals, it is a case of poor screening of tenants who use vacation rentals as a party house that disturbs the neighbors.

In a recent New York Times article, Joe Sharkey does a good job of describing the problems that hotel guests have in getting a good nights’ rest even in elegant hotels. He writes that, “It has been my experience recently that major hotel chains have done a lot to address the issue, but the problem is you cannot tell in advance where the clunkers are.�

In the case of vacation rentals, we don’t have the problem of noise going through the walls, but we have noticed growing resentment in many vacation communities against vacation rentals. This resentment is resulting in some communities enacting ordinances to regulate and restrict the use of residential property for short-term rentals and, in other cases, attempts to ban them altogether. Generally, the complaints center on rowdy groups that rent the vacation properties and disturb the neighborhood by noise and parking in their neighbors’ space.

Unfortunately, most vacation rental owners do not live on or near their vacation units. Therefore, they may be the last to know that their renters are causing problems. It is good to include in the rental documents they must sign strong language about holding the noise down at night. We designate anytime after 10:00 pm as quiet time in our vacation rentals development. This means that guests may do what they want inside their cabins, but not make noise outside that can disturb neighbors. Also, it is a good to personally interview potential renters on the phone and let them know what is expected of them.

We in the vacation rentals industry have a responsibility to the neighborhoods in which our properties are located to be good neighbors. This includes taking what ever action is needed to avoid unruly and rowdy tenants.

Posted by VRO at 08:03 PM | Permalink

Sept.1, 2006. A study by Price Waterhouse Coopers documenting the highest international travel increase since 1996 is good news for luxury vacation rentals. As reported in HotelMotel.com, the Price Waterhouse study shows that international travelers to the U.S increased by 6.7 percent in 2005. During 2004 and 2005 international travelers to the U.S. increased by 20.3 percent, the largest two-year increase since 1996, but below 2000 and 2001 levels.

The Study indicates that following 10 quarter-over-prior-year quarter declines beginning the first quarter of 2001, international travelers increased during the fourth quarter of 2003 and have achieved robust gains since then. A number of factors, including lingering travel concerns, a global economic slowdown and more strict visa and immigration procedures contributed to the declines in international travelers. Conversely, a number of factors such as strong global economic performance and the weakness of the dollar relative to most currencies have contributed to the rebound.

This resurgence in foreign travel is important to the travel and tourism industry, including vacation rentals. "The return of international travelers is especially important - international travelers have longer lengths of stay, pay higher room rates and spend more in other hotel departments including restaurants, business centers, retail outlets, communication, laundry and valet," adds Bjorn Hanson, Ph.D., a principal with the Hospitality & Leisure practice at PricewaterhouseCoopers LLP.

Since vacationers to European cities such as London, Paris, and Rome are more accustomed that American vacationers to renting villas and flats as an alternative to hotel lodging, the luxury vacation rental owner who is located in a desirable destination is well positioned to take advantage in this resurgence in foreign travel. The increasing reliance on the internet for travel arrangements by people of all countries makes vacation rentals much more accessible that in the past.

Posted by VRO at 04:58 PM | Permalink