THE SCOOP ON RENT PROJECTIONS

Why realistic numbers and valid comparisons matter.

It’s no secret that the vacation rental industry in our area benefitted greatly from the pandemic financially. This year, we are seeing things returning to normal.

Indeed, right now our entire destination is down in rental rates vs. 2022. According to Gulf Shores/Orange Beach Tourism (GSOBT) reports early in the season, occupancy was down 15-20% over 2022. When occupancy is down, ADR (Average Daily Rate) is driven down.

However, in reality, the numbers are just returning to where they were in the most recent “normal” season before quarantine, which was 2019. While the data says that ADR is significantly down, that’s only the case when you are comparing the numbers YOY. Occupancy and revenue in 2020 - 2022 were artificially inflated.

All of this is having a strong impact on the projected annual revenue for vacation rentals this year. Therefore, when you are requesting a rental projection or evaluating an investment property’s rental potential for buying or selling clients, it is so important that you make sure the numbers you are getting are real numbers based on real data in comparable market conditions. You and your clients need to be able to evaluate realistic revenue potential.

I always aim to be as realistic as possible with my projections, as I understand that buyers are looking at this income to offset some of their anticipated expenses, and they are basing important decisions on rental potential. I take into consideration the current economic conditions, the current vacation rental market, and the current condition of the property when preparing these reports for you and your clients. I use valid comparables and real data. An inflated or inaccurate rent projection doesn’t do you or your clients any favors. Instead, it sets unrealistic expectations and sets your clients and new property owners up for failure, which is the last thing we want.

I’m always happy to discuss any of this with you further. Please reach out to me for more information on our referral program or property management program.

Kathy Harr

alabamabeaches@itrip.net

251-422-3546