Rise of the Villacation

Oceanfront Villas at Kiawah Island Golf Resort

Even before COVID-19 disrupted the hospitality industry, alternative accommodations had been steadily gaining popularity with travelers across every generation and income level. For those seeking authentic experiences, “living like a local” with a stay in a vacation villa or similar short-term rental holds vast appeal. Today’s realities have brought to light several additional traveler benefits to alternative accommodations, leading to what we have named the rise of the villacation.

Pandemic Performance Indicators

To analyze the effects of pandemic-related travel restrictions on accommodations providers in the first two quarters of 2020, AirDNA and STR collaborated on the COVID-19 impact on hotels and short-term rentals study. Key findings unveiled a sharp performance divide between hotels and comparable short-term rentals, such as villas:

Week of March 31, 2020 versus March 31, 2019:

• Hotel occupancy tumbled 77.3% and ADR dropped by 50.4%
• Short-term rental occupancy declined only 45.1% (studio and one-bedroom accommodations) and 46.2% (two-plus-bedroom accommodations) with far slimmer ADR losses of 11.6% (studio and one bedroom) and 6.4% (two-plus bedrooms)

Week ending June 21, 2020 versus June 30, 2019:

• RevPAR for short-term rentals rebounded more resoundly in early summer, down only 4.5% year-over-year versus hotels, which were still at a staggering 64.8% shortfall

Value of the Villa

Social distancing guidelines issued by public health entities to decrease the spread of COVID-19 immediately unveiled a critical benefit of villas over hotels. Namely, villa guests access their accommodations through a private entrance and enjoy personal outdoor spaces, whereas guests in traditional hotels have to navigate lobbies that can encourage congregation and congested elevators before reaching their guestroom located on a heavily trafficked corridor and offering drastically limited outdoor space, if any at all.

Kitchen facilities offer another key advantage. Villa guests can store, prepare and consume meals within their private accommodation, allowing them to further mitigate the risk of contracting the virus by avoiding interaction with staff and other diners in hotel restaurants. This food and beverage autonomy is a boon to villa owners and property management companies because it also encourages longer stays—a trend that has arisen thanks to virtual education and remote work that has permitted families to learn and labor not just from home, but from anywhere with an internet connection.

Findings from the AirDNA 2021 Trend Report support this increase in length of stay, showing that 41% exceeded seven days in December 2020—compared to just 21% in January 2020. This data point peaked in early spring with 70% of stays logging in at 8+ days.

Snapshots of villa accommodation success include:

• One perennially popular beach resort in the Southeastern United States that offers both hotel and villa accommodations reported revenues up across the board in 2020. However, hotel sales increased 28% year-over-year while villa sales ascended far more steeply at 229%.
• According to the Hawaii Tourism Authority, average occupancy of vacation rentals stood at 40.5%, compared to hotel occupancy at just 23.8% in December 2020.
• Marriott International’s Homes & Villas platform reported a 700% increase in bookings and 800% increase in revenues in the summer of 2020.

The Caveat? Not All Destinations Are Created Equal.

When we dig into more granular year-over-year numbers for December 2020 (as reported here in PhocusWire), we find that pandemic performance varied widely by location. For example, RevPAR for New York City fell off by 55.9% but skyrocketed for Gulf Shores/Mobile, Alabama (+86%); Lower Hudson Valley, New York (+84.9%); Coachella Valley, California (+84.3%); Big Bear, California (+73.1%); and Lake Tahoe, California (+67.4%).

The clear takeaway here is that travelers are bypassing bustling urban centers for more sparsely populated destination markets with plenty of opportunity for outdoor enjoyment—a trend we foresee continuing into 2021 and beyond.

Alternative Accommodations—Here to Stay

Even beyond strong occupancy, ADR and RevPAR levels, powerful value proposition and real world success stories, investors appear bullish on alternative accommodations. When Airbnb hit the stock market in December 2020, it became the biggest IPO of the year with a market capitalization of over $100 billion, far exceeding its initial valuation of $47 billion—and financial experts still anticipate plenty of room for growth.

On the guest side of the equation, we see consumers who have been stalled in the aspiration phase of vacation planning due to travel restrictions as well as those who have already chosen the road less traveled to nearby destinations. Within both groups, there is pent up demand for experiencing a sense of place beyond their own backyard. We project that the relative safety and personal space afforded by alternative accommodations in an ever-expanding drive radius will continue to fuel the rise of the villacation.