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Recovery Key Indicators: Part 2

April 22, 2020

Last week we reviewed the first key recovery indicators. Today we will look at two additional indicators and give you our read on the current state of future demand.

Length of Stay

In addition to monitoring cancellations and booking pace, which we discussed last week, we have also seen a major shift in length of stay, particularly in urban centres. Looking at both US and European data, there is a clear shift to longer term bookings as average lengths of stay have more than doubled in the last month. As a result, ADR in the short term has also dropped significantly as most managers price their 30+ day rentals at a discounted rate compared to short-term daily pricing. This will inevitably change the dynamics of the vacation rental supply market, as many of these urban managers shift their inventory to offer longer term stays.

A change in short-term stay supply in the near future will benefit those managers who continue to practice solely short-term bookings. While it is too early to tell if supply has permanently shifted between different distribution channels -- removing listings or shifting to long-term stays -- this will likely appear in the long term and have an impact on prices across different channels.

Booking Lead Time

Another key recovery indicator is the time between booking a reservation and traveling to that reservation, commonly known as "booking lead time" in the vacation rental industry. Across the globe, lead times have fallen dramatically to a less than seven (7) day average. This dynamic signals a decrease and lack of guest confidence in their ability to travel in the future. It appears those willing to make reservations are only comfortable doing so for a week or two weeks ahead of time, which is a far cry from the traditional booking lead times of 60 days or more. We suggest that you monitor this indicator as a key signal of guest confidence and of recovery, overall.

Pent Up Demand

As certain localities have begun to lessen the shelter in place restrictions, there has been a corresponding uptick in reservations for vacation rental properties. However, given the continued uncertainty regarding testing or travel, there has not been a return to pre-COVID levels of reservations. Like most vacation owners and managers, we agree that people will seek outlets as restrictions subside, however it is too early to forecast whether this desire will result in a spike in travel demand, or if it will gradually happen as confidence increases. While there have been significant shocks to the global economy, we believe that travel, particularly for vacation rentals, will recover faster than most industries.

In summary, the signals we will watch for to measure this recovery are a decrease in cancellations, increase in booking pace and a lengthening of the booking lead time in various markets.

To keep most up to date on how these indicators are tracking, check out our live dashboards here.

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