Instant Software Blog

Growth of Vacation Rentals: What is the Future?

As I noted in my last blog, the current state of our economy prompts some concern over the future of our industry.  Will there be more or fewer vacation rental homes?

As my prior blogs suggest, I am not overly concerned that slow economic growth or a temporary decline in GDP, will deal a serious blow to vacation rentals.

• Rising unemployment and salary cuts/freezes will reduce vacation rental revenues (via price bargaining, fewer vacations, and possibly shorter stays), but any negative impact will be partially offset by first time renters who find vacation rental homes more appealing than the expensive hotel or resort based lodging they used to use;
• Financial stress (plus HomeAway-type promotional campaigns) will persuade some homeowners to abandon mainstream rental managers and try self-management, but self-management is more difficult and expensive than many homeowners believe, and most financially distressed homeowners will eventually sell vacation homes they can no longer afford. 
• Unemployment, plus reduced rental revenues, will combine to put many vacation rental homes on the market at lower prices.  But homeowners who rent are simply investors.  Depending on whether they behave like day traders or investors in for the long run, they will either hold tight or sell at a loss.  Either action will not likely affect the industry much. Sales will transfer rental homes to buyers at prices that allow new buyers to accept lower rental revenue

Long term, the growth rate of vacation rental inventory will depend upon the interaction of several dynamics, not all being related to the economy:

Dynamics that will increase vacation rental inventory:

• Pressure to Rent.  The majority of vacation homes that are not rented today through commercial channels.  Some owners of vacation homes will begin renting their homes for the first time because their income from pensions, investments or employment has declined; 
• Bargain Prices.  Lower home prices will induce some financially secure people to buy vacation homes; 
• More Renters.  The US Census Bureau projects that the US population will grow 44% from 2007 to 2050.  There will be more people.  These people will take vacations.  Vacation rental homes should continue to provide better value than hotel rooms.

Dynamics that will decrease vacation rental inventory:

• Less Demand.  People will have less money if the US economy does not generate the same growth and wealth that we have seen in past decades, so a smaller percentage of the population will own or rent vacation homes. 
• Non-Rentals.  Lower home prices will induce some financially secure people to buy vacation homes for their own (non-rental) use; 
• Retirement Homes.  An October 2006 survey by the National Association of Realtors concluded that four out of 10 respondents intend to convert their vacation home into a primary residence in retirement, and that baby boomers own 57% of all vacation/seasonal homes and 58% of rental property; 
• Generational Interests.  Some young people will view vacation homeownership—like Old Spice aftershave—to be a relic of their father’s generation. 
  Immigration.  New generations may have less interest in buying vacation homes for economic or cultural reasons:
   - New immigrants and their children and grandchildren born in the USA will account for 82% of the population increase from 2005 to 2050, according to recent projections by the Pew Research Center.

No one has a crystal ball.  My guess that the number of rental homes will grow modestly, at a lower rate than the US population.

Foreclosures: Will They Fuel the Flames? Reduce Vacation Rentals?

By George Volsky, Instant Software - Director of Research


Will they refuel the flames for community activists who opose vacation rentals? Will they reduce the number of vacation rentals?

These continue to be troubling times for homeowners.  In July, 360,149 properties received a default or auction notice or were seized last month, according to data seller RealtyTrac Inc.  Foreclosures hit record numbers despite the government’s Making Home Affordable program, and—according to one source quoted in a Bloomberg article — “It has been more profitable to put a home in foreclosure than restructure the loan.”

Some 235,000 distressed borrowers have begun modifying their property loans under the government’s Making Home Affordable Program, according to an August 4, 2009 Treasury Department report, but only 15% of eligible borrowers were offered loan modifications with just 9% entering trial agreements.  
 
The unemployment rate was 9.4%.in July 2009, 34% more consumers filed for bankruptcy over July 2008.

An astute rental manager friend of mine emailed his thoughts as to how to the "current real estate cycle" might affect the battles being waged in many communities against vacation rentals. 

The current economy is driving prices down and creating foreclosures and shorts.  He is anticipating that this may provide ammunition for community activists who oppose vacation rentals who will proclaim that investors who purchased vacation rentals are "carpet baggers" who came into communities when prices were going up - and are now abandoning communities when they are bad.
 
“Perhaps,” he says, “the argument revolves around price point,” and he believes that today’s economy should dampen opposition to vacation rentals.  I think he is right.

As the economy declines, state/local governments find themselves in need of supplemental tax revenue, and they will be under pressure to preserve the tourism dollars that are generated by vacation rentals.  To this extent there should be fewer public officials who try to stop homeowners from renting their homes on a short-term basis. 

It is hard to imagine that even affluent communities in California can dismiss the budget crisis of their State Government and its reduced ability to pump tax revenues into their communities.

Also, foreclosures and a poor real estate market will combine to reduce housing prices, blunting criticism that vacation rentals have pushed housing prices beyond the means of local wage earners.  But any shift here should be modest in scope.

I suspect that foreclosures will not appreciably decrease the number of vacation homes being rented.  Price point is the great equalizer that will allow most vacation homes to continue being vacation homes. 

• When current homeowners can no longer afford their investment, they will sell it at a lower price that will make the property attractive to a new buyer at current rents. Somebody will continue to own today’s current vacation homes, less a handful of distress sales that may be scooped up as permanent residences. 

There remains the more difficult question whether more or fewer owners of vacation homes will rent their homes.  I don’t have any opinion on that at this time.  Of course if the balance should shift to non-renters, the anti-rental factions will be happy that investors “abandoned” the homes.

Apart from the percentage of vacation homes that are rented, I expect to see the total number of vacation rental homes grow at a modest pace, for reasons I’ll discuss in my next blog, “What is the Future?  -- Growth of Vacation Rentals”

The Internet Evils Have Entered the Rental Business

by Jan Leasure, California Landlord Solutions

We have watched with interest as the benefits of the internet have become contaminated by those who would use its conveniences to illegally make a buck.  We were thrilled when we were able to post our vacancies on the web for the entire world to see, thus expanding our market for our properties exponentially.  However, it was inevitable that someone would eventually figure out how to take that information and use it to defraud innocent people out of their hard-earned money.  In recent years, we have seen scammers “hijack” our rental ads, and re-post them on a site such as Craig’s List, at a much lower rental price.  

Posing as the landlord or manager, the scammers collect a security deposit and the first month’s rent from an unsuspecting applicant, never to be heard from again.  When the applicant shows up to take possession of the property, the real landlord/manager hears about the transaction for the very first time.  

The following is an abridged version of a similar incident that happened to a friend of ours who manages property in Southern California.  Like us, she advertises her vacancies on Craig’s List, as well as on her own website, to increase exposure.

The manager had a house listed at $2,500 a month, but her ad had been hijacked by someone who then advertised the same property on Craig’s List for only $1,500 a month.  To add further credibility to his listing, the scammer found out the tenant’s name and used it in the ad, making it seem as if the current tenant was the landlord.  The scammer even set up a phony email account containing the tenant’s name, to make his ad seem completely legitimate.  The worst part of all was that the scammer used a private P.O. address to receive first, the application to rent, and then, the security deposit and first month’s rent.

An anxious tenant took the bait and sent his application to the P.O. box, and then, when he was told he was approved, sent a deposit and the first month’s rent.  The “new” tenant then arrived at the property, ready to move in.  Naturally, the departing tenant, who was still in residence, didn’t know anything about it. The “new” tenant then demanded that the current tenant return his security deposit and rent money which, of course, the current tenant did not have. That’s also when the real landlord and property manager were dragged into the mess, hearing about the scam for the first time.

It turned out the “new” tenant, by the way, was a police officer, whom the manager thought should have suspected there was something wrong with a $2,500 house being rented for $1,000 less. To add insult to injury, the scammer now has all the personal information the policeman put on the phony rental application, including his Social Security number, the name of his bank and his account numbers, his birth date, rental history, employment history, and everything identity thieves need to pretend to be him. 

So the old adage, “If it sounds too good to be true . . .” once again turns out to be good advice. 

What can you do about these scams, most of which come from Nigeria and other overseas areas?  Not much.  If you see that someone has hijacked your Craig’s List posting, flag the post and report it to Craig’s List as abuse.   You can also contact the Federal Trade Commission to alert them to the scam. The number to call is: (877) FTC-HELP or (877) 382-4357. 

To prevent having your ad hijacked in the first place, you may want to consider a watermark on photos that you post and including the following statement in your listing: “If you see this property advertised anywhere for a lower price, please consider that the ad is a scam and do not reply to it.” 

Horror Stories is a regular feature of California Landlord Solutions.  These are stories that have happened to our members.  We can all learn from the experience of others!

Why Rent By Owner Homes Are a Bad Idea: Man Indicted in Vacation Rental Scheme

Source: The Arizona Republic, Ofelia Madrid - August 19, 2009

A federal grand jury indicted a former Scottsdale man suspected of swindling would-be renters of vacation properties he claimed he owned.

Edwin Lyle Negrin, 47, is charged with eight counts of mail fraud and 32 counts of wire fraud. Negrin is in state custody in Wisconsin on an unrelated matter, according to U.S. District Court officials.

Negrin is alleged to have defrauded at least 62 people out of a total of more than $200,000.The 40-count indictment alleges that in December 2007 and January 2008, Negrin placed listings on an Internet Web site, "Vacation Rentals by Owner." The listings offered two luxury beach-front homes purportedly located on Topsail Island and Ocean Isle Beach, North Carolina. Rentals were offered at rates ranging from about $1,900 to $4,000 per week. The rates varied depending upon the property's location and the time of year the property was rented.

Federal authorities allege that Negrin persuaded interested parties to sign rental contracts and mail them to addresses he controlled in Scottsdale and Chandler and to wire rental deposits to bank accounts he controlled in Chandler.

Negrin is also alleged to have entered into purported rental contracts with multiple renters for the same property for the same rental period. None of the contracts were fulfilled nor were refunds made to the victims. Some victims were reimbursed through an insurance program offered by Vacation Rentals by Owner.

Read our Blog on Monday for another vacation rental scam to be aware of!

Recently Released State and Regional Trends Report

By George Volsky, Instant Software - Director of Research


The vast size of ISI’s client base (larger than key competitors combined) has allowed us to generate reliable reports by filtering out data that routinely skews vacation rental reports, such as:

• New or old rental managers who do not have two full years of data;
• Long-term rentals (here defined as 61 days or longer); and
• Reservations that are missing critical data.
  
  

Regions

• Texas and its adjoining states (Region 6) experienced the least decline during the first half of 2009: a 4% decline in bookings, a 1% decline in revenue, and a 5% decline in revenue nights.
• The Southeastern area (Region 4) and  states adjoining the Great Lakes (Region 5) experienced a third less revenue decline than all regions as a whole (-12% vs. the group average of -18%).
• The regions most negatively affected by the economy were in the Northern Rockies (Region 8 – revenue down 27%), the Northeast (Region 1 – revenue down 22%), and the Southwest (Region 9 – revenue down 21%).
  

States

On average, the nation’s key vacation rental states experienced the following changes for the first half of 2009:
 
  

Trends varied widely among the states.

• Reservations. Florida experienced the least decline in visitors (arrivals down 3%) and beat average trends in revenue (down 9% vs. an average decline of 18%).  The biggest booking hits were taken by New Hampshire (down 25%) and Massachusetts (down 21%).  
• Revenue.  Texas increased revenues by 1% year-to-year, and increased average rent per booking by 6% (rebounding from hurricane damage?).  On the other extreme, Colorado revenues fell 28%.  
• Revenue Nights.  Oregon fared well with a 3% decline, followed by three states with a 4% decline:  Hawaii, Nevada, and Florida.  Hardest hit:  Massachusetts (-20%), Colorado (-20%) and California (-16%).

DOWNLOAD THE FULL REPORT

 

 

Picking up the Phone...A Lost Art?

by Amy R. Regnier, Director of Marketing

Just yesterday, I received a "checking in" phone call from what I would like to consider a seasoned sales professional that I have done past business with. Let's call her Pam. Pam is one of the best sales people I have talked to...very detailed, thorough, knows her products (all 120+ hotel, resort and convention space properties), and very loyal to her brand. Impressive. But, Pam does not know her limits in assumptions.

Our conversation led to us talking about another chain of properties that I have had past experiences with. I noted that I had an incredibly difficult time planning because the sales person never contacted me by telephone. Not once. However, plenty of return e-mails, with the assumption we were o the same page. Once the sales person handed my event over to the manager, low and behold, no one knew what my needs were, and I had to attempt an explantion many times until the light bulb [finally] turned on.

Why is this?

Pam asked if this person was younger. Ouch. I questioned her..."Younger? What do you mean?" I stumbled over my response, until I actually decided how to respond...don't. Just hear her out. Let her talk to see what exactly she thinks this generation in the professional world has evolved into - without giving away that I just might be in this classification. 

What I learned is this: The 'younger generation' of profesionals does not use the phone as a means of selling or conducting business. They communicate only by means of email, blog, Tweeting, texting, IMing....blah blah blah. Impersonal? Possibly. 

In my opinion, this generation, just like everyone else, is evolvong alongside technology and new marketing tactics. Go where the consumers are; do what they are doing. However, Pam is right. Conversations with a warm, fuzzy body on the other end of the phone provides a desired end result (a new sale), needs are uncovered, and you build a relationship that the 'written word' just can not.

Helpful hint: Don't assume - like Pam - that you know more about who is on the other end of the phone than you actually do. Sales 101...ask questions. A lot of them!

Perhaps phone conversations are old-fashioned these days. Maybe even a lost art. But, they are one of the most powerful ways to achieve desired results. Pick up the phone, put on a smile (people can hear you smiling through the phone) and don't be so impersonal. Build the relationship first...then turn it over to technology to continue the relationship and future conversations.

You never know....you just may have a new customer, return guest or satisfied business partner on the other end of the tin can!

NC Announces Tax Increase, Affects Vacation Rental Companies

The North Carolina Department of Revenue announced today an increase in States Sales and Use Rate Taxes, effective in just over two weeks. If you are in North Carolina and an Instant Software user, do not forget that you must update your software solution to reflect this change. Please call Client Care for a "How-To" guide at 866.PHONE.ISI (746.6347).

* * * * * * * * * *

(North Carolina Department of Revenue) The 2009 North Carolina General Assembly has enacted legislation that provides for a temporary additional 1% State sales and use tax effective September 1, 2009 and will expire on July 1, 2011.  Senate Bill 202 was ratified by the House of Representatives and the Senate on August 5, 2009 and has been signed by Governor Perdue.

As a result of the additional 1% State rate increase, the combined State and county tax rate will increase to 8.25% in Mecklenburg County, 8% in Alexander, Catawba, Cumberland, Haywood, Martin, Pitt, Sampson, and Surry Counties, and 7.75% in the remaining ninety-one counties.

Read More from the North Carolina Department of Revenue 

ResortQuest Delaware Exceeds 2008 Reservations by August 2009 Through Online Distribution

ResortQuest Delaware, a property management company and Instant Software client, exceeds 2008 vacation rental reservations by early August through its online distribution and booking.

Instant Software, Inc. (ISI) and ResortQuest Delaware jointly announce a new booking record for vacation rentals, despite the economy and decline in travel. ResortQuest acknowledges one of the key attributes to this increase is its use of Instant Software’s ISILink, the Vacation Rental Industry’s largest distribution system for suppliers and distributors of online vacation rentals. 

By mid-day August 6, ResortQuest Delaware announced that it set a new record for the number of online bookings and guest stays. While only 218 days into the year, more reservations were made online than the total number of online reservations recorded in 2008. In addition, online bookings made in July 2009, by number and volume, were up approximately 45% over July 2008.

“To achieve success in online distribution and bookings, three things are key,” explains Cheryl Spezia, ResortQuest’s Corporate Vice President of Sales and Marketing. “The ability of ISILink for direct and immediate availability, an effective website, and optimization [of the website] are all critical to the success of our online marketing efforts.”

“Our accomplishments online in the last few years, and especially now in this economy, combined with our dedication to customer service, bodes extremely well for our continued success in this market,” says marketing manager of ResortQuest Delaware, Tim Fisher. “We can not lose sight that each one of these online bookings is a family placing their trust in us to deliver a truly memorable vacation.”

Overall, ResortQuest has experienced a dramatic increase in online bookings since using ISILink at a majority of their destinations. “I believe that when a  buyer can easily view and reserve a specific home or condominium on a website, it only increases their confidence in booking a vacation rental online.” Spezia says.

“Instant Software is proud of its relationship with ResortQuest. This proves that increased reservations can be accomplished with the right technology,” explains Dave Hopcroft, Instant Software’s CEO.

Vacation Rental Bookings Across the Industry Down 10% in the First Half of 2009

Vacation rental bookings across the industry were down 10% in the first half of 2009 compared to same period in 2008. Instant Software issues a trend report on the vacation rental industry compiled from the largest and most representative data pool in the industry.

Instant Software, Inc. (ISI) reports that the number of bookings during the first 6 months of 2009 in the U.S. vacation rental industry were down 10% compared to the same period in 2008.  Revenue from bookings decreased 15% during that same period as economic pressures drove the average daily rate for  Vacation Rentals from a 2008 average of $199 per night to $185 in 2009. 

These figures come from a Research report published by ISI using reservation statistics from its client base of over 1200 property management firms managing 200,000 properties, the largest aggregated network in the vacation rental industry.  Because of the size and geographic range of ISI’s data pool, this is the industry’s only truly reliable and accurate source of vacation rental data.  The free report is available on ISI’s website at www.InstantSoftware.com.

ISI launched this report as a tool for the vacation rental industry because of the recent issuance of Industry Trend reports that use so few data points that they may be skewed and inaccurate.  This resource offers the most accurate and representative stats for companies to make the most informed decisions.  ISI aggregates these stats using actual transaction data from the largest data pool in the industry.  The data is then cleaned to include only the most representative year-to-year comparisons in the industry so that the stats show true “apples to apples” comparisons.
 
“Beware of potentially skewed and misleading information from companies that draw conclusions from a small data sample,” warns Dave Hopcroft, Instant Software’s CEO. “Making decisions from a small data set may be dangerous and could, potentially, lead you in a direction that could harm your business, rather than help it – Remember, data can easily be skewed by certain outliers.  The only way to get reliable accurate data is from a large sample representing different sized organizations across a wide geographic range.”

Other interesting trends from the report are that the average length of stay in a vacation rental increased by 2% from 6.4 nights to 6.5 nights, bucking the industry perception that the length of vacation rental stays were actually decreasing.  And last minute bookings did not appear as prevalent as the industry thought they would be as the Average Advanced Booking Windows only reduced from 87 days in 2008 to 84 days in 2009.

ISI will continue to update its “Research” section of its website and will make more detailed data available specifically for its clients to compare their business performance with more localized stats. 

Industry Trends Webinar Coming Up!

With exclusive focus in the vacation rental market and experience in serving over 500 companies for their payment processing needs, VacationRentPayment is pleased to announce our newest Webinar focused on Automating, Streamlining, and Saving Money on Credit Card Acceptance.  

We will educate you on ways to save money on processing costs by letting your software control all aspects of the transaction, familiarize you on how to take advantage of a flat rate processing model, and enable you to provide your guests with the ability to use e-Checks - an innovative new payment product. Whether credit cards represent 10% or 100% of your rental income, processing credit cards outside of your rental software is costing you more than just transaction fees.  

VacationRentPayment will show you how to put together the best and most cost efficient solution for your business. Also be sure to attend one of our educational sessions during  RezFest, 2009.

VacationRentPayment is the most innovative and integrated online payment solution in the Vacation Rental industry, dedicated to providing the best combination of total cost savings, easier accounting, and superior technology.  We are the only payment processor that offers clients a web-based interface with real-time reporting and automatic transaction batching regardless of the payment method (credit/debit cards and E-check acceptance).

SPACE IS LIMITED. RESERVE YOUR WEBINAR SEAT NOW AT:
https://www1.gotomeeting.com/register/293572064