Orlando Vacation Homes Rentals

posted by orlandovacationhome on Jan 21

On this post, we develop three scenario forecasts for the Orlando Florida short term rental industry for 2009 compared to 2008. This market includes hotels, vacation homes and timeshare rentals.

As we always indicate, no one can predict the future. If you had listened to economists predictions for Florida over the last two years you would realize that most of them have been stunningly wrong.

Although some Orlando short term rental products will fare better than others, 2009 will most likely be very bad and possibly have longer term systemic consequences than what is generally recognized today.

Best Case:

Occupancy Down 7%

ADR Down 8%

= Total Room Revenue Decline of 14.4%

Expected/Most Likely

Occupancy Down 13%

ADR Down 18%

= Total Room Revenue Decline of 28.6%

Worst Case

Occupancy Down 20%

ADR Down 24%

= Total Room Revenue Decline of 39%

Short term rentals in Orlando will be affected at many levels. Inferior product in inferior locations will be effected the most, while good product in the best locations will be affected the least.

We are advised from professionals in the field that large feeder markets to Orlando such as school groups, conventions and the UK are rapidly evaporating. Gas prices are also sneaking back up and affecting the drive markets. In addition, some theme park ticket prices are now at record highs for single day passes - even as short term rental properties slash their rates.

How we calculate the numbers using an algorithmic statistical regression is not disclosed, so always deem the authors of this blog as incompetent, and read our disclaimer above.

Orlando Tourism 2009

Tweet This Post

posted by orlandovacationhome on Dec 24

Read our post why unemployment is increasing in the short term rental industry HERE

Short term rentals include hotels, vacation homes and timeshare rentals (vacation condos).

Tweet This Post

posted by orlandovacationhome on Dec 20

On this post, we will explain why the recent issues facing the timeshare industry (1) in Orlando will impact the hotel and vacation home rental markets although they appear at first glance to be unrelated. We believe that a need to generate rental revenue for developers and interval owners will force rental competition with hotels and vacation home rentals.

By now, it is old news that the Orlando timeshare market is dealing with significant problems financing transactions. As a result, some major timeshare companies with a strong presence in Orlando have been forced to layoff numbers of people.

Timeshare companies over the years have become organized at renting their units. This was done in large part to get people to tour the timeshare in the prospect of selling them a unit/slot. However, as the qualified tours dry up as a result of the recent limitations on credit, there is the temptation to just rent the empty units/slots as vacation condos. This competes directly head-on with both hotels and the Orlando vacation home rental market.

In addition, current timeshare unit owners may not want to take a vacation when they are uncertain about their economic future. As a result, many are trying to sell their timeshare weeks to potential tourists who would otherwise be hotel guests or vacation home renters. This is highly evident when visiting sites such as Craigslist.

The current rental trend within the timeshare business model means more players are competing for fewer tourists in an Orlando market that has already begun to be decimated.

Orland hotels and Orlando vacation home rentals should be concerned, as many of the timeshare units in Orlando offer a very high quality of accommodation. Most include full kitchens, large living areas and such amenities as washers and dryers.

In conclusion, the near term downturn of the Orlando timeshare market will mean some timeshare companies and unit owners will begin to aggressively rent their units and compete head on with hotels and vacation homes. This is all in an effort to generate cash to defray their maintenance fees. One can only guess this will put further downward pressure on rates and occupancy for the short term rental industry.

Tweet This Post

posted by orlandovacationhome on Dec 9

Given all the hoopla that often comes with a new hotel entering the metro Orlando market, we thought we would offer some thoughts different from our usual vacation home industry analysis. A friend of ours in Orlando wrote the following about the hotel industry. The parallels to the vacation home industry can also be drawn.

Some new larger hotels who entered the Orlando market as “newbies” went after the “convention market” and frowned upon regular theme park tourists as not being a viable market. Typically, a new hotel will learn within a year of opening they need to have a comprehensive business mix if they are to survive.

Many large convention hotels in the metro Orlando area are now experiencing significant declines in their “pick up rates”. Given the global recession, this is to be expected. But worse, some convention groups (i.e. many financial services companies) no longer exist. The Orlando CVB documents hotel room revenues dropping 30% +/- in November 2008 for the metro Orlando area. Orlando hotels who have never expereinced a big Orlando market downturn will now learn what it is all about.

The well seasoned and super efficient players such as Harris Rosen understand only too well how the Orlando game works. His world famous Rosen Hotels and Resorts operates debt free to make themselves recession proof even during dire times.

When business is slow, it is not uncommon for some upper level convention hotels to sell inventory for well under $100 a night through various distribution channels. For some newer hotels with debt levels at costs north of $100K (and in some cases more than $200K a room), this can be a devastating thought. Often, even under the best due diligence, failure to plan for economic recessions (on average every seven years) can be a rude awakening for both new hotel owners and their lenders alike.

If you are thinking of developing a hotel in the metro Orlando area, take several local hoteliers out to lunch first and get their opinion. You may also want to join some of the fantastic local hospitality organizations before you launch a project of any kind. Such simple things could be the best pre-investment you make. Relying on MBA type financial analysis by people who do not know the market at an intimate level is always a sure path to disaster.

Many of the plans to build new convention hotels in Orlando have now been shelved, but those that have opened in recent years or are about to open will soon understand why tourism experts in the area call Orlando a “unique market”. Good luck.

Tweet This Post

posted by orlandovacationhome on Dec 6

If the most recent data is to be believed, hotel revenues in Orlando are dropping at possible catastrophic rates, and this could be an indicator of what some may have already felt in the metro Orlando vacation home industry.

Data for Orlando vacation home occupancy and rate is difficult to collect, as the industry is very fragmented. However, as market indicators, we are inclined to consider hotel data trends to help as a mirror to the vacation home industry.

Recently SMITH TRAVEL RESEARCH, a provider of hotel industry data, reported that revenue per available room tumbled 13.2 percent nationally during the week Nov. 9-15, 2008 compared to a year earlier. Revenue per available room, or RevPar as it is termed, is a key gauge of a hotel’s revenue performance.

At the local level, metro Orlando has begun to see the largest drops in both rate and occupancy across the board for the hotel industry since 2001. For the week ending November 15^th, 2008 hotel Rev PAR dropped by a whopping 27.3 % according to the ORLANDO CVB records .

So what are the ramifications for the Orlando vacation home market? Hotel data now tells us that a short term combination of rate and occupancy are in a state of significant decline. Not a surprise given the current economic environment, but the level and rate of the decline is much more devastating than what is being reported on some media outlets. It remains to be seen if these short term indicators become longer term trends for the Orlando market and can provide some basis for an Orlando tourism forecast.

Possible ramifications in the vacation home industry could include:

1.     Rev PAH (Revenue per available home), is going to most likely drop significantly, as occupancies decline and some owners and home managers alike, quickly drop their rental rates.

2.     This could impact vacation home prices due to the fact that vacation homes would have a lessened ability to generate income, which would logically be reflected in the underlying home sales prices.

3.     Like any business, those homeowners that are best positioned to “hunker down” will be the ones that survive. Such factors could include: limited levels of debt, high rental occupancies, good locations and marketing strategies, excellent maintenance, and the overall experience of a good vacation home management company.

The good news for families, and even some event type groups seeking economic alternatives to hotel rooms, is that they may now logically consider the benefit of vacation homes. This helps the vacation home option become more mainstream. Please see our other posts detailing the economic viability of renting Orlando vacation homes and the value they provide to consumers. In addition, the best run vacation home management companies will most likely survive and the services they provide will become more essential.

In conclusion, there is no sugar coating the data. The drop in both rate and occupancy appears to have come so quickly and deeply that major media, and even many in the tourism industry, do not yet recognize. Expect possible systemic failures in Orlando’s tourism industry if these trends continue. Unfortunately, no one can preidict the future including us.

As always, our blog tries to inform you objectively, so subscribe.  Check the ORLANDO CVB data here.

Tweet This Post