The ever changing vacation rental investment landscape

Owning and operating a vacation rental agency for 13 years has been an incredible experience with both amazing, fun, and strenuous moments. Full service vacation rental managers wear many hats and are constantly working to improve on all facets of their business from sales/reservations, advertising, maintenance, housekeeping, inspections, accounting and so much more.

One of the strongest positive factors for our industry is there is so much more awareness about vacation rentals now than ever before. The vacation rental landscape has expanded immensely over the past 5 years. Being a local property manager, we are always aiming for a higher percentage in direct bookings every year, but I will say the major vacation rental platforms like vrbo & airbnb have done well with growing awareness for the industry. Those large scale marketing efforts will have a positive impact for an industry as a whole for years to come. Vacation rentals are now one of the primary lodging options that travelers choose. One item that will always be at the forefront of our hospitality based industry is Service. Our strongest asset with being a local property manager is the higher level of service that we can provide each guest staying with us. As time has gone on, we have seen higher expectations from our visitors on what they expect from their lodging accommodations.

The days of renting any standard two bedroom beachfront condo and getting top dollar are over, and there is much more competition in our local market now than ever before. In our South Padre Island, Tx market, we have seen vacation rental inventories increase over 30% in the past 5 years. We saw demand and rental income rise immensely in 2021 & 2022 then slow down and pull back in 2023 & 2024. This increase in vacation rental inventory and decrease in rental income was seen locally and nationally. At this same time when rental incomes were decreasing, the property taxes, hoa fees, and insurance expenses have all risen for the majority of property owners, especially in coastal markets. This is causing more negative pressure on current homeowners, especially the ones who bought at the peak when real estate values were at the highest. The decrease in rental income and increase in expenses has caused more properties to be listed for sale over the past 6 - 12 months.

In efforts to help increase rental incomes, we have been pushing our homeowners to add unique amenities to their properties so their condo or private home can stand out against the competition. Adding heaters to pools, game tables for living/bonus rooms, updating furnishings, new photography, reaching out to guests for more reviews, etc are all items we see move the needle in a positive direction. We have also placed a high priority on guest amenity supplies like providing coffee, laundry detergent, cooking oil, few bottles of water, and other helpful items that help guests get settled at their home away from home. We saw less rental income generated in 2024 vs 2023 but we are hopeful that the negative trend will reverse in 2025.

Overall I see a positive long term future for vacation rentals, and we are seeing very strong demand in 2025 from our winter visitors and hoping for a strong spring and summer season.