Some Strengthening but Still No Boom for Summer Vacation Rentals

a summer vacation rental house on the beach in New JerseyAfter several years of vacationers tightening their belts and venturing out on shorter, localized "staycations," the travel and hospitality industries are hoping this summer will show some sure signs of recovery.

One economic barometer of the summer season has been the rate of summer house rentals. Over the years, even before the economic downturn, a growing number of families or groups of friends have been opting to rent homes near popular vacation spots as a thrifty alternative to staying in hotels.

"As the economy has suffered, travelers are looking for value," says Alexis de Belloy, vice president of HomeAway. "Inherently, vacation rentals offer much more value than hotels. You can rent a whole house for half the cost of a hotel. The result on our business is, we've seen actually some very strong years in what otherwise has been a tough travel market."

Throwing In More Extras

HomeAway handles 480,000 paid vacation rental home listings worldwide, with about half those properties in the U.S. And according the company's quarterly report on the vacation rental marketplace released last month, about 62% of second-home owners say their bookings for this summer are about the same or higher than last summer.

The report says fewer vacation home owners are offering deals or discounts this summer (55%), compared with last summer (66%). With the economy still in a downswing, potential vacation home renters have become more selective -- and de Belloy says some vacation home owners are looking to make their properties more attractive by "adding an extra night, maybe being more flexible in terms of duration of stay or even looking at their base rate."

In Gulf Coast communities threatened by the BP (BP) oil spill, de Belloy says there's a stronger demand for vacation homes compared to last year, "but we did see a drop-off of about 25% on the demand where we thought it would be."

But some summer home owners are reluctant to drop their prices further as they contend with property taxes, expensive liability and hazard insurance rates, and other financial issues.

Forcing Pragmatic Choices

Dianna Baribeau, owner and manager of Rentex in Brunswick, Me., handles 10 summer rental properties. Last year, she says, her rental rates were down by about 50%. While this vacation season is looking stronger, she says it's mostly the top-end, expensive homes along the Maine coast that are renting. Rentex is also a real estate and appraisal company, and Baribeau says there's a strong link between the weakness of those summer rentals and overall real estate investment. In her area, "there's no activity in any kind of investment properties -- very, very little activity," she says. "We have certainly not rebounded."

The nation's struggling real estate market is forcing vacation home owners to make very pragmatic choices, says Mark Lee Levine, director of the Burns School of Real Estate and Construction Management at the University of Denver. "We've seen some problems in our area, in the mountains," he says, and also in "lots of other vacation rental areas because of the softened residential market. If you have to choose to lose your vacation or primary home, you'd lose the vacation residence."

Levine says it's taken some time for the summer rental and sales market, compared with the overall residential market, to be negatively affected by the recession, so this year's summer rental season may not be a true bellwether of the economy. "The reality is, it's too early to call it recovery," he says. "We talk about 'green shoots' in the residential markets, the vacation rental market, but it's too early to say."

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