Best Sized Cabins to Buy in 2021 - Deep Diving into the Data
Hochatown is obviously quite popular right now (Will it continue after Covid? That's a whole other blog post!), and we are blessed to have great weather all year round making our town an all-season vacation spot. But, is it a good time to invest? And, if so, what sized cabin should you buy?
Unfortunately, there is no magic ball that will tell you that you will make money investing in Hochatown or which direction occupancy and daily rates will go in the future years, as we get back to normal. The best you can do is do a lot of research, run different scenarios, and add a little prayer that demand stays higher than supply.
Vacation rental ROI is based on several factors, the most important being OCCUPANCY RATE and NIGHTLY RATE, EXPENSES, and COST of YOUR CABIN.
I pulled some numbers from AirDNA, a vacation rental insights company that uses data from AirBnb and VRBO to aggregate data to determine market occupancy rates and Average Daily Rates (ADR) for 2020 as well as 2019 (pre-Covid).
You can plug your own cost-of-cabin and expense numbers in my proforma spreadsheets (http://hochatowncommunity.com/financial-spreadsheets ), along with the occupancy and nightly rates below, to determine your own ROI (Return on Investment) based on the cost of the cabin you own or are purchasing.
Note: Your occupancy and nightly rate can be affected by many things such as, but not limited to:
time of year
the popularity of the area
size of cabin
how well it is marketed
ratings on listing sites
how well you host it
Let's take a look at some of the data from 2020 compared to 2019 (pre-Covid):
Before start working on your proforma worksheet, let me explain a few important things about this data.
1. These charts are based on averages by bedroom size. The occupancy percentages are broken out into the averages of the middle 50% percentile, the averages of the 75th percentile, and the averages of the top 90th percentile of active listings.
2. ADR stands for Average Daily Rate. The ADR's are calculated as an average of all the active listings.
3. This chart is just meant to be a very conservative jumping-off point for you. If you want to be able to drill down even deeper, I suggest you get a subscription to AirDNA. Do not make your decisions based solely on this chart. This should be just one resource in your decision making! I hold no responsibility for the accuracy of these numbers!
With all that said, what can be concluded from the data?
2020 was a great year for occupancy. Overall, occupancy rates were significantly higher than in 2019, likely due to Covid19.
2019 actually had higher ADR's, which is interesting considering we had more occupancy.
Larger cabins can get higher ADR's but their occupancy is somewhat lower.