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- The Predictive Daily #121924
The Predictive Daily #121924
Justin Beasley
December 19, 2024
THURSDAY TREND
FED Shows Concern: Rates Climb During Press Conference
Fed Tightens the Reins: Mortgage Rates Climb Amid Inflation Concerns
The Fed’s latest update brings a mix of measured caution and market ripples. While another 25-basis-point rate cut was no surprise, the broader picture is far less soothing for inflation watchers and mortgage seekers.
Rate cuts “cut”
Here’s the lowdown: Inflation is proving sticky, with the Fed revising its 2025 expectations upward from 2.2% to 2.5%. Fed Chair Powell flagged concerns about the inflationary impact of potential new tariffs, declining to sidestep their effect on prices. With this persistent price puzzle, the Fed is dialing back its interest rate cut ambitions for 2025, now projecting just two—half of what was anticipated a few months back. Futures markets are even less optimistic, pricing in only one rate cut.
So, what does this mean for you? Mortgage rates are feeling the heat. As 10-year Treasury yields climbed during Powell’s press conference, mortgage rates jumped 21 basis points, making it more costly to borrow for a home.
2025 likely a year of slow adjustments
The Fed’s cautious stance underscores their commitment to navigating this “new phase” of economic uncertainty. For prospective homeowners and market watchers, 2025 is shaping up to be a year of slow adjustments rather than sweeping changes.
The Bottom Line
The real estate market remains dynamic, with the future still shrouded in uncertainty. The Fed’s approach to 2025 will likely hinge on future data, making every report critical. For the Smoky Mountains, it’s still all about inventory—and yesterday’s news didn’t do us any favors. Here’s hoping the inventory clears at the pace we need to keep the market moving forward. Fingers crossed!
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WEDNESDAY TREND
The Good News about RevPAR & Market Saturation in the Smoky Mountains
Smoky Mountains Market: Steady Growth and Resilient Demand
Good news for STR operators and investors: the Smoky Mountains market is holding strong! Despite industry chatter about market saturation, the data tells a more optimistic story. RevPAR projections reveal not just resilience but real growth opportunities for savvy operators.
Here’s what the latest numbers show—and why the Smoky Mountains will remain the gold standard in STR markets:
Key Highlights from the Forecast
Steady Growth in RevPAR
With a Compound Annual Growth Rate (CAGR) of 7.1%, forecasted RevPAR continues its upward trajectory. This signals sustained revenue potential for operators who stay ahead of the game.
Consistent Year-over-Year Increases
A solid 76.9% of forecasted months show positive year-over-year growth, reflecting steady demand throughout the year—no matter the season.
Rising Revenue Over Time
Forecasted RevPAR starts at $232.24 and climbs to $268.11 by the end of the projection period. This upward trend is a clear indicator that the Smoky Mountains market is far from hitting its peak.
I would like to make one small disclaimer: projected data is built purely off of past historical data with the addition of assumptions that can be worked into a algorithm. I do not question if these numbers will be achieved, but I do question if they will be achieved in this timeframe? The addition of new data will certainly change these projections and investors should closely monitor new information to better determine the best ways to prepare for any given market.
Implications for Investors and Operators
Demand Remains Resilient: Strong year-over-year growth across most months indicates that concerns about saturation are overblown. Travelers continue to flock to the Smokies.
Revenue Potential Is Real: For well-positioned and well-managed properties, there’s ample opportunity to capitalize on this growth.
Room for Optimization: A steady upward trend means pricing strategies and occupancy management can still be fine-tuned to capture even more revenue.
The Bottom Line
While challenges in any market are inevitable, the Smoky Mountains demonstrate healthy, sustainable growth patterns that should inspire confidence among operators and investors alike. The data supports a bright outlook for those willing to adapt and optimize.
So, is market saturation the monster under the bed? Not here. The Smokies are proof that with the right approach, there’s still plenty of room to thrive. Keep learning, keep climbing!
TUESDAY TREND
The Bad News about RevPAR & Market Saturation in the Smoky Mountains
Market Saturation: Are We Really Full or Just Fumbling?
Market saturation. The latest “bad words” swirling through the STR (short-term rental) industry. But is it truly a growing issue—or just a convenient excuse for underperforming operators? The truth may lie somewhere in the data.
To get to the bottom of it, we dove into AirDNA’s RevPAR history and future projections for the Smoky Mountains. What we found was a mix of insights: indicators hinting at potential saturation alongside reasons to believe this iconic market can continue to thrive. Curious? You’re in luck—this week’s Tuesday and Wednesday Trends sections will break it all down for you.
Signs of Market Saturation
Slowing Year-over-Year Growth
Historically, RevPAR in the Smoky Mountains has grown at an impressive average of 7.5% annually. However, projections forecast just 2.4% annual growth moving forward. This sharp slowdown suggests that new supply may be outpacing demand—a classic saturation red flag.
Flattening Peaks in RevPAR
Seasonal high points in RevPAR (like July) show signs of plateauing in forecasts. Even during peak demand periods, growth is stagnating, likely due to rising competition or travelers hitting their spending limits.
Implications for New Entrants
As supply keeps climbing and demand steadies, occupancy rates and pricing power take a hit. This could squeeze RevPAR further, even during typically robust months.
How to Stay Ahead
Invest Smarter: Evaluate whether forecasted RevPAR can justify new properties, especially during slower months. This is key. Are you and will you be in a financial position where you will not feel the need or be forced to sell in the off seasons?
Target Niche Audiences: Cater to under-served groups like remote workers or event-focused travelers to fill those off-peak gaps. Creativity is an important part of success. You will hear much advice on this in the coming months. Next week I will be going over the do and donts of how to creatively drive revenue in your STR.
Track Occupancy Trends: If both occupancy and RevPAR show a decline, it’s a telltale sign of saturation.
The Smoky Mountains may face challenges, but with strategic adjustments, there’s room for growth—even in a crowded market. Don’t miss this week’s trends as we unpack the good, the bad, and the actionable.
MONDAY TREND
RevPAR - Understanding & Optimizing This Key STR Metric
Welcome to RevPAR Week!
With the release of last week’s STR Tracker, I wanted to take a moment to highlight Revenue per Available Rental (RevPAR)—what it is, why it matters, and how understanding this key metric can give short-term rental (STR) investors a competitive edge.
RevPAR measures the average revenue earned for each available rental night, combining two crucial factors: pricing (your average daily rate) and occupancy (how often your property is booked). The formula is simple:
RevPAR = Average Daily Rate (ADR) x Occupancy Rate
Or:
RevPAR = Total Revenue ÷ Total Available Nights
This metric offers a clear snapshot of your property’s overall performance, helping you optimize your strategy to maximize revenue.
Key Insights from the Smoky Mountain RevPAR Forecast
Slower Growth Ahead - Historically, the Smoky Mountain STR market has experienced strong sustained growth, with RevPAR increasing by an average of 7.5% year-over-year. However, forecasts suggest growth will slow to 2.4%, signaling a need for sharper operational strategies.
Seasonal Peaks and Valleys - The forecast highlights major seasonal shifts:
• Peak RevPAR is expected in July 2026 at $307.41, aligning with the summer tourism boom.
• Lowest RevPAR is projected at $134.90 in January 2025, reflecting typical winter dips.
What This Means for Investors - With slower growth, focus on pricing strategies and operational efficiency to maintain strong returns. Diversify your rental portfolio to offset revenue dips. Seasonal trends vary by market and savvy STR investors will use seasonality to bring balance to their portfolio.
By mastering this RevPAR, investors can make smarter decisions, align with market trends, and ultimately maximize their earnings. Stay tuned this week as we explore more ways to leverage RevPAR for long-term success!