The Predictive Daily #122624

Author

Justin Beasley
December 26, 2024

THURSDAY TREND
STR Tracker Standouts: A Snapshot of the Latest Trends

Here’s the storm cloud on the horizon: if inventory levels don’t start shrinking at a faster clip, property prices could take a hefty hit over the next year. New-build inventory is skyrocketing, and whispers about underperforming operators defaulting on loans are growing louder.

Justin Beasley

Daily Rates Climbed, but Occupancy Tumbled

Holiday magic couldn’t quite work miracles this year. While nightly rates surged to capitalize on holiday demand, occupancy didn’t rise to the occasion. Revenue and booking lead times also slipped, signaling that the market wasn’t ready to embrace such a steep price hike.

Here’s the rub: investors and operators may have leaned too heavily on outdated data and a touch of wishful thinking. The sharp rate increases seemed like a great way to close revenue gaps, but guests held out for better deals, causing booking lead times to shrink as they waited for prices to drop on unbooked properties.

Lesson learned: Keep your rates competitive, even during peak times, and don’t let emotions or lagging data drive your pricing strategy.

Absorption Rates and Time on Market

Yes, inventory absorption rates improved, and properties spent less time on the market. But let’s not pop the champagne just yet. These drops aren’t happening nearly fast enough.

Here’s the storm cloud on the horizon: if inventory levels don’t start shrinking at a faster clip, property prices could take a hefty hit over the next year. New-build inventory is skyrocketing, and whispers about underperforming operators defaulting on loans are growing louder.

The numbers speak volumes. Around 50% of borrowers who didn’t qualify for traditional loans opted for DSCR loans, and Sevier County alone likely saw 1,500 of these loans issued for STRs. Many of these loans were secured on less-than-stellar properties, creating a perfect storm. At the current pace, clearing this glut of inventory to give struggling operators a way out is a slow grind.

Pro tip: List your properties in line with pending comps to sell faster, or everyone pays the price. The clock is ticking.

Smaller Cabins Shine in Q4 (Hint: It’s All About Love!)

Big things come in small packages, and smaller cabins were the true MVPs of Q4. Why? Two words: wedding industry.

Sevier County is a wedding hotspot, hosting 11,327 ceremonies in 2023 alone, making it 19th nationwide out of 3,109 counties. That’s no fluke—this area has a rich history of being Tennessee’s love capital. Back in 2007, Sevier County accounted for a whopping 26.7% of all marriages in the state, with 16,573 couples tying the knot.

But here’s the real kicker: these guests are gift-wrapped repeat business. Newlyweds often return year after year (or at least until they divorce!) to celebrate their anniversary. Smaller cabins, cozy and romantic, are perfect for these lovebirds, and savvy operators should lean into this market.

Takeaway: From pricing strategy to inventory management and niche marketing, the STR game is all about staying ahead of the curve. Keep your rates reasonable, clear that inventory, and don’t sleep on those smaller cabins. After all, love—and smart strategy—always wins.

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