2014 has already seen key acquisitions by growing vacation rental management companies, with several big announcements on the way. Late last year, Wyndham purchased Hatteras Realty, and this year Vacasa acquired Utah Vacation Homes, Resort Realty bought the VR operations of Colony Realty, Seaside Vacations bought JoHank Rentals, Turnkey Vacation Rentals purchased Coastline Adventures, Long & Foster acquired several companies in New Jersey, and Invited Home recently purchased Maui Blue.
According to Ben Edwards, President at Weatherby Consulting which provides transaction advisory services and consulting in the vacation rental industry, the current market for vacation rental management companies is highly active. “There are companies looking to buy right now,” said Edwards. “With a lot of new entrants along with rapidly expanding existing players, and it is an optimal time to buy and sell in this category.”
As Edwards points out, market conditions are ripe for acquisition in the vacation rental industry. Besides the macro conditions, such as a solid economic recovery, low interest rates, and the influence of the baby boomer demographic , there are industry related factors which add to the favorable environment.
Large distribution channels have increased awareness of vacation rentals as a mainstream lodging alternative.
Larger Second Home Market
NAR 2014 report showed that 717,000 vacation homes were purchased last year, the most since 2006 before sharp declines in the real estate market took effect, and 89% of vacation home buyers plan to rent their new property within the next 12 months.
Regulations and Restrictions
An anticipated increase in regulation is expected to prompt owner managed vacation home inventory to move under professional management.
Increased Seasonal Occupancy
According to HomeAway, the occupancy rate for owners who report the winter season as their peak rental season rose to 70% during the winter season, while the average summer occupancy rate for vacation rentals increased to 77% for vacation rental owners who consider summer their peak season.
Advancements in technology, notably real time online booking, multi-office systems, rate management tools, and customer relationship management (CRM), have made it feasible to manage multiple operators across destinations.
“From a buyer’s perspective, building a successful national brand is more attainable than it has ever been,” said Edwards. “From a seller’s perspective, there is a high level in interest. We are seeing deals close quickly, especially in the range of 3.5-4.5 times earnings, depending on the overall health of the company.”
“We can expect this trend to increase as we move past the busy summer season, said Edwards.
By Amy Hinote