Indications of a Healthy Vacation Season

The frigid winter temperatures in New England are not stopping vacationers from looking ahead to warm summer days on Cape Cod, Martha’s Vineyard, and Nantucket. The first 2004 season study has been conducted by the website company WeNeedaVacation.com, an innovative search site that since 1997 has been advertising vacation rental homes on the Cape and Islands, and since 2003 on Florida’s Gulf Coast. Founder Joan Talmadge concludes, “Our research indicates that vacationers are willing to spend more per week for their vacations to Cape Cod and the Islands, but homeowners appear to be a bit cautious about the upcoming rental season, as measured by their outlook on pricing their homes.”

“Vacationers use our powerful search capability, which we’ve dubbed the ‘Virtual Rental Agent,’ to find suitable homes by available date, location, price range, bedrooms, and important amenities such as ‘on the beach,’ ‘walk to a beach,’ air conditioning,or a pool,” notes Jeff Talmadge, and “thus, our state-of-the-art relational database enables us to easily and accurately compare vacationer and homeowner preferences from season to season.”

The Talmadges’ most recent study compares searches conducted during January of 2004 with those conducted in January of 2002 and 2003. It also compares pricing data from over 1,500 homes that currently advertise with WeNeedaVacation.com and 426 homes that have advertised on the website for at least the last three seasons.

Where?

Mid-Cape has been the top finisher for the previous two summer seasons, with 19% of the searches in 2002 and 18% in 2003, so it’s no surprise that it’s in second place for the summer of 2004, capturing 23%. The surprise is that searches for the Lower Cape are currently on top, capturing 24%. For the summer of 2002, Lower Cape searches were at the bottom, capturing only 6%, and for the summer of 2003, the same area searches were in fifth place, with 13%. Put another way, searches for the Lower Cape increased by more than ten percent since last season.

Like the Lower Cape, searches for the OuterCape continue to increase, rising from 10% in 2002, to 12% in 2003, to 17% in 2004. On the other hand, Martha’s Vineyard and Nantucket searches have dropped noticeably for the 2004 season. The Vineyard was in second place in 2003, with 16%, but is now in fifth place with only 10%. Nantucket, similarly, was in third place in 2003, with 15%, but is now in sixth place with 8%.

The most popular destinations for this season are Orleans and Chatham. Orleans searches increased from 5% in 2002, to 7% in 2003, to 11% in 2004, while Chatham searches increased from 5% to 7% to 9% during the same periods.

How Much?

Vacationers are, on average, searching for higher priced rentals compared to 2002 and 2003. The average of weekly prices sought on Cape Cod for 2002, 2003, 2004 are $2351, $2299 (down 2%), and $2479 (up 8% over 2003). Joan notes, “The dip last year was due to threat of war and weak economic news. The up-tick this year reflects a calmer international environment and the rebounding economy.” To break this down further, we split the market into 4 price bands: modest (less than $1000), below-average ($1000 to $2000), above-average ($2000 to $3000) and expensive (over $3000). As Table 1 below shows, vacationers are willing to spend more and are moving from modest and below average to above-average homes. The demand for expensive homes shows no change.

On the Islands, the averages have gone from $2308 to $2409 (up 4%) to $2834 (up a whopping 18%). Although overall interest is down as explained above, those that are going to the Islands are willing to spend significantly more on their accommodations. Note in Table 1 the shift in 2004 from modest (down to only 5% of demand) to expensive homes (40%).

Table 1

As the average rental price on the Cape and Islands is $2,331, vacationers have a realistic expectation of price.

Although many vacationers seem willing to pay substantially more for a rental this season, homeowners have only raised weekly rental prices by an average of 2% for 2004 compared to 3% for 2003. Jeff’s concludes, “This is good news for vacationers as they should be able to get more for their money this season.”

It appears that interest is migrating from the Islands to the Lower and OuterCape. The average cost of a Nantucket rental this season is $3,766, while a Martha’s Vineyard rental averages $2,748. The highest rentals on the Cape can be found on the Lower and Outer Cape, where prices average a little over $2,200. A vacationer will be paying an average of 25% (the Vineyard) to 70% (Nantucket) more to rent on the Islands versus the Cape. Jeff goes on to say, “It seems that vacationers are finding what they want in a vacation on the Lower and OuterCape for much less money than on the Islands. But keep in mind that it is still early in the rental season and these trends may reverse in time.”

Renting homes on the water costs 49% more, on average, than a home that is not on the water, while homes within walking distance to a beach cost an average of 23% more than those not within walking distance of a beach. These numbers have stayed fairly constant over the past few seasons, indicating that homeowners expect vacationers to continue to pay substantially more to rent on or near the water.

How Long?

The overwhelming majority of vacationers (83% or 5 out of 6) are looking to rent for one week in the 2004 season, with the next largest group (12%) looking to rent for two weeks. The corresponding numbers in 2002 and 2003 were 80% and 82% for one-week rentals and 15% and 13% for two-week rentals. Only 2% ask for more than two weeks. “This indicates a slight shift toward shorter vacations over the past few seasons,” Joan observes, “and homeowners may have to reset their expectations accordingly.”

How Large?

Two and three bedrooms searches continue to dominate this season, capturing 30% and 28% respectively. In distant third and fourth place are searches for four and one bedroom rentals, which come in with 16% and 15%. The remaining 11% of searches are for rentals with five or more bedrooms.

When?

As in seasons past, the searches begin in earnest for the third week in June (coinciding with the release of most schools), continue to climb steadily until a peak for the beginning of August, then fall off quickly for searches through the end of August (coinciding with the commencement of most schools).

“This data, while encouraging especially after a couple of rough rental seasons, captures this point in time after a bitter cold January,” concludes Jeff Talmadge. “ We will redo our study in early March. We do have additional details that are available upon request.”