What a difference a year makes!

Question

This is one of my personal properties near downtown Gatlinburg. It is a luxury log cabin right on the Roaring Fork River.  A year ago, Memorial weekend - as well as all of June, was completely booked at a minimum of $299 per night.

A few weeks ago, I marked down Memorial week to $169, and it still sits unbooked!  First time since I built it in 2017.

Not worried at all, but fascinating!

Andrew Steffens · Answer

Interesting.  We lost about 20-25% on average 2022-2023 YoY.  Some top performers lost only a little 5-10%, some lost over 40%.  2023-2024 YoY so far is up 15% but ADR is down.

Collin Hays · Answer

Interesting. I suppose if your numbers aren't working, you certainly have to look for alternatives. Generally speaking, I think that investors that bought in prior to COVID are probably in good shape. Those that bought in the bubble thereafter, probably not, depending on how much they are leveraged.

Mike Anderson · Answer

It's all of the above. There is more supply that will push down ADR, vacationers are trending elsewhere now that air travel has opened up. The economy is tough right now with inflation for basic needs going higher. Layoffs have started for full time jobs and people want to save money instead of going on vacation, other people can't afford it because they have run up their credit cards because their salaries hasn't matched the rise of inflation for basic goods.

I also don't think this will improve next year. I see a slow slog downward until we hit the balance point mostly because the rates will remain elevated 6%+ for another year at least.

Chris Seveney · Answer

@Collin H.

With credit card defaults and auto defaults on the rise as well as overall debt - people will start tightening the belts and first thing they will get rid of is spending on travel and vacations etc

So reading this I am not surprised - how has 2024 been compared overall to last year ?

Collin Hays · Answer

More supply, less demand. We are in a recession.

Erica Calella · Answer

What do you think is the reason for that? Is there more supply in the area? Or are vacationers trending elsewhere for the holiday weekend?

Collin Hays · Answer

I would say the average property revenue is off 20 percent from 2023. It is also taking a lot more work and marketing to get properties booked in 2024.  Properties without a view or unusual natural amenity are down as much as 35 percent.

Alecia Loveless · Answer

@Collin H. I spoke with an investor today with local STRs that has been doing them for 10 years. She said she doesn’t want to be a landlord but has listed 2/6 units for furnished long term rentals to see if she can generate more income than her current STR situation is bringing in.

Calvin Baughman · Answer

Yes, I thought the same thing. But it could be numerous reasons... You never know! It's an interesting point of view tho, I agree!

Calvin Baughman · Answer

Yeah, sometimes that happens to a few properties of mine as well. You should be fine again next year! That's why I try to maintain properties in different cities and locations!

What a difference a year makes!

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