People Are Giving Up: State of the Economy

welcome back to the short-term rental riches podcast happy you're here again not necessarily the brightest topic this week but of course as we know real estate is not a general thing when we talk about real estate we're not talking about the United States it's not like it's one market there are thousands of individual markets some of those can be doing really well and some of those might not be doing so well I'm going to break down some numbers this week on some averages and this is

Across the Nation in multiple different markets so these will be averages but it does give us some good Insight so first of all we know that things are a little tough out there for a lot of people right inflation has made a huge impact on the economy groceries are incredibly expensive everything seems to be more expensive these days right and that's exactly why credit card debt is at an all-time high as well people are using more credit cards they're def faulting on their loans it's it's

pretty tough out there for a lot of us so if that's you I'm sorry I hope that you're able to make it through these tough times and if you have a short-term rental that's struggling I hope this podcast has been helping you and we've got actional tips and ideas every week including this episode and including the weeks to come so stick with us so just to go a little bit more down the sort of Doom and Gloom Rabbit Hole one of my biggest mentors has talked

about how we're entering a renters Nation for quite a while and now while that's good for investors right where people own properties and we have people renting them it's not necessarily good for the general public and people are saying oh the the American dream's kind of over and you know what it's hard to buy a house these days the average person cannot buy a house these days that is unfortunate so we've got to get creative we've got to get crafty there's lots of creative financing things

we can do I'll save that for another episode but just to continue down this line a little bit we hear these things on the news we hear our friends talking about these things I've been getting phone calls and I've had meetings with people recently that are property managers people that have decent size portfolios that are giving up in some areas on top of that we see a lot of your favorite short-term rental uh content producers talking about drilling down into improving the properties they have uh

and there's been a huge huge push to revenue management right why is this all happening well because it needs to because people aren't buying as many properties as they were in the past and so we're trying to make the most of what we have today so that is just the real world out there in a nutshell these reports which I'll dig into are showing the national averages down across the nation uh I'm receiving phone calls I'm having meetings with people that are that are struggling uh

I have friends that have portfolios that are struggling and uh I want to dig into it a little bit more the reality is is that the better we manage our properties the better they will do that goes for our short-term rentals um just like it goes for our long-term rentals too if you missed last week's episode we dove in deep on a hotel that's been doing really well for a long long time decades and decades and so it can be done in fact this hotel is

charging more than $110,000 a night it was a documentary I found on YouTube and I just pulled out some good nuggets I think that those will apply to all of you out there that have a short- termal or that would like to get one and we do have partners that are joining our Management program now that are acquiring properties and they're doing really well so I don't want to scare everyone off um but the reality is that things have changed a little bit the economy is

different so check out last week's episode 229 if you want to hear a little bit more about that hotel that's doing really well and that's been doing doing really well for a long time and now we're going to jump into a report this is from key data again this is a software program that we subscribe to as a manager as an owner operator uh most of you know I I've got dozens of properties around multiple States we're now managing even a broader range of properties everything

from the small little Studio to the big uh Lakeside home that sleeps 20 people it's been awesome and I know a lot of our partners are crushing it I also know that some of our partners that have joined our program aren't having such an easy time uh so mainly we're seeing this in higher density vacation markets that saw the biggest increase in Supply but this data from key data is really good uh we use it on a regular basis for all of our properties for all

of our partner properties and it's very very insightful because it links to property managers software programs it's direct data and so what do I mean by that this isn't scraped data like you might see on airdna or you might might see on price Labs scraped data means that there's a web crawler out on the web crawling these all these different listings checking their nightly rates and checking to see if their calendar is blocked but that point right there is where this data becomes not so accurate

just because a calendar is blocked does not mean it's reserved so when you're pulling up your air DNA estimates and you see this property was occupied for 90 90% of the year you don't know if that owner stayed in the property for three months for example so that can have a huge huge impact on your numbers so the data that we get my team uh and all the other property managers using key data is direct data most of the time they also have the scrape data

in fact they actually provide some data to price Labs which a lot of you know we use price labs for dynamic pricing super super helpful so they're a good source of data and they just published a report on the state of the economy before we get into it just another note on key data data that sounds weird saying that KES data it's started more with a focus on vacation rental markets where property managers in the short-term Rental World have been around for a long long time

so I would say that their data's a little more geared towards vacation rental markets as opposed to Urban markets but let's just go ahead and get into it because obviously there's vac vacation rental markets Across the Nation right so uh we had we had Co we had all the money that came after that and it was just money was everywhere right people were giving out loans there's trillions of dollars printed and what happened we all know this if we've been in the industry for a little

bit with short-term rentals a lot of people bought short-term rentals and a lot of people were staying in short-term rentals so I think it was really good for the visibility for the market but unfortunately some of those markets increased a lot in Supply and those are the ones that are having the most challenges so we can't really go back and look at 2021 2020 to data and use that to redict uh or to make projections going forward but 2023 was a pretty normal year uh and

so we can compare 2023 with 2022 and when we do and when we see key data their reports which are coming out from actual data right these are actual reservations confirmed uh it's showing that things are pretty much down across the board so the occupancy is down nationwide Supply is actually up 11% in 2023 so if we think about it 11% that's a huge number like that's thousands and thousands of short-term rentals so the supply went up and the occupancy went down so why might our

average daily rate be going up well inflation so yes all those trillions of dollars that were printed after covid have officially made their way into the economy and still are unfortunately and so that pushes prices up so average daily rates are going up along with that but the overall Revenue Across the Nation is down most of these figures are sort of the high singled digit percentage so the again they they took data from lots of different markets Across the Nation but most of them are sort

of in the high singled digit uh decreases so occupancy for example down 8% 9% year-over-year compared to last year so that's not great right again all markets are totally different uh so there's a lot of people out there that are crushing it I want to talk about the metric which really means everything right so we can talk about occupancy we can talk about ADR and those two together are going to give us our total revenue which is a really good uh idea of what's going on

but what most Hotel years use and what's really in my opinion the most most important metric for monitoring our performance is what we call revar so Revenue per available room night now the room in this definition just means property right this came from the hotel world so revpar is the most important term and I want to break down a quick example just to explain exactly what it is let's take an example where someone earned $4,000 in Revenue in the month of July so the month of

July has 31 nights so if we divide the 4,000 the total revenue by the amount of available nights the 31 and remember this is available nights so I like this equation because it accounts for days that got blocked maybe due to maintenance maybe due to the fact that an owner is staying in a property so it gives us more accurate data so okay we have 4,000 and we divide that by 31 that give us gives us a revar of $129 per day so this means that

this property whether it was booked or not earned $129 per available day in the month of July which in this example we just said all 31 days were available so again I like this equation because revpar is the combination of our occupancy and average daily rate and accounting for the days that aren't available so let's break the example down just a little bit more let's take July and August but let's say that this property still only earned $4,000 amongst those two months so we could essentially

divide it in half right because August has 31 days July has 31 days so we're taking the total revenue $4,000 divided Now by 62 and so that comes out to like $64 per day so remember this is an average across a time span and again when we look at the average revar Across the Nation across these different cities and counties it is also down a a pretty significant amount and so unfortunately the Nationwide averages again averages are decreasing this means that there's less money in owner

Pockets so yes not great news for all of you out there I'm sorry but I feel it is my duty to share the inside information that I have the phone calls out on the street that I'm getting but I will tell you that these metrics don't apply to everyone these stats I should say Do not apply to everyone we have lots of partners that are crushing it when I look at my own personal portfolio and as you know I've been in this for a long time

since 2015 in fact uh we were just uh reviewing our review strategy lately and we have like a lot of reviews seriously we have like over 10,000 reviews on Airbnb not guess at St our property not reservations but actual reviews so actually people that left reviews and yes we still have superhost status on most of our accounts uh we do have lots of different Airbnb accounts now we are still a premier host uh status on vbo and we only have one of those accounts so uh

our our team's doing a fantastic job and that all translates into the performance for our properties so I know in Memphis where I happen to have a lot of one-bedroom apartments I can look at the data the internal data and see that last year my properties my one-bedroom properties performed 34% better than the market did and this year we're already on track to perform 40% better so I'm not saying that to to brag or saying that we get all the steps right or do all that

uh and of course we do have a longer history so we have a bigger base of reviews and really good reviews but I just want to reiterate the fact that you can have two short-term rentals next to each other uh and they can perform very very differently and it all comes down to management and your guest experience so we talk about that all the time but we can't talk about enough that's the reality because it really comes down to the guest experience and getting those good

reviews if you're out there and your property is struggling a little bit I've got a couple tips for you and I promise next week's episode we have a way to help you boost your Revenue maybe some overlooked opportunities so I'll get into that next week but you might find yourself in a tough spot where you're thinking you know what I'm going to hold off on this maintenance upgrade or I'm going to hold off on on replacing this worn out Furniture but I will tell you that

that is a slippery slope so uh invest in what you've got of course we can look at all of our expenses we can cut them wherever we can but our properties we have to keep those in really good shape uh now your guest communication means a ton right so if you had things on autopilot if you had a a larger portfolio out there and you were just sending automated messages maybe it's time for you to to make those messages a little more personal to ensure that

your guests have an excellent stay because properties out there that are getting this right are the ones that are outperforming all the other properties and the ones that are going to stick around for the longest I say stick around I hope that we're all going to stick around here right but I can tell you just based off some of the phone calls I've received recently that some people are deciding not to manage properties anymore because it's maybe gotten too challenging or maybe they're managing for other

owners that bought properties that in a market that was over supplied and they have unrealistic expectations so it is a little more challenging for for some of us out there but there's always two sides to every story right hopefully you have a rainy day fund that was set aside just in case again hopefully your property is doing really well lots of our properties in our portfolio are still doing really well but take a look at your expenses I know we've been looking at our expenses and

there's some that especially those monthly subscriptions right we just cut out one that we used to track our virtual team you know so we have we have quite a big virtual team now and we were paying around $150 a month for Hub staff it was a time tracker I actually probably recommended on this podcast sometime over the last few years as you know this is well this is like year four already or we're really far into it so it's it's been a good fun Journey and

we're not going anywhere so I hope you join us here every week for good tips but check some of those subscriptions those things you're using we just cut out hubstaff and replaced it with a one-time purchase for $100 which basically does exactly what it was doing so we're going to save like $1,500 $2,000 a year it's amazing check out app Sumo it's where you can go to buy programs that are typically sold on a subscription basis but they have deals and you can buy them on

a onetime basis so check that out hope you can cut out a little bit of cost there don't skimp on your maintenance or your property uh it's a slippery slope make sure your Communications are really really good maybe it's time you take some of those off autopilot make sure you're managing your reviews really well uh and you know at the the other side of this if you are struggling just know that some people are kind of kind of giving up sadly and that means that that's

taking Supply out of the market we know that people are still discovering alternative options to hotels right staying on Airbnb uh and these platforms are still growing with demand so sorry to have not great news for some of you out there that's just the state of the economy and that's kind of how things are going but there's always two sides to every story next week we've got a good opportunity to earn a little more Revenue something you might be overlooking so make sure you stay tuned

and until then I hope you have a fabulous week want to get on the fast track to Financial Freedom through short-term rentals well it all starts with the properties you acquire but you want to make sure that you acquire the right properties I want to give you my ebook that will show you how to do just that there is no charge it's my gift to you for being one of our subscribers just go to rest methods.com that's reest methods.com