Economic recessions come and go—every 4.7 years by some estimates—and that means we’re overdue for a financial meltdown, as this quote from a January 2020 Forbes article indicates:
“While it remains unclear whether a recession will indeed occur and, if so, how significantly economic conditions will deteriorate, businesses are preparing for a potential downturn in the next 12 months,” [the consulting firm Grant Thornton] asserted in a 2020 look-ahead by the National Association of Corporate Directors (NACD).
But what about the vacation rental property industry? Could vacation rental property owners be immune from down-spiraling economic conditions?
Before considering these questions, remember that it’s impossible to predict the future. Anyone with that ability would be sipping margaritas on a Tahitian beach, keeping those secrets to themself.
And with that out of the way, let’s take a look at the theories and opinions of economic analysts, which seem to support that: (1), a 2020 recession is coming; and (2), vacation property could weather these conditions better than other industries.
Why Should We Expect an Economic Recession in 2020?
A graph published by FreedomFirstProperties reveals what prominent analysts are saying about the chances of a 2020 recession. The graph compares the opinions of market analysts from Pulsenomics and the Wall Street Journal and it certainly doesn’t look good for 2020:
*Image source: http://freedomfirstproperties.com/next-recession-2020-will-impact/
Here are some headline articles that support the notion of a 2020 economic downturn:
- “Next Global Financial Crisis Will Strike In 2020, Warns Investment Bank JPMorgan” –The Independent
- “The 2020s Might Be the Worst Decade In U.S. History” –Forbes
- “The Makings of a 2020 Recession and Financial Crisis” –Project Syndicate
How Will a 2020 Recession Affect the Vacation Rental Property Industry?
While the above opinions should raise concerns for all business owners—no matter the industry—vacation property owners and vacation property management firms might be able to breathe a sigh of relief. While we do have to stress the word “might,” history and expert opinion seem to support the alleged resiliency of this market sector in the fact of recessionary conditions.
We’ll start with the following quote from First American’s Chief Economist:
“If a recession is to occur, it is unlikely to be caused by housing-related activity, and therefore the housing sector should be one of the leading sources to come out of the recession.”
And here are more words of encouragement from U.S. News and World Report:
“Fortunately – and hopefully – the history of recessions and current issues that could harm the economy don’t lead many to believe the housing market crash will repeat itself in an upcoming decline.”
Nothing is “recession-proof” per se, but MansionGlobal offers an interesting perspective on the safety of vacation rental properties, particularly those located in vacation-resort areas:
“Purchasing in a location with limited supply is key to making sure your vacation home investment doesn’t depreciate dramatically in a recession, Mr. Herbert agreed.
“In 2009, when everything hit the skids, there was so much product being built in Phoenix, it was easy to get permits, and lending was easy, so everybody rushed in. In that market, when the recession hit, there was a 35% to 40% value drop,” he said.
“In Hawaii at the same time, though, there was a marked contrast.
“For the best locations in Hawaii, like the Maui beachfront, the dip in property values was only 10% to 12%,” he said. “The reason was the barrier to entry—the ability to get anything built—was unbelievably tough. It wasn’t overbuilt, and people recognized the value there.”
“Selecting the location of your vacation home wisely may not protect you entirely from seeing a drop in value during a recession, but it could mean that the decrease you see is much smaller than it would be elsewhere.”
Why Does Vacation Property Fair Well During Down Market Conditions?
Amy Hinote from VRM Intel, a vacation-rental industry consulting firm, offers the following insights on which vacation property businesses are best suited to perform well in a recession:
- Properties in affordable vacation areas perform better: Owners of vacation rental properties in familiar, comfortable and easily-accessible vacation areas tend to fare better in recession conditions. During difficult market conditions, properties in affordable vacation destinations tend to increase in popularity.
- Domestic travel destinations do better than foreign destinations: Owners of domestic vacation rentals can better weather bad economic conditions because vacationers are more likely to stay in-country rather than spend more money to travel overseas.
- Family destinations perform well in recession conditions: Hinote suggests that due to psychological reasons, vacationers prefer to travel as a family during difficult economic times, and this helps family-friendly vacation areas experience more stability.
Could Smart Property Automation Help Vacation Property Owners Weather Poor Economic Conditions?
If vacation property owners get hit with difficult economic conditions in the years ahead, they will face increasing pressure to streamline their workflows and organizational processes—so they can manage their properties more economically. One way to boost the efficiency of a vacation rental property business like this is with smart property automation technology.
At PointCentral, we design smart property automation solutions for the vacation property management industry. Whether your business involves three vacation property units or 10,000, our solutions will help you manage workflows, property turnovers, property maintenance, check-in/check-out procedures and more.
At the end of the day, PointCentral can help you get more done in less time, with fewer staff—and save money on maintenance and energy costs—which means you’ll be more prepared for the financial belt-tightening that could be forthcoming in 2020. And, if a recession doesn’t come, at least you’ll get to enjoy more profits and customer success from running a more efficient vacation property business through advanced automation.