Wellesley, February 12, 2008 - The Cape Cod & Island vacation rental season for summer 2008 is officially full steam ahead. In this report, we show that Cape & Island homeowners have raised their prices 3.0% over 2007, and vacationer demand exceeds that of 2007. From these trends, we cast our predictions for the upcoming summer season.
How can we cast predictions so early in the rental season? Vacationer interest spikes so strongly after Christmas that January is our busiest month of the year, with an estimated 23% of vacationers making their plans before February 1st. So, seven weeks into the rental season is a great time to look ahead.
As reported in a press release a year ago, "The New Normal," the Cape & Island rental market has stablized after tumultuous post-9/11 years. But 2008 does show subtle trends: owners show average confidence in the season, as evidenced by a 3.0% average increase in prices. In other words, the average vacation rental will cost $63 more on Cape Cod, and if you're heading to Martha's Vineyard or Nantucket, prepare to spend an extra $106 and $130 respectively.
Vacationers launched the 2008 season right after Christmas, as they do every year. Strong early bookings data, showing an increase of 27% (1600 booked weeks), compared to 2007 suggests that the gloomy economic news coming out recently is convincing folks to stay closer to home this summer and to go to Cape Cod and the Islands rather than fly to exotic destinations. Subtle early trends also indicate a preference for larger homes and slightly longer vacations. These bear watching as the season unfolds.
Homeowner Pricing
Homeowner pricing is an indicator of confidence; specifically, how confident homeowners are about renting their homes for the full eleven weeks of the summer season (unofficially, June 21st to August 29th). For the 2008 summer season, homeowners have raised their rental prices 3.0%. This contrasts with a 2.7% increase in 2007 vs. 2006 (see our 2007 report) and 2.3% in 2006 over 2005 rates, as stated in our 2006 report.
The following table looks at homeowner price increases for each of the six Cape and Islands locales.
Table 1: Homeowner Price Increases - by Locale - 2007 to 2008
| Locale | % Increase | $ Increase |
| Cape Cod | Upper | 2.6% | $60 |
| Mid | 2.8% | $57 |
| Lower | 2.7% | $62 |
| Outer | 2.9% | $69 |
| Total | 2.8% | $63 |
| Martha's Vineyard | 3.7% | $106 |
| Nantucket | 3.0% | $130 |
| Total Cape & Islands | 3.0% | $74 |
Note: Data reflect the rates of 1,588 homeowners posting on WeNeedaVacation.com for at least three seasons (i.e., since summer 2006).
As Table 1 shows, unlike last year when Outer Cape owners showed the most enthusiam, all four areas of the Cape show virtually identical increases over 2007. Also, Martha's Vineyard owners, very cautious in 2007, have become more optimistic in 2008.
As the rental season unfolds, we will closely monitor pricing trends. We will be especially watchful for falling prices in individual locales, an indicator of low vacationer demand.
Whereas homeowner confidence is reflected in relative prices, vacationer demand is reflected in average prices. The following table shows average homeowner prices for the six locales, and compares them to the total Cape Cod average.
Table 2: Weekly Rental Price Averages - by Locale - 2008
| Locale | 2008 Avg. | v. Cape Cod Avg. |
| Cape Cod | Upper | $2,582 | 7% |
| Mid | $2,141 | -11% |
| Lower | $2,462 | 2% |
| Outer | $2,503 | 4% |
| Cape Cod Average | $2,409 | - - - |
| Martha's Vineyard | $3,224 | 34% |
| Nantucket | $4,809 | 100% |
| Total Cape & Islands | $2,743 | 14% |
Note: Data reflect the rates of 2,402 homeowners posting on WeNeedaVacation.com.
Table 2 reveals the price diversity on Cape Cod, with a $441 difference between the average price on the Mid Cape and the Upper Cape. The average home on Nantucket is twice as expensive as on Cape Cod!
But how have prices evolved over the years? Since 2004, home prices across the Cape and Islands have steadily increased an average of 4.3% per year, 6.1% on the Islands and 2.7% on Cape Cod.
Vacationer Demand - 2007 Summary & 2008 Forecast
We measure overall vacationer demand by tracking the number of times our property listings are viewed and the number of emails initiated by vacationers. In the 2007 calendar year, homes on Cape Cod, Martha's Vineyard and Nantucket received 4.8 million page views and 57,000 emails. Emails were up 4% on 28% fewer property views. That is, the site became 28% more productive due to a massive redesign effort that made finding the appropriate homes much easier for vacationers.
Looking at the upcoming 2008 rental season, comparing December and January with the same month last year, we see a 12% increase in visitors. Specifically, property views were up 22% for Cape Cod and a whopping 31% for the Islands; emails were up 10% for Cape Cod and a strong 19% for the Islands. Bookings year-to-date are up 27% overall, with the Islands being the strongest.
Normally changes that we see in these measures indicate a change in the market, but this year the changes we are seeing are mostly due to substantial changes to our website. These changes lead to an overall increase in traffic to our website, which of course would impact property listings, e-mail inquiries sent, and even bookings. Key changes that we made follow:
- Our website redesign led to 11% year-over-year increases in traffic from the major search engines, Google, Yahoo, and MSN.
- The Power Search redesign made our vacationers' quest even easier. With over 3,000 vacation rental homes, finding the homes that best match one's requirements can be like looking for a needle in a haystack. Our changes have made our website more productive than ever for the vacationer: Vacationers now view 30% fewer properties in order to initiate an email inquiry to an owner.
- We added a new social-networking feature called MyVacations, which enables vacationers to use the shopping cart-like features such as creating individual vacations, saving favorite properties into those vacations, keeping track of e-mails sent to homeowners, rating properties, and many other helpful features.
- MyVacations also allows vacationers to share their vacation plans with other members of their vacation party, who can see each others' favorites, ratings, and comments on candidate properties. This has led to a 6% increase in the number of vacationers to our site.
- The Cape Cod Chamber of Commerce's website has sent us eight times as many vacationers as they did last year. Wendy Northcross, the chamber's CEO, said "we have been doing very vigorous marketing and an extremely heavy amount of PR, and our own marketing efforts have resulted in dramatic increases in the web traffic to our site as well!"
But even when we adjust our measures for these increases in visibility, there's a very strong story unfolding for the Cape and Islands for this upcoming summer. While we look at several measures aforementioned, the most important is bookings. We have recorded a 27% increase in bookings versus last year at this same point. This translates to
over 1600 more weeks. When we adjust our bookings this year for an increase in inventory and the increase in traffic mentioned above, we still see a very positive picture unfolding for 2008: a 7% increase for Cape Cod, and a 15% increase for Nantucket and Martha's Vineyard. These are significantly higher than in any year-to-year bookings increases in recent memory.
These bookings increases beg for an explanation, especially with all the gloomy financial press and unprecedented action by the FED. Several possible explanations follow.
This early activity also furthers a trend that we noticed in the 2007 season, that is there was more activity in Q4 2006 for the summer of 2007 than there had been in the prior rental season. We were not sure how seriously to take that rather modest trend, but seeing this season take off more strongly than any year in recent memory bodes very well indeed!
The Chatham market is particularly strong. "The market is Hot-Hot-Hot for us here in Chatham! Lots of families from abroad are coming because their money goes so much further here now. To date, we have the same percentage of business coming from abroad as we do from New Jersey!" reports Sonnie Hill, rental manager at Ricotta Real Estate. She continues, "Since Chatham became a 'distinctive destination' we have also seen an increase in people wanting to come here - most are willing to pay for what they want but they really want updated amenities: air conditioned - high speed internet availability - etc."
The December snowstorms played a role, according to Wendy Northcross, "When visitors from our core markets are snowed in, they start thinking summer vacation. And they jump online."
But perhaps the best reason lies in the resilience of the Cape Cod and Island vacation rental market in difficult financial times. We have seen this over the last 10 years more than once. With all the gloomy economic news, and a teetering stock market, people are staying home this summer. 47% of Americans live within a day's drive of the Sagamore and Bourne bridges. 42% of our traditional vacationers come from right within Massachusetts, and a full 80% come from New England, New York, or New Jersey. As Sonnie Hill point out, "You can also still get here from most places in Massachusetts on just one tank of gas! No need for pricey flights, and the Sagamore Bridge flyover has made for easier travel - we heard great feedback this past summer!" Also, the weak dollar is drawing Canadians and Europeans more than last year.
While these strong bookings data are very encouraging looking ahead to the summer of 2008, it is still not even Valentine's Day, so there is a long way to go. We will watch this information carefully, and report what we find as the season unfolds.