Annual 2009 Cape Cod and Islands Vacation Rental Business Update

February 10, 2009 - The Cape Cod & Islands vacation rental season for summer 2009 is underway on WeNeedaVacation.com. In this report, we show that Cape & Island homeowners have raised their prices a cautious 2.2% over 2008, and that vacationers will keep coming, even though they are being understandably cautious, as well. 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 two years ago, "The New Normal," the Cape & Islands rental market has stablized after tumultuous post-9/11 years. This year, homeowners are showing reluctance to raise their prices significantly over last year. At a modest 2.2% increase, the average vacation rental will cost $54 more on Cape Cod, and if you're heading to Martha's Vineyard or Nantucket, prepare to spend an extra $79 and $80 respectively.

WeNeedaVacation.com Homeowner Pricing

On WeNeedaVacation.com, homeowner pricing is an indicator of confidence; specifically, how confident homeowners are about renting their homes for the full nine weeks of the summer season (unofficially, June 27 to August 29). This 2.2% price increase contrasts with a 3.0% increase in 2008 vs. 2007 (see our 2008 report) and 2.7% in 2007 over 2006 rates, as stated in our 2007 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 - 2008 to 2009

Note: Data reflect the rates of 1,604 listings advertised on WeNeedaVacation.com for at least three seasons (i.e., since summer 2007). Overall, 12% lowered prices, 37% increased prices, and 51% left them the same. A year ago, 10% lowered prices and 43% increased prices over 2007.

As Table 1 shows, unlike last year when all four areas of the Cape showed virtually identical increases over 2007, this year saw wider variances on Cape Cod, with Mid Cape owners raising prices only $25 on average. Also, both Martha's Vineyard and Nantucket owners are much more cautious than last year: homes went up $79 and $80, a far cry from the $106 and $130 of a year ago. Clearly, these increases on both islands, the smallest we have seen in years, reflect concern that the troubled economy will negatively impact them.

Some owners are already starting to lower their prices, no doubt in reaction to economic woes. As the rental season unfolds, we will closely monitor pricing trends. We will be especially watchful for falling prices in individual locales, a likely trend if vacationer demand remains soft.

Whereas homeowner confidence is reflected in relative prices, vacationer demand is reflected in average prices. The following table shows average prices for the six locales, and compares them to the total Cape Cod average.

Table 2: Weekly Rental Price Averages - by Locale - 2009

Note: Data reflect the rates of 2,638 listings currently advertised on WeNeedaVacation.com.

Table 2 reveals the price diversity on Cape Cod, with a $567 difference between the average price on the Mid Cape and the Upper Cape. But, good news for island-lovers: Nantucket's average price dropped over $300; last year's average was $4,809. The Vineyard also dropped a modest $60. The average home on Nantucket is still twice as expensive as in Mid Cape Cod. However, the more expensive parts of the Cape are slowly catching the islands. The Vineyard is now only $400 (15%) more expensive than the Upper Cape vs. a 33% difference 4 years ago.

WeNeedaVacation.com Vacationer Demand - 2008 Summary & 2009 Forecast

At WeNeedaVacation.com, 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 2008 calendar year, homes on Cape Cod, Martha's Vineyard and Nantucket received 5 million page views and 60,000 emails.

Looking at the upcoming 2009 rental season, comparing September through January with the same months last year, property views have decreased 7%. Bookings year-to-date are down 19% overall.

It is not surprising to see a decrease in these numbers from last year. Virtually every industry is affected by the current recession, and the travel industry is certainly no exception.

What is surprising, however, is that these numbers are relatively modest, given the tough economic climate. Since the economy began its decline last September, property views have dropped only slightly, which means people are still shopping for a vacation. Early bookings are not as strong, probably the result of vacationers procrastinating until later in the season.

And, as vacationers plan this year's summer vacations, they will have more rental homes from which to choose. Between January 2008 and January 2009, we added almost 200 homes to our inventory.

It is still early in the season, and we remain cautiously optimistic about the 2009 season on the Cape and Islands. We believe that the bookings will lag behind those of past years until the first of two things happen: Washington manages to breathe confidence into everyday Americans and credit starts flowing again, or we get to June, when many procrastinators will make plans, even if they are more modest than in the past. As noted, vacationers are already looking in large numbers. As in prior years, we do not believe that a troubled economy will dampen the value Americans place on their summer family vacation, the Cape & Islands' mainstay. We will be posting further analysis on WeNeedaVacation.com as the season unfolds.