Analyzing Vacation Rental Markets: A Beginner-to-Pro Guide for Smart Investors

Are you ready to dive into vacation home investing, but feeling overwhelmed by the complexity of analyzing vacation rental markets? You’re not alone. Whether you’re a beginner seeking your first property or a seasoned investor aiming to level up, mastering market analysis is the key to unlocking lifestyle and financial freedom. In this guide, we’ll break down the steps to analyze vacation rental markets with clarity, using proven Vodyssey strategies that take you from novice to pro.

Investing in vacation rentals is more than just picking a property in your favorite destination. Successful owners know their markets inside and out—they understand not just their property, but the market as a whole, their specific segment, and their ideal guest. Proper market analysis helps you accurately forecast income, spot hidden risks, and seize opportunities that others overlook. Without it, you’re flying blind and risking costly mistakes.

Before you crunch numbers, it’s essential to recognize the variety of vacation rental markets and what drives their demand. The main types include:

• Beach Destinations: Seasonal, family-oriented, often with high competition from hotels and resorts.
• Mountain Destinations: Year-round potential, especially in ski areas, with high demand for both luxury homes and rustic cabins.
• Cities & Urban Destinations: Strong competition, year-round demand, tight regulations.
• Lake Destinations: More seasonal, attract families and groups, premium for waterfront homes.
• Nature/State & National Parks, Theme Parks, College Towns, Off The Beaten Path: Each has unique demand cycles, guest profiles, and revenue patterns.

Understanding what brings travelers to an area—seasonal events, attractions, or business—allows you to anticipate occupancy swings and adjust your strategy accordingly.

Start by clarifying your personal property goals and the kind of guest you want to serve. Are you prioritizing cash flow, a family getaway, or long-term appreciation? This clarity will keep you focused and help you avoid distractions.

Use tools like AirDNA to pull essential data points for your chosen market:

• Total number of active rentals
• Comparable properties by size and amenities
• Average Nightly Rate (ANR) by price tier and bedroom count
• Occupancy rates
• Total market revenue

For a reliable snapshot, ensure there are at least 50-100 comparable properties. This gives you enough data to see the true market range and identify both average and top-performing opportunities.

Every market has a significant revenue range based on property type, size, and seasonality. Calculate the break-even point using Vodyssey’s 10% revenue rule: your property should generate at least 10% of its acquisition price in gross revenue (12–13% if using a property manager). Look for a healthy gap between average and top-tier revenues—this indicates room to add value and outperform the market.

Check the market’s revenue trends over the past three to seven years. Is the market growing, stable, or declining? Are there multiple peak seasons? Seasonal markets aren’t a problem as long as you plan for slower months and ensure peak season income covers annual costs.

Never rely on the average numbers published for the whole area—dig into the data for properties like yours. Calculate the Average Nightly Rate (ANR) and occupancy for your specific property type and location, not just the market average. Use Vodyssey’s STR Investment Analyzer for accurate projections.

• ANR: Add all nightly rates and divide by total booked nights. Adjust for cleaning fees and other differences as needed.
• Occupancy: Look at monthly and annual trends, and understand how seasonality will affect your bookings.
• Expenses: Account for all fixed, variable, and pass-through costs—property management, maintenance, utilities, taxes, and more. Even small changes here can significantly impact your ROI.

Where does your property fit: Budget, Economy, Midscale, Upscale, or Luxury? Analyze not just what properties are charging, but what the best performers do differently—better amenities, superior location, unique features, or experience-driven design. Know your competition and what sets you apart.

Combine all your data in a projection tool. Play out different occupancy and rate scenarios to stress-test your investment. What happens if bookings drop by 10%? Can you adjust rates or add value to stay competitive? The most successful owners always run the numbers from multiple angles.

Vodyssey members enjoy the world’s most comprehensive property analysis tools, proven to come within 3% of annual revenue projections on average. Our step-by-step process, calculators, and proprietary worksheets take the guesswork out of market analysis, empowering you to underwrite deals confidently and outperform the market. We also provide ongoing coaching and support to ensure you’re always current as markets shift.

Analyzing vacation rental markets is the foundation of a thriving portfolio. Don’t leave your financial future to chance or guesswork—arm yourself with data, proven tools, and a clear strategy. Whether you’re just starting or ready to scale, Vodyssey’s process will help you unlock your unfair share of the booming vacation rental market.

Ready to analyze a market or need help with your numbers? Schedule a call with our team for personalized guidance and access to the industry’s best analysis tools. Your financial freedom starts now!