2022 Year End Report

2022 YEAR END REPORT

A LOOK BACK AT 2022

The industry enjoyed a record year in 2022 with an overwhelming amount of record high rates and occupancy, especially in Q1 and Q2. However, the last two quarters of the year were showing signs of normalized rates, occupancy, and extended booking lead times. Industry professionals from all markets across the U.S. saw a spike in rates and occupancy following Covid lockdowns, but now the data is showing demand returning to more standardized levels. Fortunately, the data indicates the luxury short-term rental market is expected to continue to experience rate and occupancy levels better than homes of a more affordable nature.

BOOKINGS ARE BACK TO PRE-PANDEMIC LEAD TIMES

+44% Year-over-year

Booking lead times are also returning to pre-Covid levels and last minute bookings are not as common as they were since mid 2020. Booking lead times are up 44% year-over-year with most travelers booking 60-80 days out from their stay.

VacayAZ is keeping calendars open 10-12 months in advance to capture those travelers who like to book in advance. Advance bookings are valuable since our cancellation policy remains as strict as booking sites will allow.

CANCELLATIONS SEEM TO HAVE CANCELLED

Our cancellation rate in 2022 dropped dramatically, down 67% from 2021. Our cancellation rate in 2022 was only 14%, down from 42% in 2021. Travelers are no longer concerned about Covid causing them to cancel their trip. We also added travel insurance for our guests to purchase which protects them from unexpected illnesses or other unforeseen issues that would effect travel plans.

Property: Whispering Ridge

A DRAMATIC SHIFT TOWARD LUXURY

The reason is simple – luxury vacation rentals generate more returns for our owners. And there is data to support this. Our luxury listings yield a higher nightly rate and a higher occupancy rate.

In 2019 we made a strategic shift to lean luxury and in 2020 we launched 14 new properties, 23 properties in 2021 and 9 new properties in 2022 with the average property being $2.4MM in value.

VacayAZ continues to dominate the market in Average Daily Rate. This past year we averaged 227% higher ADR than the competition. VacayAZ’s ADR was $872 vs. $267 for the rest of the industry. We attribute this gap to our consistent data-driven pricing strategy, our level of prompt guest service, our high number of first-page impressions of our homes on bookings sites, and our luxury inventory mix.

Airbnb statistics identify that 80% of the homes that appear on the first page are the ones that get booked. We achieve that high first-page presence through high review ratings, consistent price changes, as well as proper design and photography.

Property: Yucca

MARKET SATURATION

+27% Increase year-over-year

>$1.5M In property value

2022 saw a 27% increase in Short Term Rentals listed on the market compared to the previous year. A vast majority of these new listings fall below $1M in property value and land in the most competitive range in the STR market. Our prediction is the 2023 projections will squeeze our non-serious players whom do not prioritize abundant amenities, excellent guest experiences, and full-time rentals.

Property: Grapevine

AMENITIES

Now, more than ever, guests are looking for trips packed with memories and plenty of things to do. The best STRs in the market make guest amenities a priority. All of VacayAZ’s properties give the guests something fun to do during a break in their itinerary.

SOME OF 2022’S MOST REQUESTED AMENITIES

INCLUDE:

• OUTDOOR MISTING SYSTEMS

• HEATED SWIMMING POOL & SPA

• BOCCE BALL COURT

• PICKLEBALL COURT

• PROFESSIONAL GAME ROOM

• 80S STYLE ARCADE MACHINE

• SHUFFLEBOARD

• PING PONG TABLE

• AIR HOCKEY TABLE

• FOOSBALL TABLE

• ELECTRIC VEHICLE CHARGERS

IN SCOTTSDALE, AZ

In late 2022, the city of Scottsdale passed a bill that adds some more nuance to operating a STR. You can find a link to the full details here.

Most Notable Compliance Changes:

• All Scottsdale vacation rentals are required to have a permit approved by the city.

• Each property is required to have a minimum of $500k coverage in liability insurance.

• Each neighbor surrounding the home must now be notified the home is a vacation rental and be provided with the emergency contact of the Owner or Owners Designee. This applies to vacations rentals already in place, not just new ones.

• A floorplan with the fire escape route and location of fire equipment must be posted in the home.

• Bi-monthly pest control maintenance is now required by the city.

• Homes with pools and spas must conform to city code for pool safety requirements.

• We will now be required to perform sex offender checks on the booking guest of each reservation within 24 hours of guests arrival. We are required to refuse the renting of our homes to those registered under the national sex offender registry.

SEDONA 2022 REVIEW

VacayAZ acquired new office space in Sedona. Sedona continues to be a highly desired vacation destination with over 3 million visitors a year. Luxury short-term rentals are rare in Sedona but demand is high for them. Vrbo recently conducted a study for VacayAZ and found that only 17% of vacation rentals are 4 bedrooms or more. Sedona captures similar revenue numbers to Scottsdale and Phoenix, however, the cost to operate a home in Sedona is approximately 15% less.

2022 FOR VACAYAZ

VacayAZ experienced moderate growth in the number of homes launched, but significant revenue growth of 50%. VacayAZ continues to stand out among the competition. Our asset management strategy managing luxury homes for serious investors is unique and in high demand. VacayAZ is the only asset management firm in the STR industry that has professionalized our approach in managing short-term rentals. Our strategy will continue to focus on attracting the best short-term rental homes valued over $2M with amenities that are in high demand for the affluent traveler and are owned by businessminded investors who are committed long-term to the industry. The focus remains on managing a finite number of the finest homes in Scottsdale, Phoenix, and Sedona to ensure we are offering the BEST guest experience, producing the highest returns for OUR clients! Currently, we manage $126M in assets comprised of 53 homes with an average value of $2.4M.

9 PROPERTIES LAUNCHED

50% INCREASE IN REVENUE

DEVELOPED IN-HOUSE SOFTWARE TO PROVIDE A SUPERIOR GUEST EXPERIENCE AND SHARE PROPERTY INFORMATION

5 NEW PROPERTIES LAUNCHING IN Q1 OF 2023

VACAYAZ LAUNCHED THEIR OFFICE IN SEDONA.

WHAT THE FUTURE LOOKS LIKE

We continue to strive to be ahead of the curve when it comes to the short term rental industry. Indicators show 2023 might not be the record-breaking year that 2022 was, and we anticipate a 10%-15% decline in rates and occupancy. However, the more unique and highly amenity-rich the home is, the likelihood of it performing better is much greater. We will promote and encourage owner clients to enhance their property in 2023. This will position the home to perform better in the next 2-3 years as guests' expectations rise and the product enters the market with unique and desired amenities.

Our intentions for 2023 are specific and simple: We will leverage our data to attain the highest rates, and keep occupancy at a sensible level while ensuring the property is well-maintained and has the proper enhancements to stay competitive in an ever-changing market.

Some of the milestones we hope to reach in 2023:

Initiate property enhancements across our inventory to continue 1st page results and remain competitive

Bring on 16 or more grade A properties in both Scottsdale and Sedona markets.

Supply our guests with even more concierge services

Launch public access to our in-house software

And more…

INDUSTRY INSIGHTS

As a leader in the short-term rental space, it's important to stay ahead of industry trends and continuously gather insights to improve the guest experience and drive growth. Below are some of our latest insights gathered from top sources, conferences, and our own learnings.

VacayAZ Key Insights:

• Many don’t think the market will hit 2021 and early 2022 numbers again for quite some time. It will be seen as a benchmark year for years to come.

• Lending is becoming easier on these units thanks to more securitization in the marketplace.

• 50% recovery rate so far in international travel with more demand on the way.

• Regulation can positively be viewed as stabilization for lending and investing.

• Average Daily Rates are expected to be maintained, but occupancy is expected to drop.

• Out of all listings nationwide, only 5% are viewed as “Fully Optimized” aka professionally managed the way VacayAZ does it.

IN THE NEXT 5 YEARS…

Integrate more advanced technology to enhance the guest experience

Leverage enhancements to multiple homes with preferred vendor pricing, (i.e., installation of solar, synthetic grass, game rooms, etc…)

Develop a rewards point system for our guests to return more frequently to our homes.

Offer our office ballroom space at Venue8600 for guests who wish to host large events that can’t be hosted at the properties due to local laws.

Property: Brewer