In Villa Finder’s first Asia Pacific Villa Rental Market Research 2017, the Singapore and Bali based vacation rental specialist focused on how the villa rental market was picking up fast and growing with an annual rate of 18.3%. The market at the time accounted for $390 million of the global $120 billion vacation rental market. Two years on, Villa Finder takes a look at the market for newer, upcoming destinations and re-evaluates the growth of existing, popular destinations like Bali. With some markets struggling to stay competitive, destinations like Thailand are in focus, with industry experts weighing in on how villa owners and investors can double down and improve the quality of guest experiences and offerings to win in their respective markets.
The overall Asia Pacific market grew by 12% in the past 2 years, reaching US$440m, with an increase in villa supply across various destinations. A tourism hotspot, Bali was found to still be the biggest market with over 4,000 villas but other markets like Goa, Sri Lanka, Australia and New Zealand are catching up with every single market in Villa Finder's study has seen more villas being offered than 2 years ago. Clearly showing the keen interest investors have in tapping into the ever-growing vacation rental market.
Loved by various travelers from Australia and the UK, Bali, the largest market as has grown by 18% in the past two years, reaching US$162.5m with more competition between villa owners being created as more and more villas are being built. An increase of +34% in a market clearly shows that there was already oversupply 2 years ago. Consequently, the average price decreased by 10% to US$220/night. In terms of visitors to Bali, China overtook Australia as the top inbound market, accounting for 23% of the market while Australia fell to 19%. It is also important to note that the weak Australian dollar and the property market crisis in Australia have both pushed Australians to cut on their travel expenses and delay their international travel decisions. Other main markets for vacation villas are Europe, Singapore and Hong Kong.
Growing destinations like Goa sees the strongest potential with a growth of +23%. According to Aakash Kochar, Sales Director of Luxurystays.in, 2015-2017 were the prime years for villa rentals in Goa where the demand exceeded the supply. Fast forward to 2019, there are more villas in the market, with occupancy at 60-70%, much higher than in other markets. The main customers for villas are families and groups, mostly Europeans and Americans. He predicted that the market in Goa will continue to grow in early 2020 and will slow down in the latter part of 2020.
Catching up with its neighborhood destinations, Australia is also developing with the number of villas in Byron Bay and Sydney going up by 30% and 33% respectively. “A few years ago, popular regions like Byron only had a few professional property managers promoting villas and holiday homes. With the increase in villa supply and demand in this region, there are now dozens of new players compared to only two years ago,” shared Mat Lewis, Co-Founder & CEO of View Retreats. While villa renters are mostly families, View Retreats saw an increase in Gen Z customers (aged 18-24) who are spending a lot of money celebrating special occasions as well as corporate clients considering villas for functions, meetings and events. Connected to villa owners in their destinations, Villa Finder found that the average occupancy went down in those destinations, a clear early sign of an oversupplied market.
Heralded as “destination of the year” by multiple publications in early 2019, Sri Lanka was a destination that many travelers flocked to, and with good reason, as the number of villas in Sri Lanka increased by 25%, contributing to market growth of 20%, reaching US$4.6m. However, the nation’s tourism was brought to a halt after the terrorist attacks in April but experts of the destination are confident the impact isn’t long-lasting, as travelers are starting to come back. In July, there were 115,000 tourists in Sri Lanka, a decline of 40% compared to the same period last year. In August, there were 140,000 visitors, and the decline was 28.3%. The drop was 27.2% in September (source).
As successful as some markets are, others are struggling with Thailand being marked as one that has gone down compared to positive growth 2 years ago. “The number of villas being built for rent has saturated the market, the choice is now endless but demand is down.” – shared Stuart Burt, Property Manager at Sunshine Samui Villas, a fast-growing management company in Koh Samui. The villa occupancy rate went down across various destinations (Hua Hin: -54%, Pattaya: – 21%, Phuket: -18%, Samui: -11.5%). With the lack of Chinese tourists arriving in Thailand; the Phuket boat accident in July 2018, saw the Thai government blaming the Chinese tour operators for the tragedy, many have also contributed the weak exchange rate against a strong baht and the impending world recession to the shrinking of the tourism market.
Villa Finder's study found that the villa market in Hua Hin went down by 38%, Samui by 15%, Pattaya by 1.5% and Phuket by 2%.
Aside from Goa, Australia, and Sri Lanka, other up and coming markets are Japan, New Zealand, Vietnam, and Malaysia.
According to David Compton, Managing Director of Twizel Holiday Homes, a Property Manager in New Zealand, there are more villas for short-term rental in the market, and the demand is going up. The main source of customers is domestic travelers and Australians. He also noted that popular tourist destinations are becoming too expensive, so many are looking for more off-the-beaten-path locations.
In Japan, there are over 500 villas and chalets for rent. While Japan was not included in their study 2 years ago, Villa Finder shares that experts clearly confirm that the destination is booming. While Niseko is the most established ski destination in Japan, Hakuba & Nozawa Onsen are following in its trail, but most owners admit the big challenge for these chalets will be to attract tourists during the summer season.
Destinations like Vietnam and Malaysia are slowly growing with both having over 100-holiday villas in the market. These markets are being monitored closely by Villa Finder and its competitors with the expectation for them to be among the fastest-growing in 2020.
New developments have also been identified with promising vacation rentals like NovaBeach Cam Ranh Resort & Villas, Sonasea Villas Resort, Ha Tien Venice Villas (Vietnam), Forest Estate in Langkawi and Forest City Coastal Villas in Johor Bahru.
What this means for travelers is largely positive with many markets offering some of the cheapest rates around. Destinations like Perth, Chiang Mail, Goa and Sri Lanka offer less than US$200/night. These holidays get our pick for a villa bargain. Australia especially is a good holiday destination with the currency exchange rate being favorable for travelers. Perth properties are 60% cheaper than Byron Bay’s and Sydney’s. According to Mr. Lewis, the quality of the villas continues to increase and customers are expecting more from accommodation providers (in terms of services, inclusions and quality) while wanting to pay less.
Although a struggling market this year, villas in Thailand are generally more expensive than in other destinations in Asia and with the Thai government working hard to mend the relationship with China, travelers can still expect to pay a little bit more for a holiday in Thailand.
Above all else, Bali is still a great villa destination but due to increased competition, villa providers are expected to compete with each other to bring more value to attract customers. Although this will affect villa prices and bring it down by 10% travelers will find they have plenty of options to choose from, and there’s always room for negotiation.
For villa owners, there is a lot more to be wary of. With increased supply comes more competition but although the market continues to grow there is still more room for newcomers. While the occupancy rate has gone down across markets, properties with a unique selling point are still doing very well. Villa owners are advised to equip themselves with better marketing, villa management and distribution strategy to stand out against the crowd.
Finally, it's no surprise that customer expectations are ever-increasing. Clients demand better service, more inclusions and lower prices; so the need for professionally trained staff, proper maintenance and value-added services, while meeting business and investment goals are vital to success.
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