What was the impact of Covid in the Smokies?

Question

1. I'm not a data scientist or statistician.

2. These numbers are my opinion and have been compiled from Air DNA. I don't believe Air DNA is a perfect data source, and I believe you can find inconsistencies depending on when the data is pulled and lagging inputs.

That said, I thought it would be interesting to add some data to all the discussions around 2022 STR demand in the Smoky Mountains.

While park data from the NPS is not yet available for 2022- I've pasted the # of visits to GSMNP below for those keeping track.

NPS:

2018- 11,421,200

2019- 12,547,743 (10% growth y/y)

2020- 12,095,720 (-4% growth y/y)

2021- 14,161,548 (17% growth y/y)

2022- TBD

Source: irma.nps.gov/STATSWhile It looks like there's some credence to the discussions of reduced rental demand, it doesn't appear to be significant (3%-7% depending on the number of bedrooms). I agree that 2021 demand was not sustainable, but I don't think the data paints a bleak picture of the Smoky Mtn rental market.  In my opinion, these numbers show the overall impact of the pandemic on tourism in this area was significantly positive (2019 vs. 2022). This data strengthens my take on the Smokies and recommendations to my clients as a Realtor. 1. The Smoky Mtns are hard to beat for STR rental demand. 2. Choose your property wisely. Base your investment decisions on the property, not the average. 3. Tether yourself to longstanding investment criteria and consider all four wealth-building strategies in your investing (appreciation, cash flow, loan pay down, tax benefits).

Collin Hays · Answer

The COVID effect in Gatlinburg was magnified by the Gatlinburg fire a few years earlier.  The fire destroyed several thousand houses.  I was one of the first to rebuild, and it was around 17 months after the fire before the cabin was complete. It took that long because there was a myriad of new regulations from Gatlinburg and Pigeon Forge, and the local authorities were trying to figure out how to implement it all.  Then there were only a handful of local builders.

So even going into 2020, the COVID year, we still had a tremendous shortage of houses. Add to that a massive pent-up demand, there was a recipe for doubling and tripling of rates and high occupancy.  Everyone was a winner.

So of all resort places on the earth, the Gatlinburg area had a far bigger boom than anywhere else, at least that I am aware of.

This led to a building boom, of super high-dollar houses (limited builders and contractors), many of those in not very-ideal locations, cheaply built, sold to the highest bidder, @ 3.5% APR.

Luke Carl · Answer

21-22 were insane. I. Numbers were huge.In the past 6 months or so we went from 5-6 weeks out to 2-3. Not that that was a bad thing for gross income, just different than what we were used to.

For 2023 I think 2-3 will go back to 4-5 weeks out and be somewhere around 7-10% higher than 2019.

I think this goes for just about any vacation market in the US.

Lisa Marie · Answer

The problem is not the demand but the supply. AirDNA had some data showing a nationwide short term rental supply went up by about 20 to 25% from 2020 to 2022. However in some pockets such as the Smokies, supply went up by more than 30 to 35%. It’s no surprise that ADR is down and occupancy is down.

If your rental is below average, your occupancy will be down by more than 35%. The natural reaction is to significantly cut your rate to attract business. If you cut enough, you will take some business away from the above average rentals, because some guests would rather give up nicer views or better decor in exchange for several hundred dollars less in cost. Therefore, even if your rental is above average, you will still suffer lower occupancy rates. That’s the beauty, or curse of capitalism/free market. When there is an opportunity to make better returns in one niche, money will flow to that niche until supply overwhelms the demand, and the return in that niche comes down to the average of the rest of the market. We are witnessing it happening in real time. That means people will still make money in shorter rental, it’s just no longer as lucrative. The return on investment will eventually be the same as investments in other forms (stocks, bonds, or long term rentals), adjusted for respective risks.

Corbin Loveless · Answer

Sorry guys...the forum got my post out there before I added the data.

That said, @Luke Carl and @John Underwood and @Collin H. are the folks that I was hoping would offer their opinion. Appreciate your input and advice!

Nathan W. · Answer

@Corbin Loveless We do have data through November. GSMNP is on track to hit about 13M visitors this year. https://irma.nps.gov/STATS/SSR...

John Underwood · Answer

We didn't have our cabin in the smokies at that time, but to Luke's point, people where going stir crazy and where booking our Lake House where they could still have fun with family but be away from the crowds.

I bet there was little to no negative impact on rentals in that area.

Curious to see what other people with properties in that area have to say.

Leslie Anne Morris · Answer

Good observations @Corbin Loveless

Definitely seeing the shorten booking lead time, but visitation overall is still high. I hadn't looked up the GSMNP 2022 data yet, so thanks for that @Nathan W.

Corbin Loveless · Answer

Thank you, sir!

What was the impact of Covid in the Smokies?

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