Smokies STRs: The State of the Union mid 2022

We are halfway through 2022. I am getting a fair number of texts and calls asking where things stand overall in the Smokies, so this is a good time to give a report.

1. Occupancy overall is down about 20 percent year over year. That number is deceiving though: Our premier properties are not down at all, while our “average” properties are off 30 percent or more.
2. Revenues are down only slightly. Nightly rates remain strong, but again, the premier properties are skewing the average on this. Average properties are suffering lower revenues.

As we enter into an economic recession, which I was calling for a number of months ago, it’s probably a good time to take stock and learn about the sometimes-ugly-underbelly of, not only short term rentals, but investments in general. Here are a few nuggets, in no particular order of importance:

1. Demand decline doesn’t necessarily equate to a commensurate revenue decline.

If there are 1,000 cabins available this weekend, but only 800 vacationers that want them, there is downward pressure on the prices for all of the cabins except for the premier properties: The average properties are in a fight over the 800 vacationers. Prices are slashed and slashed again, yet 20 percent of the cabins still go unsold.

Stated another way, an “average” cabin could experience a 30-40-50 percent drop in rental revenues if demand falls 20 percent, because there are more average cabins than vacationers.

1. An untrained monkey was a good property manager in 2021. 
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3. Demand for cabins actually exceeded supply, which meant self managers and Property Managers could be sloppy, inattentive, and flat-out lazy with no consequence. The demand was there. If guests didn’t like our property, they could pound sand. There were 10 other people in line waiting. 2021 covered a lot of sins with regard to cabin quality and the management thereof.

In summary, NOTHING comes easy. Let’s consider those three words. Restated, the only thing that does come easy is nothing, itself. If we want our investment to perform, we have to roll up our sleeves and make it happen. Careful management. Attentiveness. Awareness. Doing business the right way. For those that can are willing to work hard, and work smart, there is never a recession.