November 2023

Lodgify has done a market study on holiday rental bookings during the first half of 2023, focusing on more than 100,000 reservations. This study looked at the evolution of rates, booking channels, length of stays, occupancy rates, and booking lead times.

According to the National Institute of Statistics, in May, more than 8 million international tourists arrived, marking a 17% increase compared to May 2022. Additionally, in the first five months of 2023, over 29.2 million people visited the country. Despite this growth, there’s still a 0.4% decrease compared to the same period in 2019, due to the COVID-19 pandemic and its impact on the industry.

In this article, we’re giving you the lowdown on what’s happening right now in the holiday rental game in Spain and what we’re expecting for the future. We’ll cover:

• How rental rates are changing.
• The main booking platforms.
• What guests are looking for in their rentals.
• Occupancy rates and what’s coming down the line.
• And some other tidbits.

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Tourism bounces back

With international travel restrictions lifted post-pandemic, Spain’s tourism indicators are showing signs of recovery, according to a report from the Bank of Spain. Though tourist numbers haven’t yet reached the 2019 levels, revenues are back to pre-crisis levels, and international tourism is picking up steam.

In Spain, rental rates have gone up by 7%, according to the INE, and the length of tourists’ stays has decreased. Hosts are getting more bang for their buck with direct bookings, offering stays at €180 per night, whereas through online platforms like Booking, TripAdvisor, or Airbnb, the average price can fluctuate to around €140. As a result, we’ve seen a dip in occupancy rates, going from 55.66% in 2022 to 54.32% in 2023.

This has also led to a 7% decrease in tourist rental homes along the Spanish coast. In August 2022, the occupancy rate was at 90.9%, while this year it’s at 84.3%. However, the coasts of Málaga, Mallorca, and Menorca still remain top destinations with high occupancy rates for tourist rentals.

Evolution of rental rates

Holiday rental rates have seen an increase, especially during the off-peak season, leading to higher profitability for direct bookings. However, the occupancy rate has slightly decreased due to shorter stays. Despite these shifts, the holiday rental sector in the country is expected to finish the year on a high note, thanks to the growth in international tourist arrivals.

Here’s how the rate evolution breaks down:

• Rate Hike: according to Lodgify’s study, there’s been a 3.5% increase in the Average Daily Rate (ADR) of accommodations compared to 2022, particularly during the off-peak season.
• Higher Profits from Direct Bookings: direct bookings are raking in hosts an average of €179 per night, which is 33% more than bookings made through online platforms.
• Occupancy Rate Drop: the occupancy rate has fallen by 2.5% this year compared to the same period last year. In 2022, the occupancy rate was 55.66%, while in 2023, it’s at 54.32%.
• Shorter Stays: a slight reduction in the average length of stays in holiday rentals is expected this year, down to 4.96 days, compared to 5.31 days in 2022.
• Changing Demand: the rate increase has led guests to shorten their stays, helping hosts fill their booking calendars. However, this has led to a drop in the average occupancy rate. Despite that, this transformation is still seen as positive in the sector.

Factors affecting rental prices

It’s important to consider the factors affecting rental costs, which can vary based on:

• Rising Demand: demand is still on the upswing due to the high cost of purchasing homes. This allows owners to charge higher prices.
• 2% Rent Renewal Cap: this cap prevents owners from significantly increasing prices between contracts.
• High Prices in Capital Cities: 2023 started with high rental prices, especially in major cities like Valencia, Barcelona, Málaga, and Alicante, where prices have exceeded inflation rates.
• Rental Market Shortage: the decline in the number of rental homes in cities like Palma de Mallorca, Barcelona, Málaga, and Madrid exceeds 40%. This is due to high demand and state measures that cap prices and create legal uncertainty in the sector.
• Short-Term Rentals: short-term rentals have seen a 200% increase in the last year. This option allows property owners to make a profit without losing the long-term availability of their homes.

These factors combined are shaping the current rental market dynamics in Spain in 2023, characterised by rising prices and increasing demand due to challenges in home buying.

The Value of Direct Bookings

How do direct bookings affect the Average Daily Rate (ADR)?

Direct bookings have a significantly positive impact on the Average Daily Rate (ADR) for holiday rentals in Spain. Compared to bookings made through online platforms (OTAs), direct bookings through the host’s website generate substantially higher revenues.

• The numbers back this up: the average ADR between January 2022 and June 2023 for OTA bookings was €134.56, while direct bookings through the host’s website averaged €179.08, a 33% increase.

This data supports the trend in the hotel industry to prioritize the benefits of direct bookings, emphasising that having a personalised holiday rental website can be a cost-effective investment, with low costs starting at around €10 per month.

Holiday Rental Web Platforms

The proliferation of online platforms has completely transformed how travellers find accommodations, offering a wide range of options worldwide. These platforms have not only revolutionised the industry but have also democratised access to the tourism market for property owners, which was traditionally dominated by hotels.

In the Spanish tourism sector in 2023, holiday rental bookings are distributed across various channels. While Airbnb pioneered the holiday rental revolution, Booking.com stands out as the leader in reservations in the country, accounting for 39% of the total, while Airbnb holds 32%. However, platforms offering Channel Manager services, such as Holidu, are gaining popularity in the country as they allow hosts to list their properties on multiple channels and manage them all in one place, saving them a lot of time.

Surprisingly, the third-largest segment of bookings consists of direct bookings, accounting for 28% of the total. This suggests that property owners and hosts are increasingly opting for direct reservations from guests, thereby avoiding the commissions typically charged by platforms, which are usually around 15%. This shift reflects a trend towards seeking alternatives to maximize income and reduce costs associated with holiday rentals.

In our magazine section, you can find detailed information about these platforms and the most popular ones for holiday rentals in 2023.

Predictions for future rates

Several factors are influencing the market rates, and to predict their behaviour, we must consider factors like:

• A Growing Holiday Rental Sector: international tourist visits have surpassed 2019 levels, reaching a historic high.
• Destabilization of Rates: the trend points towards rates stabilizing, with price increases during the off-peak season. This could be a strategy to maintain year-round income.
• Occupancy Rates and Length of Stays: we’ve seen a trend towards shorter stays compared to previous years.
• Impact of Accommodation Type: single-family homes, like villas or country houses, experience a higher rate of growth in the summer compared to apartments or hostels, suggesting more seasonality in these types of properties.
• Direct Bookings vs. Online Travel Agencies (OTAs): direct bookings through accommodation websites generate higher revenue for owners compared to reservations made through online booking platforms (OTAs) like Holidu or Rentalia.
• Booking Lead Time: there has been an increase in reservations made more than 3 months in advance in the early months of the year, possibly due to pandemic-related uncertainty and other global factors. Last-minute bookings (less than 21 days in advance) are still common during the high season.

In summary, Spain’s holiday rental sector is performing well in 2023, with stable rates and some increases during the off-peak season. Occupancy rates and length of stays are fluctuating, but the summer months are expected to remain strong.

How Does The Accommodation Type Influence Rates?

In the debate about whether to invest in a house or an apartment for your holiday rental, here are some key points to consider:

• Accommodation Choice: when considering an investment in holiday rentals, you have to decide between a house or an apartment.
• Rate Difference: statistics show that single-family homes for holiday rental have a 60.48% higher Average Daily Rate (ADR) than apartments with the same purpose.
• Purchase Prices: when examining data from Tinsa and Mitma regarding new construction homes in Spain, it’s revealed that the purchase price of a single-family home is 65.15% higher than that of a similar-sized apartment.
• ADR Seasonality: single-family homes experience a more pronounced increase in ADR during the summer months compared to apartments, possibly due to the preference for properties with gardens and pools during the high season.
• Host Preferences: the choice between a house and an apartment depends on the specific case and the host’s preferences. Some seek stable cash flow throughout the year, while others are willing to deal with fluctuations if it means higher earnings during the high season.
• Economic Considerations: if you don’t already own a single-family home and need to purchase one, the price is usually approximately 65% higher than that of an apartment, although this could be offset by higher profitability.

The choice between a house and an apartment for holiday rental depends on factors like personal preferences and financial goals. Before making a decision, it’s essential to perform accurate profitability calculations using appropriate tools.

Does the length of stay matter?

Despite the increase in average rates, there are doubts about whether we’re genuinely benefiting in Spain. As a result of this increase, there has been a slight dip in the occupancy rate this year, with an average drop of 2.5% up to June. However, there’s no reason to panic, as this is considered a natural adjustment in the post-COVID era and within the context of global economic cooling. Additionally, we should remember that the strong months in terms of occupancy in Spain are historically July and August.

Now, let’s explore more details about the length of stays and how this can influence the holiday rental market.

Occupancy Rate

• The occupancy rate has experienced a slight decline.
• In March, this decline was more pronounced, going from approximately 60% in 2022 (57.52%) to around 50% in 2023 (53.25%).
• This decrease is seen as a natural adjustment after the post-COVID enthusiasm phase and in the context of global economic cooling.

Length of Stays

• Most hosts prefer longer stays, typically 30 days or less, due to reduced check-ins and check-outs.
• An average stay duration of 4.96 days is projected, slightly lower than the 5.31 days in 2022.
• The booking distribution shows that medium-length stays (4-7 days) and longer stays (8+ days) are more common during the summer.
• During Easter, 4 to 7-day stays experience significant growth.

Length of Stays by Accommodation Category

• Luxury accommodations tend to have shorter stays, with 18% of stays lasting 1-3 days and 11% lasting over a week.
• In the premium category, longer stays (8 days or more) make up 25% of bookings.
• Increasing the minimum stay to a week can be beneficial for premium accommodations.

Length of Stays by Booking Channel

• Reservations of more than 8 days are mostly (53%) made through the accommodation’s website (direct bookings).
• Direct bookings are commission-free, making them attractive for accommodations looking to base their business model on longer stays.

In conclusion, the occupancy rate has seen a slight decrease in 2023, but it’s expected to increase in the near future.

Booking lead time

During the months of January and February 2023, there has been a noticeable shift in booking lead times for holiday rentals in Spain. Compared to the previous year, approximately 50% of bookings were made more than 3 months in advance, a significant increase compared to the 32% in 2022.

This unusual increase could be related to the ongoing uncertainty caused by the COVID-19 pandemic and other factors like the conflict in Ukraine. In addition, bookings with less than 21 days of lead time consistently account for around 40% of the total, with a peak extending from June to November.

Booking lead time also influences:

• The average length of stays.
• Bookings made with less than 20 days of lead time are usually for short stays (less than 4 days), which could be seen as impulsive purchases.

On the other hand, bookings made with more than 3 months of lead time tend to last around 8 days or more than a week, which could be useful for planning promotion strategies, like Google ad campaigns.

Primary destinations for international visitors 

According to a report from the National Institute of Statistics, the most visited destinations this year are as follows:

• Balearic Islands: they take the top spot in tourist arrivals in May, with 21.9% of the total. They’ve experienced a 10.2% increase in tourist arrivals, with Germany (31.3%) and the United Kingdom (29.0%) being the main source countries.
• Catalonia comes in second, very close behind, with 21.8%, followed by Andalusia in third place with 14.7%. Catalonia has seen a 21.7% increase in the number of tourists, receiving nearly 1.8 million, with France (21.9%) and the United States (11.0%) as the main sources of visitors.
• Andalusia is the third primary destination, with over 1.2 million tourists and a 16.5% increase, led by the United Kingdom (25.5%) and France (11.4%).
• Other regions are also experiencing increases, with a 26.3% rise in the Valencian Community, a 23.3% increase in the Community of Madrid, and a 9.7% rise in the Canary Islands.

In the cumulative data for the first five months of 2023, Catalonia, the Canary Islands, and Andalusia are the top tourist-receiving regions, with significant increases compared to 2022.

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