Decline of remote work spells gloom for villa holidays
And so, the per-home yield is getting better even though the occupancy may not be as high. Average Room Rates or ARRs are getting better because of the improved quality of inventory. ARR is a metric hoteliers use to calculate how many times a property is occupied in a month and what the average cost per room per night is.
There are no official estimates of the size of the luxury villa segment. Parulekar estimates there would be anywhere between 2,500 and 3,000 high-end and luxury villas in the country, and SaffronStays has about a tenth or 290 of them.
One industry estimate— though by a builder and rather rosy—suggests, in 2023, the overall branded rental villa market stood at $329.6 million and is expected to grow at a CAGR of 33.2% in years to come. Axon Developer, in its report, said this segment is slated to reach $1,377 million by 2028. But the business of alternate accommodations has become steady.
Online travel major Booking.com’s Asia Pacific managing director Laura Houldsworth, in a recent conversation with Mint, had said a third of the company’s global bookings come from this segment.
Villa owners, who typically share 30% of the revenue with these operators, are now seeing lower returns from their properties. After operational expenses, the owners earn about 50% of the revenue from the days their villas are occupied.
The operators said they have been able to offload some problematic or older inventory where the owners have not been focused on or interested in investing in maintenance and upkeep.
For instance, StayVista is trying to keep away from budget homes in general. “We tell new owners not to expect too much from their holiday homes, but the fact that their holiday homes will be well maintained and yield positively at the end of the month rather than give them negative returns in the form of repairs and maintenance expenses when the home is left unused,” he added.
“When they come there, initially, they are kind of nervous about giving their properties to people who are not their friends or family, but later, as the asset gets older, they find it a little more difficult to deal with the asset because the novelty value of it has gone down and now it requires a lot of repairs and restorative work,” added Damani. The company is now looking at better, newer developments all over the country where “we are also able to suggest more realistic projections to our owners”, he said.