The trend of themes in vacation rentals is niche, but popular — is it also a viable investment in the long-term?
This year has been an eventful one for short-term rentals around the world: The boom-bust saga and seeming unending fights about new regulations.
One aspect of the business that gets overlooked is themed rentals. Airbnb’s Barbie House in Malibu, the Hobbiton in New Zealand and Booking.com’s latest Willy Wonka-inspired rooms in Los Angeles and New York City are all examples of themed accommodations. Often categorized as “unique stays” for data purposes, these are becoming a sub-category of their own.
Orlando — Themed Land of Disney, Universal
Let’s start with Orlando. By some rough estimates, 79% of Orlando’s rental market consists of entire home rentals. Kissimmee, Florida, which is 30 minutes south of Orlando with over 30,000 vacation homes, is touted as the vacation home capital of the world.
It is mandatory for those operating in this busy market to differentiate themselves. And if one can hitch a ride on the backs of Disney World and Universal Studios – why not?
“Themed rentals put you at the top of the category, and you’re just piggybacking off of Universal Studios’, Disney’s and SeaWorld’s marketing dollars to bring people to the area and your property sits at the top and is getting rented,” said Josh Luttrell, co-founder of Home Theme Orlando, which specializes in theme-based renovations.
Luttrell is also a realtor in the area who works exclusively with investors interested in themed short-term rentals. His company, Home Theme Orlando, does room renovations to turn them into specific themes inspired by Star Wars, James Bond, princess castles, superheroes and more.
Home Theme Orlando, founded in 2020, manages 30 themed properties, has done 60 full-home renovations, and about 200 individual rooms.
Oliver Wallace, CEO of Shine Villas, which manages 100 properties in and around Disney World, acknowledges the benefits of Orlando.
“It’s a very busy market with around 60,000 vacation rental properties,” Wallace said. “So we tell owners they’re going to be full at Christmas, at Thanksgiving, and spring break. Orlando never really has an off-season because the weather’s great, and here we have resorts that are built that can only ever be used for short-term rentals, servicing the Orlando theme park family destination.”
Disney’s Good for Dollars
If you’re wondering how these themed rentals are for business, let’s break this down: The Barbie house in Malibu, owned by a private family estate, which Airbnb listed for a limited period this summer, may be valued at $10 million due to its connection with the iconic doll, according to Ruby Home, a luxury real estate firm in California.
These rentals are good for branding too: The Barbie house was Airbnb’s most popular listing ever with over 250 million social media impressions.
That’s why Luttrell thinks themed rentals are a separate asset class. He noted that some properties managed by his firm had 100% occupancy even in a down market.
“You’re at about double the average nightly rate and about 85% to 95% occupancy throughout the year for themed homes, whereas other homes on the rental market year were at 30% to 50% occupancy, if lucky,” said Luttrell.
According to AirDNA’s monthly report for October, occupancy among rentals in the U.S. hovered around 56%. Most data firms do not cover themed rentals as its own category, and they often get bucketed as unique stays, along with campers and RVs, tiny houses, farm stays, and campsites.
There were over 52,000 unique stay listings last month in the U.S., an increase of 122% compared to October 2018 and 14% year-over-year, according to AirDNA.
The Risks in Themed Rentals
There are other operators who believe that it may not be a sound investment.
“I think there’s a flock right now to create experience. And I think it’s a bit over done. They’ve got all this stuff,” said Corey Ashton Walters, founder and chief executive officer at Here, a Miami-based vacation- rental investment company.
What happens when the owner wants to sell a themed property?
“In the last couple of years, Airbnb said it’s going to push unique stays, people heard that and thought, well, I’m just gonna put a tennis court in the backyard, or I’m gonna put a movie theater in the basement. I think that’s a trend that’s gonna die,” said Walters.
“And what makes short-term rental such a great asset class is that at the end of the day, it’s a house that somebody could always live in,” Walters added. “So if a market shifts and you need to sell the place, you then can sell a home to somebody else that wants a second home or wants to live in this vacation destination. But as soon as you transform it into a theme park, who’s going to buy that home if you want to sell it or have to sell it.”
Vacation-rental software providers including Hostaway and Lodgify warn hosts in their dos-and-don’ts against going too far. These include mundane details like getting the color scheme wrong to more grave ones like compromised safety.
Enter the Investors
In a market that’s getting increasingly overcrowded, the bar for what’s unique and different is constantly changing. In 2022, Airbnb invested $10 million dollars in “absurd buildings” shaped like everything from a giant fossilized snail to a cheese wedge.
The uniqueness comes at a price that only a few can afford.
Both Luttrell and Wallace’s firms manage themed properties for investors who buy them. And they both work exclusively with investors who are prepared to pay the price.
“Almost every single house we’ve renovated is not somewhere one can live with a family,” Luttrell said. “These are 100% investment properties meant to be rentals, and never to be lived in by folks who own it.”
Luttrell cited the example of a home his company was interested in closing for $1.1 million dollars.
“We’re in a down market right now, and even in that you’re still making $30,000 to $50,000 per year. That’s the kind of range we’re talking about. But remember, that themed homes are a lot of work and not everyone can do it well,” he said.
Wallace added that in addition to being an expensive affair, the concepts get outdated over time, and require additional investment to keep the themes relevant and contemporary.
“You have to remember that theming still has a shelf life, something that was cool 20 years ago isn’t anymore,” Wallace said. “And if you want to compete you need to redecorate every X number of years, and I think that works best with investors who are looking at this as an investment in the long term.”
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Photo credit: The Hobbiton Movie Set in New Zealand was briefly available on Airbnb. Source: Airbnb