Outer Banks luxury rental market shows economic divide

Every January, reservations start pouring in for summer vacations on North Carolina’s Outer Banks.

The Outer Banks has roughly 10,000 rental homes, ranging from modest accommodations to massive homes with 10 bedrooms or more in places such as Duck.

In January, Lee Nettles, the executive director of the Outer Banks Visitors Bureau, starts to see the trends trickle in, an early snapshot of the summer season ahead.

“January is a prime booking time so we get an indication of how the season is going to go,” said Nettles, noting that some rental companies book 60% of their summer business in January.

This season, he saw interest in the biggest houses was slightly up, and interest in the smaller homes was slightly down.

In other words, the discussions about a K-shaped economy, with the wealthy getting wealthier and the lower incomes feeling more economic stress were playing out in reservations on the Outer Banks.

Nettles calls it “the bifurcation with the economy.”

“Households at $100,000-plus are spending much like they have before,” he said. “As you work your way down, if I’m a one- to four-bedroom house away from the oceanfront, I can wait until closer to the day of travel.”

Nettles said the fact that smaller homes are not renting as fast as the past could be a reflection of economic uncertainty or that there is still plenty of availability and so people can wait, perhaps hoping prices drop.

In a way, it’s not a huge surprise. The larger homes tend to be on the ocean, so demand is intense. Also, someone looking for a 10-bedroom place is usually coordinating with other families, so planning is essential.

Given that, if you’re needing a 10-bedroom beachfront rental and waiting until May to book, you are likely to be out of luck.

“There seems to be a strong correlation — the larger the home the higher the occupancy percentage,” Nettles said.

Nettles said that he was at a recent Visit North Carolina conference in Asheville and others were seeing the same patterns. How that plays out in each market depends, of course, on their potential customers.

“So it kind of depends on your market? Are you more luxury focused?” he said.

The Outer Banks is different than many vacation locales in that there is basically no convention traffic, so the rental snapshots are a strong indication of what’s to come.

Nettles remains confident about the season ahead.

“I don’t think it’s time to sound the alarm,” he said. “People are just kind of waiting a little bit longer to make those decisions.”