Investing in Luxury Vacation Rentals

Real estate is a great hedge against inflation. As inflation rises, so do property values.

But market cycles are getting shorter and growing increasingly unpredictable, with most commercial real estate (CRE) and development trends facing mounting downward pressure.

Anyone who claims otherwise is selling a false sense of certainty.

Case in point—the Harvard Business Review: U.S. Commercial Real Estate Is Headed Toward a Crisis

A bit dire? Maybe. But it’s worth serious consideration. Because it’s not just in the office sector.

A lot of the economic trends CRE investors have been relying on for years—across multiple different asset classes—just don’t hold up anymore.

4 out of the 5 sectors in the NPI have been in the negative for years. 

I know it’s not fair to generalize, but it’s a pretty clear reflection of the challenges most CRE asset classes are up against in today’s market, and where things are headed.

And that’s why we love the luxury SFL asset class.

• It consistently outperforms traditional CRE through downturns to recoveries.

• Under the right deal structure and operating model, it even cash flows in doomsday scenarios like a pandemic.

• And when it comes to longer-term growth, it outpaces lower segments by leaps and bounds—to the tune of 60%+ since 2019 according to JP Morgan’s private banking report.

At the end of the day, the COVID pandemic proved something big. 

When most real estate took a hit, the right luxury SFL assets in the right markets not only held their value better than any other asset class—they thrived. 

And that says a lot.

Few, if any, other real estate asset classes have shown this level of resilience under that kind of pressure.

It’s the ultimate risk-adjusted asset class.

But why?

First, let’s talk about why this asset class is so resilient.

It’s all about the buyer demographic.

Luxury vacation homes are accessible only to ultra-high-net-worth (UHNW) individuals—the top 0.1% of the world’s wealthiest people.

And here’s what makes this group unique: they don’t just survive economic downturns; they often come out of them even wealthier.

Why? Because they have highly diversified investments, ample liquidity, and the flexibility to pivot when markets shift.

So, while the average investor might be forced to sell assets or cut back on spending, UHNW individuals are in a position to capitalize on opportunities.

Now, let’s talk about luxury spending patterns.

One of the only things that slows down UHNW buyers from splurging during a downturn isn’t a lack of wealth—it’s social perception.

In tough economic times, there can be a stigma around spending lavishly when others are struggling. But once that stigma fades, luxury spending tends to bounce back fast—and even stronger than before.

This is the reason Bernard Arnault, CEO of LVMH (Louis Vuitton, Dior, etc.), saw his company’s value nearly double in 2021. As soon as luxury spending became “acceptable” again post-pandemic, demand skyrocketed.

And this phenomenon is also true in luxury SFL markets, where buyers and sellers mostly operate independently of the usual macroeconomic pressures, and where affluent travellers are the first to return after economic uncertainty. .

Now, let’s discuss why luxury vacation homes hold their value so well.

Unlike other commercial real estate assets, where valuation is tightly linked to rental revenue, luxury vacation homes operate a little differently.

Their value isn’t just about income potential—it’s also about asset appreciation.

That means they offer downside protection similar to the single-family rental (SFR) market but with even stronger long-term growth potential.

Luxury SFL assets in high-barrier-to-entry, outperforming markets will command significant and stable growth in intrinsic value as much as 60% faster than non-luxury homes—completely independent of yield.

What’s more, luxury SFL assets can also generate cash flows akin to boutique hotels as a significant second value driver, with their own multiple reflecting their distinct contribution to valuation. 

This unique hybrid model offers resilience and risk-adjusted upside that most real estate investments don’t.

Sure, any asset class can take a hit in a downturn. But if luxury vacation rentals are struggling? Chances are, everything else is struggling even more.

Bottom line: In the right markets, luxury vacation homes are one of the best hedges against volatility.

They combine strong appreciation, steady demand, and built-in protection from market swings—making them a standout choice for long-term, high-value growth.

Apart from the obvious liquidity requirements to purchase a $4,000,000-plus vacation home in a market where leveraging the asset is mostly impossible, there are three main barriers to entry that offer established players in the premium and luxury market segments a significant advantage and protection, by discouraging new investors to enter the market.

Generating strong profits with the luxury vacation rental asset class requires a specific knowledge on how to create real value in luxury real estate, and a rare savoir-faire for doing the same in the rental segment.

Sourcing an asset with rare intrinsic value, that also has high-yield improvement potential requires skill that goes beyond the spreadsheet.

And implementing the design and operational improvements that will drive profits at the property level isn’t done in a boardroom.

It’s done by working intimately with each asset.

Our global expertise spans over 35+ markets, across 16 different countries, and we have a combined 20+ years of experience evaluating hundreds of millions worth of luxury real estate opportunities, design projects, and booking activity.

From how we source assets, to prioritizing which design and operational elements to implement, how we market and distribute our properties globally, to how we recruit and build dedicated local operations teams, etc... Our team has spent years of trial and error, improving on and fine-tuning every aspect of our operation. And we're still innovating every day.

Our processes are totally unique to us.

But most importantly, it’s the results that matter. And our assets outperform 99% of all the highest-grossing luxury vacation rentals in each of our operating markets, and globally — including those managed by firms that are larger and have been around longer.

The number of operators with a proven track record of generating strong yields at the asset level in this segment is rare because of the asset class’ unique nature.

And because it takes a heck of a lot of time, money, and experience to learn how to create the most value across all levels of a luxury vacation rental investment life cycle.

Individual investors trying to enter the luxury vacation rental market will do so at a significant disadvantage due to the established economies of scale currently being exploited by the existing leading firms.

A luxury vacation rental operation requires a robust operational structure that runs 24 hours a day, seven days a week, 365 days a year.

For instance, let’s just use one aspect of the luxury vacation rental operation: Booking management.

At Jack Laurier, over 30 percent of our bookings are confirmed during the hours where most people around the globe are sleeping — Without this 24 hour coverage, this opportunity is lost. 

To properly cover this 24 hour period, successful teams must be unencumbered by any inexperienced personnel, and have multiple, highly-skilled professionals who are expertly trained in luxury sales and service to be on call over different shifts. The same also applies to almost every link in the luxury vacation rental value chain.

On top of that, you have to design, stock and service the luxury vacation home according to what commands and converts the highest ADR.

Established luxury vacation rental operators (like us) will also have experienced interior designers on their team, and have valuable vendor relationships with luxury suppliers. We have access to wholesale rates and large discounts that individual investors or potential new entrants simply don’t have access to.

The clear benefit to established teams is that they can onboard new properties faster and at less cost, and can manage a larger number of bookings for many different properties at any time (albeit, a top manager will never have too many properties in the same market in its portfolio).

Alternatively for individual investors, the significant amount of time, expertise, and financial resources required to release a new property all while building successful teams will greatly shrink margins, and ultimately deter them from entering the market.

There is significant amount of time and financial resources required to build a successful team, there are also considerable marketing and set up costs associated with onboarding a luxury vacation home and preparing it for release. 

At Jack Laurier, we invest a lot of resources into the onboarding of a new asset rental operation.

It goes into time, market research, finding the deal, travel expenses, photography, videography, post-production, branding, ad graphic & web design, professional copy, display & media placements, custom booking funnel creation, interior design and FF&E plans, dedicated staff sourcing, recruiting and operational workflow training, etc…

Almost every single aspect of the luxury vacation rental operation is either a marketable advantage that increases the property’s perceived value in the marketplace, or it is simply wasted potential.

And poor quality marketing assets, or uninspired design elements can also decrease a property’s perceived value, and in return, deteriorate its overall potential. 

As a result, most investors are either deterred from entering, or grossly underestimate these costs, cut corners, or aren’t able to properly compete with the market leaders and are pressured to exit their positions early.

Seven-figure luxury vacation rentals are rare—for a reason.

Most markets can’t support returns at that level. Most owners prioritize personal taste over profits. And most property managers focus on keeping owners happy, not maximizing asset-level profits.

Traditional real estate strategies? They don’t work here.

Success in this space isn’t about spreadsheets—it’s about execution. It takes precision, exclusivity, and strategies most investors don’t even know exist.

For those who do, the luxury vacation rental market isn’t just rare—it’s one of the most lucrative plays out there.

So, while the segment is uniquely insulated by asymmetric barriers to entry, it’s also underdeveloped and lacking in competition.

At Jack Laurier, we know this because we prove its profitability day in and day out for our property partners.

Our properties outperform 99% of top luxury rentals worldwide, generating up to 10x more profit than local managers and major firms.

Under the right market conditions, a $4M asset at a 6X GRM with a 50%+ margin can pull in seven figures in just a few years—purely from cash flow.

And that’s before factoring in:

• 8%+ CAGR in top luxury markets

• High-yield property improvements

• The added value of a multi-six-figure operation

There’s never a “perfect” time to invest in luxury vacation rentals.

This asset class is incredibly resilient, and the biggest wins come from compounding value over time—just like any great long-term investment.

The smarter your reinvestments, the faster your equity grows.

Waiting for a downturn might seem strategic and tempting, but in the best luxury SFL markets, big dips are rare and short-lived. And when they do happen, everyone’s fighting for the same few deals, which can slow you down—or make you miss the window entirely.

Luxury vacation rentals are still an emerging asset class, and very few operators know how to truly maximize returns.

Which is enough to keep the segment well protected… at least for now.