Decoding The Luxury Vacation Rental Operation

Billions have been poured into vacation rental management—and billions have been lost.

The deadpool of well-funded PMs that have failed to sustain value or are now defunct is large enough to give investors pause.

But the real problem isn’t because the demand isn’t there. 

It’s because most traditional CRE investment strategies and operating models don’t work in luxury SFL.

For years, investors have ignored the fundamental market failure in the space, betting on transaction-driven models, assuming scale would eventually drive efficiency. 

This approach works in other CRE asset classes and marketplace tech, but it breaks down at scale in SFL management.

No matter how much investors have tried to force it, it simply doesn’t work, and leads to systemic underperformance. 

Why?

The traditional operating model has 3 inherent limitations for scale:

Over-scaling within the same market segment eventually dilutes performance per property. Sophisticated hotel investors always consider Areas of Protection (AOPs) for this reason.

Operators are not marketplace platforms.

Budget, mid-market, and luxury homes have distinct value drivers. Trying to manage them under one model creates conflicting marketing and operational demands, straining resources and inflating costs.

Applying a one-size-fits-all strategy to fundamentally different market segments doesn’t create efficiency, it erodes quality and margins instead of improving them.

The result?

❌ Travellers overpay for mediocre product with artificially inflated pricing

❌ Most properties underperform—even operating cash-flow negative

❌ Growth strategies end up scaling losses, not profits

It should go without saying, but opportunity lies in capitalizing on market failure, not exacerbating it.

This is exactly why we love luxury SFL. It’s a model that doesn’t need scale to succeed.

In fact, the opposite is true.

Value in our world is built on scarcity and rarity, not volume. 

And the best-performing assets aren’t commoditized, they are highly curated, distinct, and experience-driven.

Our team analyzes $2B+ in luxury leisure real estate each quarter, leveraging our proprietary market intelligence to assess properties, booking transactions, and overall market activity.

Here’s what most investors get wrong about evaluating luxury SFL markets:

1. The local hotel occupancy and ADRs have nothing to do with luxury vacation rental demand.

The group travel nature of the luxury SFL asset class places it in an entirely different search category for affluent travellers.

It might as well be a different universe.

Even when local luxury hotels top out at 50% occupancy rates and $1500 ADRs, it tells you almost nothing about how the market reacts to an individual luxury vacation rental. 

2. Comp occupancy and ADRs don’t mean much either.

Most luxury SFL rentals are burdened by rigid owner restrictions, who’d rather stay empty unless they get their ideal group or arbitrary price.

And frankly that’s just the start. 

Look closer, and you’ll see value erosion everywhere—from poor design choices to operational inefficiencies—compounded at every stage of the value chain.

So unless you’re looking at comps to refine positioning strategy, individual comp activity means very little.

3. Data aggregators fail in the upper market segments.

Often overlooking important aspects like asset value fluctuations, true ADRs booked, counterfeit occupancy, most available aggregated data leads to flawed assumptions and misinformed decisions.

Unfortunately, this is where most operators and investors get their initial data.

Ultimately, analyzing luxury SFL markets is a precision game.

That’s why we handle all market research, data collection, and regression analysis in-house—ensuring we operate on accurate, actionable data. [Learn more here.]

Through this process, we’ve identified 6 key market KPIs that matter most for uncovering hidden value and maximizing asset performance.

These KPIs cut through the noise, expose real demand, and reveal where true pricing power exists.

We break these down in detail regularly and are always happy to share insights. If you’d like to dive deeper, reach out to request access to our Executive Summary.

The luxury SFL asset class is a unique niche, and not all markets are created equal.

It thrives in a select few locations where the unit economics outperform exponentially—far beyond what’s possible elsewhere.

While lower segments rely on portfolio volume and price competition, top-tier markets offer higher pricing power, resilient demand, and significantly better margin potential.

But only for those who execute at an elite level.

Ultimately, success in luxury SFL isn’t about volume, it’s about precision, market expertise, operational excellence, and delivering lifestyle-rich experiences for discerning guests—and institutional-level returns for investors.

That’s the advantage we bring, and where others fall short.