Impact of 2019 NCAA Tournament on Minneapolis Vacation Markets
An event that draws in over 100,000 out-of-state visitors, plus generates over $140 million for the local economy, is one that can have resounding impacts on a vacation rental market. The Final Four — the culmination of the NCAA March Madness college basketball tournament — is one of those events. Not to mention, when considering the average ticket price of one semifinal game ($1,123) and the average price of a hotel room ($350), it becomes clear this isn’t an average traveler demographic.
Having hosted the Final Four in 2019, Minneapolis experienced significant shifts in its accommodation market. AllTheRooms Analytics has dived into the comprehensive vacation rental data to conduct an in-depth event analysis. Here’s how the event shook up the Minneapolis vacation rental markets.
Few Chance Hosts
One of the most unique takeaways from the 2019 NCAA tournament is the surprisingly low number of chance hosts. Chance hosts can be defined as opportunistic property managers who decide to publish listings just days or weeks before an event. They’re often first-time hosts, and they often operate on a high risk/high reward formula — listings are priced higher than those of more established hosts, but occupancy rates tend to end up lower.
When conducting standard event impact analysis, we traditionally see a significant inflation in the supply of vacation rentals in the days and weeks prior to the event. This theme holds true for events like the Super Bowl, the World Cup, music festivals, and even unexpected heat waves.
However, in the case of this year’s Final Four and National Championship, hosts in Minneapolis were far less proactive about capitalizing on the big-ticket event. In the weeks prior to the Final Four, the supply of active Airbnb listings in Minneapolis averaged around 2,000 at the beginning of March, and 2,070 at the beginning of April. The market supply of Airbnb peaked at just 2,105 on April 3rd — a mere 1.6% increase.
What’s more, throughout the duration of the Final Four and National Championship (from April 6th to April 8th) and beyond, the supply of active listings actually decreased. AllTheRooms Analytics’ algorithms projected the supply to continue a positive trajectory, but the real data shows a different story.
Effect on Occupancy Rates
As seen by the graph below, occupancy rates follow a predictable weekly trend. Before the tournament, early-week averages for Minneapolis hovered around 30%, and the gradual upward swing resulted in weekend averages around 43%. These numbers are about on par with other cold-weather destinations for mid-winter.
Once the Elite Eight round ended on March 31st, Minneapolis occupancy rates bottomed out on Monday, April 1st at 30%. Throughout the week, occupancy rates shot up and peaked at 67.7% on Saturday, April 6th, the night of both Final Four games. After that, they began a quick downward trajectory and plateaued on the following Wednesday, April 10th.
During the impact period, the Minneapolis vacation rental market averaged a 57% occupancy rate. If it were not for the event, projections for the same time period would have averaged 45%. Thus, it’s fair to conclude the tournament caused for a 12% increase in vacation rental occupancy rates.
Effect on ADR and RevPAR
Up until this point, the impacts we’ve seen of the NCAA tournament on occupancy rates and supply have been relatively marginal. A 12% increase in occupancy rates and a 1.6% increase in supply are numbers that don’t exactly cause hosts to reconsider their management strategies. The effects on ADRs and RevPAR, however, may have hosts thinking otherwise.
Throughout the most impactful period of the event, ADRs in Minneapolis shot up to an average of $241.13, an amount 68% higher than what our algorithms projected were it not for the tournament ($142.77). The best performing day of the entire event was Saturday, April 6th when ADRs peaked at over $291.
The statistics for RevPAR (ADR multiplied by occupancy rate) tell an equally compelling story in regards to Minneapolis’ profitability during the major event. In fact, because RevPAR is a product of both ADR and occupancy rate, it’s more indicative of a listing’s success. During the 6-day event period, RevPAR shot up over 126% from $63.97 to $144.82. Only in very rare circumstances are vacation rental hosts able to realize this large of an increase in the revenue earned per available room.
Effect on Overall Gross Revenue
Arguably the most important key performance indicator in this study is gross revenue. Gross revenue earned by vacation rental managers is a metric that not only gauges the health of the short-term rental market, it also shows how an event like the NCAA tournament can impact the finances of an entire metropolitan market (making it interesting for government agencies and DMOs).
Taken in sum, Airbnb hosts in Minneapolis earned $1,771,800, or an average of $295,300 per night from April 4th to April 9th. By contrast, if the tournament were to have not occurred, hosts would have likely earned around $130,820 per day, or $784,920. In effect, the NCAA tournament provided 125% more short-term rental revenue than non-event projections.
AllTheRooms’ data for Minneapolis during the 2019 NCAA basketball tournament shows how an event of this caliber can impact a vacation rental market. An interesting takeaway for hotels, governments, and DMOs is the surprisingly small number of listings added to the market in anticipation of the Final Four and the National Championship.
Whereas many markets become inundated with chance hosts prior to events, this wasn’t particularly the case in Minneapolis. This is likely due to the relatively small size of the city. With a population of under 500,000, Minneapolis simply doesn’t have enough potential hosts to overwhelm the rental market. Thus, based on our comparison between Atlanta and Minneapolis during the Super Bowl, it’s fair to assume that hotels and other competitors are more protected against the vacation rental market in smaller cities vs. larger cities.
Even though the supply influx was underwhelming, Airbnb hosts who did list their properties during the tournament gained substantial earnings. In fact, each of the 1,995 active hosts in Minneapolis earned an average of $888 over just a 6-day time span. While not as lucrative as other events, the NCAA tournament certainly has the capacity to shake up the vacation rental market of any host city.