Horseshoe Bay, Texas

Horseshoe Bay, positioned along the scenic shoreline of Lake LBJ, has recently gained attention as a desirable destination for short-term rentals. The area attracts a blend of tourists seeking leisure activities and residents wanting a weekend retreat. Its natural beauty, access to water activities, and proximity to the Texas Hill Country establish a unique appeal for both guests and investors alike. In particular, the market has experienced an uptick in rental demand over the last few years, partly driven by the overall rise in remote work and short-term travel.

In 2023, the Average Daily Rate (ADR) for short-term rentals in Horseshoe Bay is reported at $310.4. The increase in vacation home purchases and an influx of tourists has further solidified the potential for profit in the market.

As of now, Horseshoe Bay's short-term rental market shows several critical indicators that provide insight into its performance:

• Average Daily Rate (ADR): $310.4
• Occupancy Rate: Approximately 62%, which is in line with other Texas lakeside markets.
• RevPAR (Revenue Per Available Room): The RevPAR can be derived from the ADR and the occupancy rate, placing it at approximately $192.25.
• Length of Stay: The typical guest duration ranges from three to five nights, suggesting the sector caters primarily to leisure travelers.
• Market Size: Short-term rentals account for about 20% of the total lodging market in Horseshoe Bay, indicating significant demand.

These metrics indicate that the market remains competitive, with room for growth, especially for new investors focusing on providing desirable experiences for guests.

Horseshoe Bay's short-term rental market has shown a steady increase over the last decade.

• 2013-2015: The market was relatively stable, with occupancy rates hovering just below 50% and ADR around $220.
• 2016-2018: A gradual increase in tourism and property investment was observed. The average daily rate rose to approximately $260, with occupancy rates exceeding 56%.
• 2019-2021: The demand for rental properties surged during this period, driven by families looking for short-term escapes close to nature. The ADR crossed the $300 mark, while occupancy rates approached 60%.
• 2022-2023: Post-pandemic recovery fueled a notable upward trajectory, with the current ADR at $310.4 and occupancy rates stabilizing at around 62%. The growth trend indicates a sustained interest in vacations that offer outdoor activities and relaxation.

Forecasting for the next five years, it’s reasonable to predict that occupancy rates will improve slightly due to ongoing marketing efforts from local tourism boards and an increasing emphasis on avoiding crowded urban destinations.

The investment potential in Horseshoe Bay for short-term rentals is significant due to its strong tourist draw and the current and projected growth in pricing. With an ADR of $310.4 and an occupancy rate of 62%, the calculations suggest that investors could potentially realize appealing returns.

• Monthly Revenue Calculation: Assuming 62% occupancy, the estimated monthly revenue for a property at this ADR is:

  • Monthly Nights Available: 30
  • Monthly Occupied Nights: 18.6 (30 nights * 0.62)
  • Estimated Monthly Revenue: 18.6 nights * $310.4 = $5,769.04

• Operating Costs: Typical operating expenses, including cleaning, property management, and maintenance, can range between 20%-30% of revenue. If we estimate roughly 25%, that brings monthly costs to about $1,442.26, leading to a net revenue of approximately $4,326.78.

Given that the average property price in Horseshoe Bay ranges from $500,000 to $750,000, with a cap rate of around 5-7% for vacation rentals in the area, investors can anticipate favorable long-term returns.

Horseshoe Bay showcases distinct seasonal trends that influence rental patterns:

• Summer (June – August): Peak season for short-term rentals as families flock to the lake for vacations. Occupancy rates tend to exceed 80%, and the ADR may increase due to high demand.

• Fall (September – November): Slight decline as summer vacations end. Occupancy rates hover around 55%, and rates drop by about 10-15%. Guests may still come for fall foliage and outdoor activities.

• Winter (December – February): A slower season, primarily driven by holiday travelers. The occupancy rate generally drops to around 40%, and properties may see reduced ADR.

• Spring (March – May): Rebounds as tourists begin to return, particularly during spring break. Expectations for occupancy reach 65% as visitors look for outdoor and lake activities.

Understanding these seasonal trends can inform pricing strategies and marketing efforts, optimizing revenue across the year.

Different property types exhibit varied performance metrics that investors should consider:

• Single-Family Homes: Typically commands the highest ADR due to their spaciousness and amenities. These homes offer family-friendly accommodations, often leading to a higher occupancy rate during peak seasons.

• Condos and Townhomes: More affordable than standalone homes, these properties attract younger audiences and couples, especially in off-peak seasons. Their ADR is lower, averaging around $250, but occupancy rates can be competitive due to lower upfront costs.

• Luxury Rentals: High-end properties with premium features and amenities can exceed $500 in ADR. These properties cater to affluent travelers and have year-round appeal, particularly during major events in the area.

Understanding the performance of each property type can help investors target their investments effectively.

Research into guest preferences highlights several key amenities that drive bookings in Horseshoe Bay:

• Water Access: Most guests prioritize properties directly located near the water with easy access to boating, fishing, and swimming.

• Outdoor Spaces: Features such as decks, patios, pools, and outdoor kitchens are highly sought after, as guests desire social spaces for entertainment and relaxation.

• Pet-Friendly Rentals: With the increasing trend of traveling with pets, properties that allow animals tend to have higher occupancy rates.

• Modern Conveniences: High-speed internet, smart home features, and updated kitchen amenities are vital, as remote work gains popularity.

Understanding what guests value enables property marketing to align with these preferences, improving occupancy rates.

Horseshoe Bay has regulations governing short-term rentals that prospective investors should be aware of:

• Permitting: Property owners must obtain a rental permit to operate short-term accommodations legally. This typically involves adhering to specific zoning requirements and safety inspections.

• Tax Obligations: Investors are responsible for collecting and remitting hotel occupancy taxes, which can add approximately 6% to rental costs.

• Homeowner Association Rules: Many neighborhoods have specific HOAs that enforce rules about short-term rentals; ensuring compliance can be critical for investment success.

Current regulations are relatively flexible compared to urban areas. However, ongoing changes could impact future investment potential.

Certain neighborhoods in Horseshoe Bay are more favorable for investment due to their amenities, accessibility, and market demand:

• Horseshoe Bay Proper: This area offers many high-end properties with immediate lake access, often seeing higher occupancy rates.

• Lakepoint: With a mix of newer developments and classic homes, this neighborhood is popular with families and short-term renters who value amenities like parks and waterfront access.

• Marble Falls: Just a short drive from Horseshoe Bay, this area offers budget-friendly rental options, attracting price-sensitive guests who prefer to venture out for activities.

Understanding the nuances of each neighborhood helps investors choose properties that align with their target market.

The future of Horseshoe Bay's short-term rental market appears positive, driven by several contributing factors:

• Increased Tourism: The outlook for tourism in Horseshoe Bay is optimistic, with more visitors expected to explore the Texas Hill Country, leading to sustained demand for lodging.

• Economic Development: As local infrastructure improves, including restaurants, shops, and recreational facilities, the area's appeal will likely grow, benefiting short-term rental demand.

• Emerging Trends: The trend of remote work means more visitors might extend their stays, allowing opportunities for investors to tap into longer-term rental income during peak seasons.

• Sustainable Practices: Increasing awareness of sustainable tourism is leading properties to adopt eco-friendly practices that appeal to a growing segment of the traveler demographic.

Investors should remain informed about these trends to maximize their return potential while aligning their properties with guest expectations.

1. What is the average occupancy rate for short-term rentals in Horseshoe Bay?
The current average occupancy rate is approximately 62%, reflective of seasonal patterns and local tourism trends.

2. How much can I expect to earn from a short-term rental in Horseshoe Bay?
A property at the current ADR of $310.4 with a 62% occupancy rate can yield an estimated monthly revenue of around $5,769 before expenses.

3. Are there any specific regulations I should be aware of?
Yes, property owners must obtain a rental permit and adhere to local zoning laws while collecting hotel occupancy taxes.

4. What amenities are most valued by guests?
Water access, outdoor spaces, pet-friendly policies, and modern conveniences are crucial factors that influence booking decisions.

5. How does the property type affect performance?
Single-family homes typically achieve the highest ADR and occupancy rates, while condos and townhomes can attract a younger clientele.

Investors looking to enter the Horseshoe Bay short-term rental market should leverage this data-driven analysis to make informed decisions about property acquisition and management within this appealing Austin suburb.