It Pays to Plan Ahead
For Next Year's Vacation

September 22, 2004 -- Every August, John Tomlin, a banker from Midlothian, Va., packs up the car and, with his wife and children in tow, drives to Hilton Head, S.C., for two weeks of swimming and golfing. But this year Mr. Tomlin's vacation wasn't quite as leisurely: He was scoping out a condo for next summer. "We've looked at two or three places already," he says.

Mr. Tomlin didn't have much choice. For the last five years, the Tomlins had rented in Shipyard, a gated community with a pool, golf, tennis and private beach access, at a rate of about $1,500 a week. This year, by April, their condo was booked -- along with seemingly everything else on the island. "I've never had a problem getting what I wanted," Mr. Tomlin says.

In recent years, the sluggish economy meant that last-minute shoppers could pick up a good summer-home rental in May or even later. Now, with 2004 occupancy rates up 10% to 25% from last year, and next year expected by some to be even higher, there's a sea change underway. From the Hamptons to Hawaii, many procrastinators who had to settle for their second, third or even fourth-choice rental are booking their 2005 lakeside retreats and ocean views now.

Doug Foregger, chief executive of Country Village Real Estate, which handles 2,500 rental properties in five rural or resort markets, says 10 people a day walk into the Nantucket, Mass., office to inquire about next summer. To date, advanced bookings are up 25% from last year. "In Nantucket, we're expecting to be up 75% on pre-January bookings by the end of the year," he says. Tenants are lining up in Lake Geneva, Wis., too. Marcia Fox, director of rentals with Keefe Real Estate, which handles 60 properties in the area, says she has a 30-person waiting list for 2005. "I had a few requests last year," she says. "But nothing like this."

Payment Planning

Tenants satisfied with their summer accommodations often try to earn a return invitation with a burst of end-of-summer cleaning, effusive thank-you notes and gift baskets. But now, the tactics for securing next year's house range from putting down a reserve fee, usually a few hundred dollars, to signing a lease. Almost all rental companies and private owners require a deposit anywhere from $100 to 50% percent of the total rent, as well as a signed rental agreement, to book a year ahead. Cancellation policies generally refund a tenant's money in full if the landlord can re-rent the property, or charge a nominal fee.

This week, Caroline Owens Crawford is putting a $1,000 deposit down on a $30,000-per-month Nantucket summer home, even though she won't move in until August 2005. She found "the perfect house" last October, she says, a "weathered and wonderful" seven-bedroom home a block from the water, when she flew to Nantucket on a house-hunting mission for her employer, New York's Adelson Galleries. Ms. Owens Crawford needed a big, comfortable place to put up staff members working this summer at Adelson's satellite gallery. "I didn't want it to be like 'Survivor,' " she says. But when she went back in early winter to book the house, it was gone.

This summer, she and her colleagues are sharing what she calls a "funky bungalow." Among the quirks of the four-bedroom, one-and-a-half bathroom house are a low kitchen ceiling with a sign that says "Duck!" and rooms that flow into each other. "You have to run around in your towel in front of your colleagues," she says. So she is racing to lock down the house she fell in love with last fall. "Everybody's looking now," she says. "They think it's going to be more competitive next year."

By and large, roomy oceanfront properties at the top at the market are the ones being reserved a year in advance. Many renters booking ahead say they're trying to insulate themselves against the steep rent increases that marked this summer's hottest vacation-home markets. Chuck Diachenko and his three brothers have rented a Hilton Head home every summer for the past five years. But with prices having risen 10% a year -- to the point that they're now paying $13,000 a week for a six-bedroom, white-stucco beachfront home -- Mr. Diachenko says rents would soon reach a "choking point."

So, when his rental company offered to let them have the place next summer at current rent if he reserves now, Mr. Diachenko jumped on it. Locking in the rent with a 20% deposit was worth the chance that the vacation-rental market might soften in coming months, says Mr. Diachenko, vice president of sales for a Greensboro, N.C., hosiery company. "We're building our kids' memories."

Of course, gauging the market so long in advance is notoriously difficult. Demand -- and prices -- could still drop if the economy weakens. Prices, and their rate of increase, vary by region, too. But in the Hamptons on New York's Long Island, where annual price increases were as high as 20% this summer, brokers say they expect many tenants to renew when they hand over the keys on Labor Day weekend. "We've had at least a dozen rentals that are re-upping for next year," says Cia Comnas, senior vice president and brokerage manager at Sotheby's International Realty.

Brian Goode, general manager of Oceanfront Rentals, which manages over 300 rentals on Hilton Head, says he always offers good tenants the right of first refusal. But this year, he's rewarding loyal patronage by holding the price steady on renewals, in part because he can't see hiking rents any higher. As a result, renewals are up 25% over last year for July. "People renting a house that costs $8,000 to $10,000 a week are a lot happier knowing they've got their rent locked in," he says.

The Oceanfront Premium

Other landlords are offering 10% to 15% discounts, or extra days, to tenants who commit now to stays of a month or longer. But even landlords who are notching up rents for next year are landing tenants. Andre Cilliers, a landlord and real-estate agent with ERA Evergreen Real Estate, rents out his two ocean-front homes in Hilton Head. Despite an increase in the weekly rent to $13,900 next summer from $10,999 a week this summer -- and his requirement that renters for early summer put a 50% deposit down now -- his eight-bedroom oceanfront house is already booked for most of 2005. "People are expecting the economy to get better, so they are getting the place they want," he says.

Of course, buttering up the landlord doesn't hurt. This year was homemaker Kelley Ellsworth's first summer as a landlord rather than tenant. She bought the six-bedroom Victorian house one block from the beach at Martha's Vineyard, Mass., that she rented last summer because "I was afraid if I found the perfect rental home it might not be available the next summer," she says.

Ms. Ellsworth used her house for four weeks, then rented it to three families that she says were better tenants than she ever was. One even sent a Sony PlayStation 2 to her children as an end-of-summer gift. "I'm definitely renting to her again," she says.

Email your comments to rjeditor@dowjones.com.