Shrinking travel budgets have many people becoming more creative with the way they travel.

Vacation rentals — where you rent someone’s home or apartment instead of staying in a hotel — have been a growing trend over the past several years. But now thanks to the tough economy, even more travellers are looking at this option.

From lakeside cottages to villas in the Italian countryside, there are dozens of internet-based companies and resources to either list your property or find one to rent. Besides offering a way to save on hotel and dining costs, the advantages of a vacation rental can include more privacy and space, as well as an opportunity to become immersed in local culture. After all, what better way to feel like a local than to live like one?

And as the vacation rental market — once considered a niche industry — becomes more competitive, travellers can now enjoy greater flexibility, last-minute deals and more hotel-like services and amenities, industry officials say.

“It’s a whole new ballgame,” Douglas Quinby of PhoCusWright, a travel research firm that issued a report on the $25 billion-plus market, told USA Today. The firm estimates there are 1.2 million vacation rental units in the United States alone, with just over half arranged through individual owners and the rest through real estate or property management companies.

In Europe, the possibilities range from modest French gîtes (farm cottages) to palatial Parisian apartments.

What’s the downside?

Despite the potential benefits, there are some risks to renting a holiday home –mainly that you forgo the predictability of a hotel. To minimize your risk of getting a SNAD (industry-talk for “significantly not as described”), it’s important to do your research. Review photos carefully and if available, read any customer reviews. Also, if you’re not renting privately, try to use a company that provides satisfaction guarantees or can help to settle disputes (as opposed to simply providing a means for interested parties to meet up). HomeAway.com, for example, reimburses renters up to $5,000 if a listing isn’t legitimate.

Other considerations:

– Pre-payment or deposit (typically required for vacation rentals) may not be fully refundable in the event of last minute cancellation or dissatisfaction with the property upon arrival. Also some owners may also require a credit check.

– What services are included? Unlike at a hotel, you likely won’t have the convenience of a concierge or 24-hour room service. But you’ll want to check on any other perks such as cooking or cleaning services. (Also, particularly if you’re renting a private cottage, be sure to ask if linens and other staple items are provided.) Ask for the name of a local contact should you encounter any problems with the home or during your stay in general.