If you want to hang something from your vinyl siding don t even think about drilling through it to attach a hook to the sheathing.
Attach hose spigot to siding.
Measure the length of the short hose that is attached to the hose reel.
From outside use a hole saw to drill for your new pipe.
Find location inside of house and drill a 1 4 inch pilot hole from the inside through the siding.
Cut the siding into two pieces if the faucet will be located in the middle of a piece of siding.
Ground about 3 feet then attach your reel to it.
There are at least three alternative ways to do it.
That way you wont ruin your sideing for a hose reel that will likely fall apart in a year.
This renders the siding vulnerable to moisture and voids the warranty even if you seal the hole.
This will give you a clean cut through the siding.
If you are using a mounting block you will need to cut out for the block and then pull back the siding to get the backing plate installed.