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With 2023’s peak season now wrapped up, it makes for a perfect time to step back and take the pulse of the short-term rental (STR) industry.
Are we still in Airbnbust territory? Is there light at the end of the tunnel? What are the main talking points we can bring up to homeowners and colleagues?
Here are seven main takeaways property managers need to know about the STR industry for the remainder of the year.
1. New Listing Growth Is Slowing
Good news: The last few months have each seen drastically fewer listings added to the vacation rental market than what we’d gotten used to.
Whereas peak season in 2022 saw upwards of 70 percent year-on-year listing growth, 2023 has been a different story. Since March, we’ve seen negative year-on-year supply growth. Most recently in July, we saw over 20 percent fewer listings added to the market than in July of 2022.
The trend is clear: Major market saturation in 2022 and a glut of supply led to underwhelming revenues, and now less competition is being added to the market. Good news for vacation rental managers.
2. Demand Pacing Ahead of Last Year
If supply is trending in the right direction, what about demand?
AirDNA future data shows a strong outlook. Each consecutive month for the remainder of the year has more reservations on the books as of today compared to the same point last year.
This furthers the trend of a more malleable peak season in many destinations. Destinations that previously had clear-cut seasonality patterns are now seeing compression events in shoulder seasons.
The latest demand data for July is particularly compelling. There were over 2 million more nights booked in July of 2023 versus July of 2022—over 9.4 percent higher.
3. Rates Are Pacing Higher than Last Year
Another strong indication of a healthy rental market is a gradual rise in nightly rates. When looking at the remaining months of the year and into 2024, we see nightly rates pacing above last year, especially for holiday months.
December, for example, is seeing 6.8 percent higher nightly rates than in 2022. January is seeing 5.8 percent higher rates.
No major price slashing, and no unprecedented discounting. Hosts and managers seem confident that there’s enough demand to justify increased nightly rates.
4. STRs Continue to Gain Ground on Hotel Share
Where do we stand on the STRs versus hotels market share?
Since a correction after the pandemic-driven shift to vacation rentals, each year has seen a gradual increase in the percentage of demand going to vacation rentals.
Especially for larger, two-plus bedroom units, travelers are increasingly opting for vacation rentals over hotels. The trend is even more pronounced when we look at revenue, as opposed to nights booked.
5. Top Up-and-Coming Markets for Expansion Have Similar Qualities
This summer, in the latest installment of the Ranked by AirDNA™ series, we explored the best hidden gem locations for Airbnb—places with fewer than 500 listings that are showing high potential for continued growth.
We applied many filters that are common characteristics of good short-term rental markets:
- Less than 50 percent professional hosts (to weed out markets that are overly professional)
- At least 85 percent of listings in the market are still available from last year (to weed out markets that saw high host churn)
- Positive booking growth from 2022
What did we find? The vast majority of the top 25 markets are located near bodies of water. Rivers, lakes, oceans—it seems that “near water” is one of the best buy box criteria you can have.
Geographically, nearly all destinations were located in the Sun Belt southeast, the Northeast, or the northern Midwest.
6. Occupancy and RevPAR Will See Minor Dips
Now for the reality check. Even despite slowing supply growth and peaking demand, the truth is that these two trends aren’t strong enough to offset occupancy and revenue per available room (RevPAR) dips.
Across the US short-term rental industry, we’re predicting a 1.6 percent drop in occupancy rates by the end of the year—from 59.4 percent to 57.8 percent—and a 1.7 percent dip in RevPAR.
While we expect the occupancy dips to extend through 2024, RevPAR should turn the corner with a 0.2 percent increase.
7. Top Tip: Use Data in Your Projection Pitches and Homeowner Conversations
Summer 2023 confirmed a final major trend: Many vacation rental managers are still relying on estimates and “market experience” to convert owner leads.
One property manager—Kyle Crespino of Venture REI—found that prior to beginning in his role, the organization was only converting 20 percent of its inbound management leads.
Once the company started using AirDNA vacation rental data in their pitches, the lead conversion shot up by 2.5 times to 75 percent. Using tools like the property performance dashboard empowered him to have accurate, compelling conversations with potential owners.
Looking for insights like these for your own market? Learn more about how AirDNA helps vacation rental managers get ahead with data and insights.
Find more information on the Property Performance Dashboard, the go-to growth platform for property managers.
Stay tuned for major new updates from AirDNA in the coming weeks.
Dillon DuBois is the director of enterprise marketing at AirDNA.