08.8.2023 PropStream
With the onset of the global pandemic last year, demand for short-term rentals suffered a significant decline. Thankfully, this holiday season has seen them on the rise again. Demand has bounced back to (and surpassed) 2019 levels, as Americans pursue their favorite pastime of vacations once again.
Let's examine these trends on a deeper level and reveal what 2022 has in store for the short-term rental market. More important, let's take a look at how investors can capitalize on this market’s recent boom.
What’s Happening in the Short-Term Rental Market?
Recent data from AirDNA revealed that the demand for short-term rentals in the U.S. for September 2021 was 4.7% higher than in 2019 and 33.7% higher than in 2020. In the third quarter of 2021, short-term rental revenue rose to $14.5 billion. This was a significant increase from the previous years — 24% higher than in 2019 and 37% higher than in 2020.
So, what’s contributing to this significant rise? There are several positive factors at play here. Most significant is the overall decline in COVID-19 cases, as well as surging vaccination rates. After travel was restricted for much of 2020, Americans are eager to enjoy their freedom once again and experience some normalcy across the holiday season.
With the end-of-year holidays upon us, people are taking advantage of their time off work to go on vacation with family or friends. Plus, international travel is seeming far too risky (or impossible) for many. The safety and convenience of booking a short-term rental stateside is undeniable.
A Demand for Rentals Outside of Urban Areas
Although New York has consistently been a popular vacation destination during the holidays, this isn’t the case in 2021. For both Thanksgiving and Christmas, the state recorded more than a 50% decrease in bookings compared to 2019. This figure increased to a whopping 65% decline for the New Year period.
It’s not just New York feeling the pinch, either. Demand also remains down by more than 50% in other urban locations, including Jersey City/Newark in New Jersey (-55.6%) and San Jose/Palo Alto in California (-51.1%).
This is in stark contrast to coastal and mountain destinations, which are experiencing a significant increase (20%) in demand. The locations benefiting the most from this shift in popularity include Cape Cod in Massachusetts, Myrtle Beach in South Carolina, and Hilton Head in South Carolina. In these regions, occupancy rates are 30% higher than 2019 levels. For the week between Christmas and New Year, they're set to soar 89% higher than in 2020.
Investors hoping to capitalize on this trend can look to other top markets for short-term rentals. These include Gatlinburg/Pigeon Forge in Tennessee, the Ozark Mountains in Missouri, Pocono Mountains in Pennsylvania, North Georgia Mountains, and Flathead Valley/Glacier National Park in Montana.
The Ozark Mountains have had the highest growth in listings alone, with an increase of 62.5% since 2019, as investors recognize demand.
Long-Term Stays on the Rise
Although it’s dubbed the "short-term" rental market, it’s interesting to note that longer-term stays are also on the rise as we approach the end of 2021.
Trips lasting 28 days or longer made up 16% of the total nights booked in September. This is a figure not seen since February of this year. Experts are attributing it to the newfound flexibility of an increasingly remote workforce.
Average Daily Rates Are Higher
Not surprisingly, the average daily rates (ADR) of short-term rentals have increased in 2021 to keep up with the upward shift in demand. In September alone, ADRs averaged $253. This is an increase of 24.6% when compared to rates during the same month in 2019.
What This Means for Short-Term Rentals in 2022
This is all good news for short-term rental owners and those thinking about investing in a short-term rental property. Experts expect these strong levels of demand, coupled with higher prices, to continue well into 2022.
As vacationers turn their attention away from large urban centers, investors have an opportunity to purchase properties within a more affordable price range. Plus, with longer stays and higher average daily rates, investors can expect to earn a tidy sum from their short-term rental moving forward.
To help you maximize your short-term rental investment efforts, you need the right tools at your disposal. PropStream can help you dig through the data and find properties in areas ripe for short-term rental ROI. Using data on a property’s annual rent and market value, PropStream provides you with an estimated monthly rental amount and gross yield percentage.
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