Looking at the rest of 2023 and beyond, both short-term rentals and hotels are expected to experience growth in supply and demand, albeit at a decelerating pace. Nevertheless, the share of demand for short-term rentals will continue to grow - from 14.6% in 2023 to an estimated 15.4% in 2024.
The article New report from AirDNA and STR: Why rentals are gaining ground over hotels first appeared in TravelDailyNews International.
AirDNA has just released its latest report in partnership with STR on the changing dynamics of the lodging industry, as short-term rentals gain ground over hotels on the whole but find difficulties in larger cities.
Some key findings for 2023 are:
Before the pandemic, both hotels and vacation rentals enjoyed growth in demand (+30% and +26.4% year over year respectively), but by Q2 2023, growth had decelerated to 11.7% for rentals, and -0.6% for hotels. What changed? The return to European travel is partly responsible, though this affects both rentals and hotels. However, “bleisure” – the fusion of business and leisure travel, may have upset the balance. The remote work revolution has prompted many to extend their stays, leaning towards rentals with more amenities, and the trend towards less-populated or rural areas, where rentals make up a larger proportion of supply, also gave the short-term rental sector a boost.
Specifically, by May 2023, short-term rentals in small city/rural locations had witnessed a demand growth of 24%, compared to 0% for hotels. Rental demand growth also exceeded hotel demand growth in mid-sized cities, suburbs, mountains/lake resorts, and coastal resorts. However, in larger urban environments, both vacation rentals and hotels saw a 12% growth in demand, thanks to stricter rental regulations and an abundance of conventional hotel rooms.
When it comes to supply, vacation rentals are again ahead of the curve. Year-over-year supply growth for short-term rentals stayed above 15%, while for hotels it lagged below 5% between Q1 2022 and Q2 2023. Two key drivers? Size and location. Short-term rentals are expanding faster in rural and suburban areas, at 18% and 14%, respectively, while in urban areas, where short-term rentals are more comparable to hotel rooms in their size limitations, they’re growing at 8%. Plus, larger properties are gaining popularity – over 300,000 three-bedroom units became available, outpacing one and two-bedroom units by more than 70,000 each. Three-bedroom units have also seen the highest growth in demand of any size of property.
The average daily rate (ADR) paid has also changed dramatically over the past few years. Although hotels saw faster ADR growth (7.2% YOY) compared to short-term rentals (2.8%), this growth was largely driven by performance in the top 25 markets, which include urban areas and mountain/lake resorts. Short-term rentals are still 20% cheaper than hotels in urban areas, but rentals are slightly more expensive in other location types, reflecting the larger spaces and amenities that they are able to offer outside of cities.
The pandemic was a catalyst for the lodging industry, speeding up existing trends and creating new ones. However, as short-term rentals maintain and even grow their share, hotel operators can learn from what draws guests to short-term rentals, just as rental operators have learnt from hotels to professionalize. As we navigate the landscape that lies ahead, one thing is clear: the accommodation game is changing, and competition is only getting fiercer.
New Frontier in Lodging - AirDNA
The article New report from AirDNA and STR: Why rentals are gaining ground over hotels first appeared in TravelDailyNews International.
