The Rollercoaster Ride of the Short-Term-Rental Market
The short-term-rental market has experienced its fair share of highs and lows in recent years. The pandemic-induced travel restrictions in early 2020 hit owners, hosts, and property managers hard, as bookings on platforms like Airbnb and Vrbo came to a standstill. However, as the hunger for adventure and the rise of remote work took hold, the demand for unique stays skyrocketed, leading to a record number of nights booked nationwide. This surge in interest attracted new investors to the market, but it also resulted in increased competition and a dip in host revenue in 2023.
Hosts Navigate the Overheated Market
For some hosts, the intense competition and fluctuating market conditions became too much to handle. Peggy Gascon, a host from Phoenix, Arizona, with decades of real estate experience, decided to convert her four Airbnbs into long-term rentals. Gascon cited the consistency of tenants with yearlong leases as a more reliable income source compared to the uncertain ups and downs of short-term rentals.
However, despite the challenges, many owners and hosts managed to remain profitable. Montana host Ryan Villines saw a 10% drop in revenue in July 2023 compared to the previous year but still earned a substantial $5,900 that month. Villines even came up with a creative strategy by offering a “romance package” to attract couples planning to propose, showcasing the potential for hosts to adapt and find success in the market.
Smaller Cities Near Outdoor Attractions Offer Investment Opportunities
According to analytics site AirDNA, some of the best places to invest in short-term rentals are smaller cities located near outdoor attractions. AirDNA’s economist Jamie Lane explained that although average host revenue experienced a 6% dip in 2023, there are still opportunities for short-term-rental owners to thrive. The key criteria for these investment hotspots include relatively affordable homes and high occupancy rates, with a threshold of above 50%.
Finding these ideal locations has become more challenging as the market intensifies. Lane noted that “grand-slam deals” are becoming increasingly scarce. However, AirDNA’s list highlighted several spots that defied the national trend and experienced growth in host revenue last year.
High-Potential Spots for Short-Term-Rental Investments
The top-ranked city for investing in short-term rentals according to AirDNA is Columbus, Georgia, which attracts visitors with its whitewater-rafting courses on the Chattahoochee River. In addition to Columbus, many of the other recommended locations are smaller towns near coastlines and national parks. For example, Ellsworth, Maine, near Acadia National Park, and Port Angeles, Washington, near Olympic National Park, are prime spots for investment.
Impact of Increasing Regulations on Short-Term Rentals
The landscape of short-term-rental investing has been reshaped by increasing regulations in cities like New York City and Dallas. AirDNA took these new rules into account when compiling their rankings. One example of the impact of regulations is Marquette, Michigan, a town on the shores of Lake Superior. While initially ranking high among the best investment locations, Marquette was ultimately removed from the list due to its strict cap on short-term rentals.
These 24 cities and towns identified by AirDNA offer promising opportunities for aspiring short-term-rental investors in 2024. Factors such as proximity to outdoor attractions, affordability of homes, and occupancy rates contribute to their investment potential. However, it’s important for investors to stay updated on local regulations to ensure compliance and mitigate potential risks.
Analyst comment
Positive news: The short-term-rental market has experienced a surge in demand for unique stays, attracting new investors. Despite challenges and increased competition, many hosts remain profitable and are adapting to find success in the market.
Short-Term Market Analysis: The short-term-rental market is expected to continue growing, with potential investment opportunities in smaller cities near outdoor attractions. However, investors should stay updated on local regulations to mitigate risks.
