Vacation Rental Trends 2023 What Every Host Needs to Know
Over the past decade, the short-term rental industry has taken the world by storm, shaping not just where people stay, but how they vacation in general. Short-term rentals existed before Airbnb’s launch in 2008, but it wasn’t until Airbnb hit the scene that the alternative lodging market became a mainstream industry accepted by investors across the globe. By 2019, the short-term rental market was valued at $115 billion, worldwide.
In 2020, the travel industry as a whole took a massive hit due to the Covid-19 pandemic. But, by May 2022, there were 88,000 new short-term rentals added to overall supply—an all-time high in total listings, according to AirDNA.
It’s worth noting that although demand for short-term rentals is expected to increase in 2023, occupancy rates are expected to decline. This is a side effect of supply outpacing demand growth.
In order to maintain high occupancy rates and consistent revenues in 2023, hosts need to be intentional about their pricing strategies. Additionally, hosts should be aware of the following five trends:
Full Comeback of the Short-Term Rental Industry
Although the vacation rental industry suffered a setback with the pandemic, the market has already started recovering. In 2023, STRs are expected to reclaim their throne as the more profitable rental strategy when compared to traditional rentals.
This expectation is supported mainly by the return to travel. In April 2022, monthly travel expenditures surpassed pre-pandemic levels (April 2019) for the first time. Success of STRs is directly related to positive travel trends.
As more people travel, demand for vacation homes will increase. This uptick in travel provides vacation rental owners with the opportunity to capitalize on an influx in demand and innovate their vacation rental business based on emerging travel trends.
Demand for Long-Term Airbnb Rentals Accommodating Transient Populations
One of the strongest travel trends Airbnb investors should pay attention to is increased demand for long-term Airbnb rentals.
Travel nurses and digital nomads need housing for extended periods of time, typically 3-6 months. These transient populations have inspired vacation rental owners to take on a hybrid rental strategy, which combines the benefits of STRs and long-term rentals.
Operating both a short and long-term vacation rental allows you to host short-term stays at a higher ADR during peak seasons, and secure long-term stays during slow seasons.
From an investor’s perspective, a hybrid rental strategy just works. It provides a higher rental income than traditional rental properties, but also more stability in terms of occupancy rates than other vacation rentals. The key to getting this rental strategy right is understanding your STR’s seasons.
Demandfor Larger Rentals Accommodating Groups & Families
AirDNA reports that short-term renters are interested in rentals that accommodate large groups and families. Over the last five years, the average number of rooms for booked properties has grown consistently.
In 2020, those numbers jumped considerably as travelers prioritized larger homes in destination locations over small, urban properties for safety reasons.
If investing in a large rental is out of the question for you as a new investor, you may want to capitalize on tiny houses. Tiny houses were the fastest-growing short-term rental property type in 2021. They grew to a total of 9,402 listings on Airbnb in 2021, a 21% increase from the year before.
Rising Demand in Secondary and Rural Markets
A third travel trend vacation home owners want to keep in mind is the shift towards secondary markets. Before the pandemic, cities such as New York, Los Angeles, Boston, and Chicago dominated the vacation rental industry.
However, as more people are working remotely, interest in experiencing the peace and security of smaller towns has grown. Although many families are looking to move into a home of their own, others are interested in testing out these secondary markets before committing to a full-on relocation.
Vacation rental owners can cater to professionals who are on the hunt for a new home. They may want to stay a week, a month, or even longer to get a feel of the neighborhood.
Whether you’re an existing investor interested in expanding your reach, or a new investor looking to secure a rental with low property prices, investing in a secondary market is a smart move in 2023.
Using Technology to Curb the Pending Recession
Lastly, we can’t talk about 2023 without addressing the elephant in the room. An economic downturn is expected sometime next year. Property managers who want to remain afloat should rely heavily on the tech tools being made available through the emergence of proptech startups.
As the real estate industry continues to evolve, more proptech companies will appear in an attempt to ease the real estate investing process. High-tech will continue to inform all aspects of the property investor journey; from identifying promising opportunities to managing STR revenues.
Using a dynamic pricing tool and reviewing data every quarter is not going to cut it in 2023. Vacation rental owners are facing increased competition in 2023 and need to accurately understand and discern market data to know which direction to move in.
Failing to adjust prices at the right time will exacerbate the vacancy rates that are expected next year due to the increase in rental supply. Vacation rental owners who adjust prices ahead of time will be able to curb the downturn in occupancy rates.
Outlook of the Vacation Rental Industry in 2023
Many vacation rental owners are asking themselves what impact a potential recession could have on the short-term rental industry. The last time the U.S. was in a recession, STRs hadn't taken off yet, so it’d be hard to tell exactly how the vacation rental market could respond.
Between 2007 and 2009, occupancy for the U.S hotel market declined from 63.2% to 55.1%. But, even as economic conditions threaten the growth of the vacation rental industry in 2023, its rapid growth over the past several years has positioned STRs to withstand dips in activity.
As long as vacation rental owners lean into new investment opportunities presented through 2023 vacation rental trends and strategically price their rentals according to market data, they should continue to profit in the new year.
If you’re interested in learning more about how you can capitalize on vacation rental trends in 2023, reach out to MBX Homes today! We are a full-service, vacation rental management company helping investors like you make the most of their Airbnbs. Contact us today to learn more.
