The short-term rental (STR) industry took a pretty big hit last year as travel ground to a halt. Fortunately, bookings have recovered since that point -- and then some -- and investors seem to be betting big on STRs and vacation rentals in the long haul.
Just take the most recent news from Guesty as an example. The STR property management solution raised a whopping $50 million in Series D funding last month, taking its total funding up to a cool $110 million. It’s now the highest-funded property management platform on the market.
The company also just acquired two competitors, MyVR and Porter, and is reporting summer reservations at 282% higher than 2020 levels and 32% over 2019’s. As Guesty CEO Amiad Soto puts it, "These numbers highlight a bright future ahead."
Why the confidence in short-term rental hosting?
Short-term rentals picked up steam mid-pandemic. Many Americans had tired of staying home and began seeking safe, private, and drivable getaways to escape to. Some went for a change of scenery; others took their remote work and schooling on the road.
Whatever the reason, bookings started to creep up, and the industry slowly but surely started to recover. Now, Soto says, short-term rentals are "mainstream," and the industry has a bigger user base than ever.
A recent statement out of Airbnb confirms as much. Just last month, Airbnb CEO Brian Chesky told CNBC that it needs a jaw-dropping 1 million more hosts in order to meet demand. It’s a massive number that signals serious interest in STR travel -- as well as quite the opportunity for investors.
Airbnb is actively recruiting those new hosts, and if it meets that goal -- or even comes near it -- that’s certainly a massive slice of business for Guesty and other similar STR platforms.
There’s definitely an opportunity for investors here. As our own Matt Frankel explained, "This might seem like a great situation for real estate investors, especially those who might be interested in buying a vacation home. After all, the CEO of the largest vacation rental platform in the market is telling you that there's going to be massive demand for vacation rentals that cannot be met with the current inventory on the site."
Just tread carefully if you plan to invest in a new short-term rental property. For one, home prices are rising at astronomical rates these days. The Federal Housing Finance Agency has prices up over 12% annually.
High competition and bidding wars are also common in the current market, which can often mean paying much more than the listing price. This can cause appraisal and financing issues or even throw off a deal entirely later on. Make sure you’re prepared for these possibilities and have a backup plan just in case.
The bottom line
Short-term rentals are on the up and up, and there could be investment opportunities in the right markets. Just be smart about where you buy and what you spend, and be sure to budget for all the other costs that come with an STR, too — like cleaning and furnishing the home or subscribing to property management solutions like Guesty.