The first quarter of this year was a strong one for short-term rentals. According to a new report from AirDNA, the U.S. hit a new booking record every month in Q1. And in April? Short-term rental occupancy rates hit their highest level ever.
As the report puts it, "This milestone marked the end of recovery and the beginning of the next phase of expansion for the U.S. short-term rental industry."
Let’s take a look at what this "expansion" looks like -- as well as the property types and markets that are seeing the biggest resurgence.
Small cities and rural markets are booming
According to AirDNA’s data, occupancy rates on STRs in small cities and rural areas are up a whopping 67% compared to April 2019. Properties in destination markets and mid-sized cities have also seen growth, with occupancy up 25% and 8%, respectively.
Suburban and large city short-term rentals, however, are still feeling the effects of the pandemic. Suburban occupancy is down 13%, while large cities decreased a jaw-dropping 41%.
It seems large-city property owners pulled back from the market, too. In April 2021, there were 40% fewer nights available in larger markets. Destination and resort (short-term rental) STR owners acted similarly, with availability declining in many areas.
According to the report, "Many owners removed properties, preferring to use second homes themselves."
A look ahead
As the report stated, this isn’t just a recovery in most places -- it’s an expansion. So what can we expect in the months ahead?
Well, first off, large-city STR owners can expect demand to pick back up fairly soon. AirDNA projects travel demand to rise starting in Q3 and Q4 of this year and then "in earnest" by 2022.
"Urban STRs could see an even quicker rebound if business travelers prefer their own space and added amenities like a kitchen and separate living space," the report reads. "There may also be additional demand as remote workers plan trips back to headquarters."
That’s just one sector of the market, though. Overall, AirDNA is forecasting a strong year for the short-term rental industry. Occupancy is expected to average around 58.9% -- up from 53% the two years prior. Average daily rates are projected to rise 6%, too, hitting about $248 for the typical property.
Most importantly, demand should jump 27.5% by years’ end. "High levels of demand and a delayed expansion of available supply of new STR units will mean at least two years of elevated occupancy levels for U.S. properties."
The bottom line
This latest report is pretty good news for investors, especially those with short-term rentals in smaller market and destination areas.
Don’t have an STR just yet? Considering Airbnb itself has said it needs at least a million more hosts to meet demand, it could be a good time to jump on in. Just keep in mind that home prices are elevated. Once foreclosures pick back up again, it may be easier to find a bargain-priced property you can flip and rent.