Traditionally, hotels and rentals have rarely competed directly. In most markets, they’ve been more complementary to one another than anything else. But the COVID-19 pandemic triggered some key changes in travel trends and guest behavior that all rental hosts and property managers should be aware of.

Hotels vs. Airbnbs: 3 Things Rental Hosts Need to Know About Lodging Competition in 2023

Hotels and vacation rentals are two sides of the same coin. But unlike a coin, one side of this debate isn’t more or less lucky than the other. The differences between today’s two mainstream lodging options are nuanced and always evolving—especially as of late.

To this end, our team at AirDNA partnered with STR/CoStar to compile our data on rentals with their data on hotels, spanning 2018 to 2022. Here, we’re sharing three critical takeaways from the report, detailing how the competition between hotels and rentals is, in fact, heating up. 

Consumer perception has typically favored rentals when it comes to affordability, and for good reason. Hotels reported 42.9% higher average daily rates (ADRs) than rentals in large cities in 2019. However, as of 2022, that gap has closed to 26.6%.

What does this mean for hosts? Hotels now offer rates lower than rentals in all markets except for urban and coastal resort areas, where rental ADRs remain 26.6% lower and 10% lower, respectively. This does mean travelers looking for deals may perceive hotels to be more approachable in certain markets, but there’s also an opportunity for rentals hosts here. Value-for-money heavily factored into booking decisions for both hotel and rental guests, but location, location, location overwhelmingly reigned supreme. 

This is where rentals can stand out, especially in markets where hotels are underrepresented: coastal and mountain towns. These areas have the highest rental market share and proportionally fewer hotels, which means they’re fertile ground for savvy rental hosts to make their mark.

As a host or manager, your aim should always be to discover a Goldilocks zone where your nightly rates aren't too high or too low.

#2 - Hotels are back in force, but not everywhere.

When COVID-19 hit, lodging demand waned, most notably among business travelers hotels have long relied on. Rentals, meanwhile, were more conducive to social distancing and exceeded 2019 demand levels as soon as June 2020. This pushed the rental market share to a record high of 17%.

But as travelers gradually hit the roads and skies in force, hotels hit their stride, too, especially in cities. They started competing more directly with rentals by targeting leisure travelers. And while urban rental supply dipped during the pandemic (it’s still 17% below 2019 levels), hotels in large cities remained in steady supply thanks to stimuli that helped them stay open. Hotels are now capturing more traveler demand, particularly in urban areas, leaving less market share for rentals.

What does this mean for hosts? Rentals aren’t suffering in all urban markets and can still win back market share by focusing on resorts and small towns; rentals are 17% more in-demand than hotels in coastal areas and 10% more in-demand in mountainous destinations. 

#3 - Unique guest experiences still set rentals apart.

With hotels, what you see is what you get—from small and unfussy motels to big, glitzy resorts. But with rentals, every experience is truly unique. And this continues to be one of the key differentiators between hotels and rentals after the height of the pandemic.

In 2020 and 2021, more than 40% of Airbnb guests were first-time guests, compared to just 25% in a typical pre-pandemic year. This boost in first-timers has so far generated lasting gains in customer satisfaction for both individual hosts (those with five or fewer listings) and professional hosts (those with 20 or more listings).

What does this mean for hosts? Don’t forget that it’s individuality that makes the rental experience special. While professionalizing and scaling matter, so does delivering memorable stays for each and every guest. This is especially important because rental demand is still historically high, reaching a forecasted 13.4% share of all accommodations in 2022 compared to 9.7% in 2018. 

Remember: Rental hosts can learn from hotels.

Hotels may compete more directly with rentals than they did before COVID-19. But that also means rental hosts can learn more from hotels than ever before. In 2021, one sector’s demand could accurately predict the other’s 87% of the time. In 2019, that was only possible about 50% of the time. 

Paying attention to hotel trends, in addition to accurate vacation rental data, is key to understanding travel behavior—and optimizing your listings to stay ahead of the competition.

Download the full report to learn even more about post-pandemic travel trends, and what they mean for both hotels and rentals.

Hotels vs. Airbnbs: 3 Things Rental Hosts Need to Know About Lodging Competition in 2023

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Trusted Data to Stay Ahead