Easter holidays and fairer weather brought good news for both the economy and European short-term rental (STR) hosts in April 2023, as demand nights stayed grew 26% from the same month last year, giving hosts greater pricing power to push average daily rates (ADRs) up 16.4% year over year (YOY).

Europe Market Review: Strong April Brings Demand Growth, and Supply Catches Up Outside of Cities | AirDNA

Easter holidays and fairer weather brought good news for both the economy and European short-term rental (STR) hosts in April 2023, as demand nights stayed grew 26% from the same month last year, giving hosts greater pricing power to push average daily rates (ADRs) up 16.4% year over year (YOY). Remaining subtly above 2019 levels (+3.2%) in April, the supply of available listings in Europe increased 14.9% YOY, lagging behind demand growth and pushing occupancy rates up 4.2%. In another strong month for short-term rental hosts in Europe, revenue per available rental (RevPAR) also increased 21.3% YOY.

At a Glance: Key European STR Performance Metrics for April 2023:

Revenue increased 46.7% YOY and 81.5% vs. 2019

Available listings stayed just above 2019 levels (+3.2%) and up 14.9% YOY

Total demand (nights) rose 26% YOY and 26.4% from 2019

Occupancy was up 4.2% vs. 2022 and 6.9% vs. 2019

Average daily rates (ADRs) rose 16.4% YOY

RevPAR grew 21.3% YOY and 52.5% vs. 2019 

While Eurozone GDP grew just 0.1% in the first quarter, this is a relief as the continent narrowly avoided recession. It was widely expected that Europe would be in recession in the first half of 2023. However, inflation is still frustratingly high, with April headline inflation up 7%, causing strain on individuals’ spending power. The outlook for the rest of the year, according to Oxford Economics, calls for the European economy to continue to expand over the next year, with GDP forecasted to increase 0.8% in 2023 and an additional 1.0% in 2024, driven by further growth in consumer spending—which should be positive for short-term rentals. 

European short-term rentals have been slower to recover to pre-pandemic levels compared to other continents. In North and South America, where demand and supply have seen the quickest recovery, demand returned to pre-pandemic levels in March 2022 for North America and May 2022 for South America. Supply quickly followed, with available listings returning to pre-pandemic levels in August 2022 for both continents. 

Meanwhile in Europe, demand, measured on a trailing 12-month basis, did not recover to pre-pandemic levels until November 2022. Compared to the same time last year, demand in the 12 months to April 2023 increased 27%, while supply growth expanded at a slower pace, up just 13% YOY. With slower growth in supply, average available listings remain 5% below 2019 levels.

Across our top 20 European countries, supply has returned to varying degrees. Supply growth has been the weakest in Croatia and Denmark, where demand growth has also been minimal (1% YOY in Croatia) or even negative (-5% YOY in Denmark), leading to the occupancy declines both countries are currently experiencing. With Denmark being the exception, the Nordic region saw the strongest supply growth, with Norway, Sweden, and Finland experiencing 50%, 37%, and 28% YOY growth, respectively. Unluckily for operators, supply growth in these three countries exceeded demand growth, causing occupancy declines of nearly 5% YOY for Norway and Sweden and 7% YOY for Finland. 

Occupancy grew during April in 14 of the 20 largest European countries, as supply growth continues to lag behind demand in most areas throughout the region. We see the greatest gaps between demand and supply growth in Greece and Austria and, consequently, the highest growth in occupancy.

In Greece, demand grew 31.7%, and supply grew 13.2%, pushing occupancy up 9.2% YOY, while in Austria, demand grew 29.5% and supply 11.8%, causing occupancy to grow 8.8%.

Demand Recovery Stronger in Rural Areas than Urban

Following a trend that began during the pandemic, demand for short-term rentals in more rural areas continues to outperform the continent’s largest cities. Where demand returned to pre-pandemic levels in October of 2021 for listings outside of the top 50 European cities, in those top 50 European cities, we have yet to see demand return in full. In April 2023, demand within European cities was still 15% below demand in 2019, and supply was 23% below 2019.

Analysing trends in the United Kingdom, we see growth in demand has been concentrated outside of cities in the last two years, particularly in coastal and rural destinations. Exponential demand for seaside destinations such as the Isle of Anglesey, East Yorkshire, and Lancaster/Blackpool has given way to outstanding growth rates of 185%, 152%, and 124% compared to 2019. Other rural destinations such as Gwynedd, West Yorkshire, and Conwy have also fared well, with demand exceeding 2019 levels by more than 80% for all three destinations. Growth among the top 15 UK markets continues to show strength, with demand averaging 31% higher than last year.

On the other end of the spectrum, large cities have seen the lowest demand growth in the United Kingdom. London has seen the slowest demand recovery in the country, with demand for short-term rentals still 33% lower than in 2019. 

Demand in cities may not have returned to pre-pandemic levels yet, but travel interest in cities is reviving and will likely lead to faster growth in urban demand and supply in the next year. In the bottom demand growth markets of the United Kingdom, we see that YOY growth in demand for these large cities has been trending upward, particularly in London, where YOY growth was 48%. 

Recovering travel interest in cities can also be seen in some of Europe’s fastest-growing short-term rental markets. Supply growth is often a lagging indicator of where demand has been the greatest. In Finland, Norway, and Sweden, where supply growth has exceeded demand growth YOY, we see greater supply growth in the capital cities of Finland and Norway than we do outside of them. Available listings grew 41% YOY in Helsinki compared to 24% in the rest of Finland, while demand grew 17% YOY compared to 9% for the rest of the country. In Oslo, available listings grew 108% YOY compared to 35% in the rest of Norway, and demand grew 68% YOY compared to 27% for the country. In Sweden, the capital Stockholm did not outperform the rest of the country but still saw 20% YOY growth in supply and demand.  

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Demand Pacing Strong Through Summer and Autumn 

As of May 1, demand nights on the books were pacing 29% higher than at the same time in 2022. Booking activity continues to have great momentum through the summer and autumn as demand for travel in Europe accelerates. For the summer months of June, July, and August, demand was up 23%, 26%, and 30% YOY, respectively. September and October pacing sees the most standout gains, with booked nights exceeding last year by 70% for September and by 49% for October. Guests are looking to travel beyond the summer peak season, and Europe is on track to reach record-breaking levels of nights stayed this autumn. 

Looking closer at demand pacing among our top 20 European countries, Poland, Austria, and Greece led the way in growth for nights booked between May and October, with 63%, 48%, and 42% growth compared to last year. September pacing growth was more than 50% YOY for 16 of the top 20 European countries, with Poland and Croatia experiencing triple-digit growth of 151% and 113% YOY, respectively. October pacing growth was more than 50% for 11 of the top 20 European countries, with Italy, Hungary, and Czech Republic leading the way with 80%, 70%, and 65% YOY growth. 

For every short-term rental question, AirDNA data has the answer. Our data tools empower hosts, investors, and researchers to understand their markets and unlock new revenue opportunities.

Be prepared for trends impacting your vacation rental market

Europe Market Review: Strong April Brings Demand Growth, and Supply Catches Up Outside of Cities | AirDNA

Be prepared for trends impacting your vacation rental market

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