European Market Review: Summer Kicks Off with a Bang for European Short-Term Rentals

May saw the summer season off to a great start for the European short-term rental (STR) market, with over 33.8 million nights stayed, an increase of 20.6% compared to 2019 and 15.1% compared to last year. The supply of available listings saw another month of positive growth at 8.3% above last year and 6.3% above 2019. Steady demand coupled with subdued supply growth enabled occupancy to grow, and occupancy was up 2% year over year (YOY). Average daily rates (ADRs) up 13.5% YOY have given way to impressive revenue growth for European STRs. Revenue in May was up 30.7% YOY and 68.8% compared to 2019.

At a Glance: May STR Performance

• Available listings are up 8.3% YOY and 6.3% from 2019
• Demand is up 15.1% YOY, 20.6% vs. 2019
• ADRs are up 13.5% YOY and 39.9% versus 2019
• Revenue is up 30.7% YOY, and 68.8% from 2019, fueled by higher daily rates and demand
• Occupancy is up 2% YOY and down 0.8% vs. 2019
• Revenue per available rental (RevPAR) grew 15.8% YOY and 38.8% from 2019

Faster Recovery in Domestic Demand vs. Foreign Demand in Europe

Demand is the impetus for growth in the short-term rental industry in Europe. But where is it coming from?

Using Airbnb review data that allows us to identify where guests are travelling from, we found that 80% of trips to European destinations in the last year were from European travellers. In the first quarter of 2023, domestic travel (residents travelling within their own countries) accounted for about 45% of trips in Europe, and cross-border travel (Europeans travelling to other European countries) made up another 35%. This compares to roughly 40% each in 2019 for short-term rental trips in Europe. Domestic travellers are prioritising smaller towns and rural locations over larger destinations abroad, as we saw in the UK in our last market review.

The remaining 20% of trips were made by travellers from outside Europe, with North American travellers making up the largest portion of foreign travellers.

International travel to Europe took a big dip during the pandemic but has slowly been making its return in the last few years, with an acceleration in recovery throughout 2022. Travel from North America has returned to pre-pandemic levels, with its share of European trips up 11% year to date (YTD) from 2019. Travel from Asia, Oceania, South America, and Africa has not recovered nearly as well. Asian travellers make up the second largest population of foreign travellers to Europe, but the percentage of trips from Asian travellers is down 35% YTD from 2019. 

Currently, the share of trips made by international travellers in the top 20 European countries is similar to 2019. Most countries (15 of the top 20 European countries) have seen slight decreases in their percentage of trips made by foreign travellers when compared to 2019. Finland has seen the biggest decline, with the percentage of trips from foreign travellers dropping from 61.3% in 2019 to 50.5% for the last 12 months. Greece has seen the biggest increase in foreign travellers, with their percentage of trips from foreign travellers jumping from 84.5% in 2019 to 90% in the last year. 

16 of the top 20 European countries are highly dependent on foreign travel, with foreigners making up 70% or more of trips in the last 12 months. Portugal, Croatia, Hungary, Austria, and Greece are particularly popular, with over 90% of trips in all five countries coming from travellers from other countries.

A handful of the top European countries receive predominantly domestic travellers. These include Finland, Germany, France, and the United Kingdom, where domestic travellers from within the countries make up 50% or more of trips. France and the United Kingdom are heavily reliant on domestic travel, and 67% of stays in both countries are made by their own citizens.

Understanding the breakdown of foreign and domestic travel can provide some perspective on why demand has returned to the top European countries at such varying levels. In countries that receive more domestic travellers, such as France and Germany, a return to pre-pandemic levels of demand was faster than in countries that receive more foreign travellers. Travel within Europe was able to resume in 2021 with some restrictions, but foreign travellers did not begin to return to Europe en masse until last year. 

Countries such as Hungary, Ireland, and the Czech Republic have struggled in their return to pre-pandemic levels of demand but have begun to see more rapid recovery in the last year with the return of foreign travellers. YOY growth in demand was 25.6% for Hungary, 24.2% for the Czech Republic, and 18.7% for Ireland. Other countries, such as Denmark and Croatia, have yet to see a strong return of foreign travellers and are experiencing negative YOY growth in demand (-7.8% in Croatia and -2.3% in Denmark).

Demand Pacing Continues Growth Through Summer and Autumn

Demand for the next six months is keeping its momentum of growth. As of June 11th, there were 23% more nights on the books for the next six months than at the same time last year. The summer months of June, July, and August are seeing 16%, 17%, and 23% growth YOY in demand pacing. However, the most significant growth is in the shoulder months of September and October as guests look to travel outside of the hottest, busiest, and most expensive months. The autumn continues to break records, with 56% more nights booked for September and 45% more nights booked for October than at the same point in 2022. 

Looking more closely at the next six months for the top 20 European countries, Poland, Norway, and Sweden are taking the lead with 48%, 42%, and 34% more nights on the books for the next six months compared to last year. These three countries are also leading demand pacing for summer with 43%, 40%, and 33% more demand nights on the books for June through August than last year, respectively. Switzerland, the Netherlands, and Denmark are experiencing the lowest pacing growth for summer with 13%, 12%, and 9% more nights booked for June-August, respectively, than last year.

Growth in demand coupled with longer lead times is giving STR owners more pricing power — and ADRs for the next six months are pacing to grow 17.3% YOY for European STRs.

As part of our ongoing commitment to accuracy, we continuously implement data methodology improvements, leading to updates to some of the information in this report as of December 21, 2023. For further questions, please contact us.