May saw the summer season off to a great start for the European short-term rental (STR) market, with over 37 million nights stayed. Average daily rates and revenue are also booming as international travel rebounds.

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 37 million nights stayed, an increase of 32.8% compared to 2019 and 22.6% compared to last year. The supply of available listings saw another month of positive growth at 8.6% above last year and remaining 4.8% above 2019. Steady demand coupled with subdued supply growth has enabled occupancy to grow, and occupancy was up 5.4% year over year (YOY). Average daily rates (ADRs) up 19.1% YOY have given way to impressive revenue growth for European STRs. Revenue in May was up 45.9% YOY and 96% compared to 2019. 

Available listings are up 8.6% YOY and 4.8% from 2019

ADRs are up 19.1% YOY and 47.6% versus 2019

Revenue is up 45.9% YOY, and 96% from 2019, fueled by higher daily rates and demand

Occupancy is up 5.4% YOY and 7.7% vs. 2019

Revenue per available rental (RevPAR) grew 25.5% YOY and 59% from 2019

Top 20 European Countries: Stages of STR Recovery 

Recovery of the short-term rental sector after the COVID-19 pandemic has looked different in each of the top 20 European countries. To provide a better understanding of where each country is in its recovery to pre-pandemic levels of supply and demand, we’ve categorized them into the following four stages that are reflective of phases in a typical lodging business cycle.

Stage 1 (Demand Lag): Travel demand has yet to recover and is still below pre-pandemic levels. Slow demand growth has led to lagging supply. 

Of the top 20 European countries, the Czech Republic, Denmark, Ireland, Hungary, Netherlands, and Croatia have yet to return to pre-pandemic demand levels, and this lack of demand has suppressed supply. 

Stage 2 (Demand Return): Travel demand has recovered to pre-pandemic levels and is driving occupancy and ADR growth. Supply is on the rise but has not fully recovered.

In Spain, Portugal, and Italy, where demand now ranges from 20-35% higher than in 2019, available listings are still slightly below pre-pandemic levels, driving occupancy growth.

Stage 3 (Supply Lag): Supply has fully returned to pre-pandemic levels but has not caught up to growing demand. Higher ADRs and revenue as a result of supply shortages encourage new short-term rental investors to enter the market.  

Seven of the top 20 European countries are currently in Stage 3, where current demand has surpassed 2019 levels and is exceeding supply. We see the greatest gap between supply and demand growth in Greece, where demand growth since 2019 is almost five times higher than supply growth over the same period. With the second largest gap, France has seen nearly three times more demand growth than supply growth since 2019.

Stage 4 (Supply Surplus): Supply growth has exceeded demand growth and is leading to occupancy declines. 

In Finland, Sweden, Norway, and Poland, where supply recovered to 2019 levels faster than demand in 2022, we’ve seen a significant supply surplus since the autumn of last year, leading to occupancy declines ranging from 10% to 22% compared to 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 26.5% for Hungary, 25.9% for the Czech Republic, and 20.2% 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 (-3.2% in Croatia and -2.4% 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.

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

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