Europe Market Review: Off-Season Demand Booms for European Short-Term Rentals | AirDNA

The “shoulder season” officially kicked off in Europe last month with a bumper September. Year-over-year (YOY) demand was up 15.7% in September, a return to the double-digit demand growth seen in the first half of the year. In August, the supply surplus led to a signficant occupancy dip of 5.9%, but occupancy rebounded in September down just 0.3% YOY).

At a Glance: September STR Performance in Europe

• Available listings were up 15.3% YOY and 5.7% above 2019 
• Demand was up 15.7% YOY, down 1.4% vs. 2019 
• Average daily rates (ADRs) were up 13.4%% YOY and 36.6%% vs. 2019 
• Revenue was up 31.1%% YOY and 34.7% from 2019 
• Occupancy was down 0.3% YOY and down 5.3% vs. 2019 
• Revenue per available rental (RevPAR) grew 13% YOY and was up 29.4% from 2019

A strong job economy, robust wage growth, and declining inflation in Europe continue to give travelers the confidence to book their holidays. Inflation fell from 5.2% in August to an estimated 4.3% in September and is expected to continue falling as the European Central Bank (ECB) maintains its interest rate hikes. Last month, for the tenth consecutive time in 14 months, the ECB raised interest rates from 3.75% to 4%, a record rate since the launch of the Euro in 1999.

Autumn Travel Boost Shrinks the Gap Between August and September

Last year, demand across the European continent fell 33.8% from August to September, expectedly as kids go back to school and the high season comes to a close. This year, the growing popularity of looking to the Autumn months for better deals and smaller crowds led to a significantly lower demand drop-off of 26.4%.

For each of the top 20 European countries, the demand drop-off from August to September was more subtle this year than last. Sweden, Croatia, and France experienced the most significant drops in demand from August to September, with 43%, 42.8%, and 36% decreases, respectively. The United Kingdom and Germany experienced the smallest drop-off; demand dropped just 13.3% from August to September in the UK, while demand for Germany decreased only 11.8% thanks in part to the millions of visitors to Munich’s Oktoberfest. The demand drop-off between August and September shrunk the most for Germany, UK, and Czechia this year.

Eight Countries Saw Occupancy Growth in September, Nordic Countries Lagged Behind

Eight of the top 20 European countries exhibited positive occupancy growth YOY in September. Leading YOY occupancy growth in September were Ireland (+1.8%), Austria (+2.8%), and Czechia (+4.1%). Demand greatly surpassed supply in all three countries, which contributed to their occupancy boosts. Czechia notably saw a 30.7% increase in demand growth, which was more than double the 14.8% supply growth.

Occupancy in the Nordic countries continued to lag behind in September. Sweden and Denmark experienced 6.5% and 5.8% YOY declines in occupancy, while Finland experienced an astonishing 12.1% decline YOY. Finland’s 28% supply growth YOY was more than double  demand growth YOY of 12.2%, crippling occupancy and leading to a RevPAR decline of 0.9% YOY.

While Norway saw the strongest YOY demand growth among the top 20 European countries, its 48.3% YOY supply growth exceeded its 41.1% YOY demand growth, leading to an occupancy decline of 0.8% compared with this time last year.

Bedroom Count and Price Tier Affect Occupancy Declines

In Finland, Norway, Poland, and Sweden, YOY supply growth has exceeded YOY demand growth since the beginning of this year, causing occupancy to take a steep downturn. Last month was the eighth consecutive month of declining YOY occupancy for Finland and Norway and the tenth consecutive month of declining YOY occupancy for Sweden. Poland was in its seventh month of declining YOY occupancy in August before seeing an upturn last month. 

While occupancy has been on the downfall in all four countries, not all property types have declined equally. In the last year, listing growth in the countries where occupancy declined has largely favored apartments over homes, further weakening the occupancy performance of smaller properties. As of September, occupancy for one-bedroom properties in Finland fell 10.1% YOY, while occupancy for five-bedroom properties only fell 3.4%. In Poland, while occupancy for one to three-bedroom properties fell this year, occupancy for four and five-bedroom properties actually increased by 3.4% and 6.2%, respectively.

Looking across price tiers in Sweden, Norway, and Poland, occupancy declined the most this year for lower-priced properties. In Sweden and Norway, occupancy fell 7.6% and 5.1% YOY for budget rentals but only dropped 1.7% for luxury rentals. In Poland, there was a smaller performance gap; occupancy fell 5% in budget properties, while occupancy in luxury properties only fell 3.5%. 

While higher price tier properties have demonstrated stronger performance YOY in Sweden, Norway, and Poland, the opposite is true in Finland, where lower price tier properties have been favored this year. Budget and economy properties have seen 5% and 7.7% declines in occupancy this year, while upscale and luxury properties have seen 10.8% and 11.7% declines.

Demand in Europe Is Trending up for the Rest of the Year

After nine months of record-breaking demand growth, Europe is on track to go out with a bang in the final quarter of this year. As of October 11th, demand for October through December is pacing 17% higher than last year. Looking ahead to the new year, there are 18% more nights on the books for January through March than there were at the same time last year. 

Of the top 20 European countries, Norway (+41% YOY), Czechia (+33% YOY), and Poland (+31% YOY) are leading demand pacing for the remainder of the year; demand in all three countries is pacing more than 30% higher than last year. Countries that are lagging behind in nights booked until the end of the year are Croatia (+1% YOY), Greece (+5% YOY), and Switzerland (+6% YOY).

Christmas is Coming!

Christmas is just around the corner, and dozens of festive cities that see a big boom in stays for their Christmas markets and other activities are gearing up for a strong season. The top 15 festive hotspots that are seeing the greatest YOY demand growth for December are all seeing 25% or more growth in demand compared to this time last year. Krakow (+73% YOY), Prague (+68% YOY), and Vienna (+61% YOY) are all leading the pack for growth in Christmas demand. 

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 12, 2023. For further questions, please contact us.