AirDNA Market Review | U.S. April 2022

Economic Uncertainty Fails to Slow Short-Term Rental Bookings, Demand Up 25% in April

There’s no sugar-coating it: The past few weeks have exposed weakness in the American economy. Gross domestic product (GDP) declined during the first quarter of 2022, and the major U.S. stock indices lost between 15% and 30% of their value since Jan. 1.

However, when looking at performance in the short-term rental (STR) industry over the past month, there are still lots of reasons for optimism.

Most key STR performance indicators in April greatly exceed previous records, and growth continues to look strong over previous periods. But similar to last month, some weakness is showing in select figures when compared to 2021, which was a record year for the industry. 

When it comes to GDP, the headline figure was down mainly because of an increase in exports and a decrease in government spending. Despite these developments, spending on personal consumption (such as goods and services) was actually up 2.7% during Q1, which was the highest rate of growth in the past three quarters. The other key indicator is jobs; and in April, the U.S. added 428,000 jobs, which should support further income growth and consumption as we head into the summer. 

Reasons for STR optimism:

1. Demand is up 25.3% year-over-year (+25% vs. 2019)
2. Average daily rates (ADRs) are up 11.2% YOY (+33.9% vs. 2019)
3. Revenue is 39.4% higher YOY (+67.4% vs. 2019)
4. Available listings reached 1.25 million, up 19.5% YOY (+8.5% vs. 2019)

Reasons for STR concern:

1. Nights booked were down 3.6% YOY to 17.4 million
2. Occupancy was down 1.7% YOY to 60.2% (+11.1% vs. 2019)

Declining occupancy: Where are areas of weakness?

The declines in occupancy were most prevalent in destination/resort markets as well as in small cities throughout the country. As was the case last month, most of the weakness in occupancy stems from increases in the nightly supply of listings and not from systemic weakness in demand. Demand grew by more than 25% on average from the same time last year in small city/rural areas, which fell short of the 32% increase in available listing nights. 

Looking more closely at the occupancies in mountain/lake destinations, it’s clear that occupancy levels are consistently coming in lower than 2021 levels but still significantly higher than the levels achieved in 2019. It’s also been a trend since last August that occupancy was coming in lower than the prior year when guests started to flock to these destinations en masse. Another trend is that occupancy seems to be maintaining some higher demand levels during non-peak periods. For example, the typical drop in occupancy was not as pronounced in April 2022 from March as it was in 2019.

The occupancy declines in mountain/lake areas were most pronounced in the Pacific Northwest, as Oregon and Washington claimed eight of the top-15 markets for largest occupancy declines. It’s important to note that all except one of these markets—Redding, California—had an occupancy level higher than in 2019. Most remarkable was Broken Bow Lake, Oklahoma, where its 52% occupancy level left it 16% below 2021 levels but 56% higher than in 2019, when occupancy was just 33.4% in April.

Occupancy continues to recover strongly in urban areas, up 4.9% in April. Growth was highest in some of the largest U.S. cities like Boston (+24.1%), New York City (+19.7%), and Washington, D.C. (+37.5%), relative to the same time last year. A full recovery in demand to pre-COVID levels seems elusive, though, with very little improvement in demand relative to 2019 levels. Demand in Boston remains about 50% below 2019 levels, while New York City and Washington, D.C., have been at -46% and -27%, respectively, for the past few months. 

New Bookings Lag Behind 2021's Spring Surge

Growth in demand for STR night stays accelerated in April to +25% vs 2019 (+25.4% YOY). This is the highest growth rate relative to 2019 levels since the start of the pandemic. Even with weakening occupancy in destination/resort markets, demand was up 15% YOY in mountain/lake locations and 20% higher in coastal locations in April.

When compared to 2019, all but just a handful of top 50 STR markets have fully recovered demand back to 2019 levels, which mostly include large metro areas located on the west coast or Southeast, such as Atlanta, Dallas, and Austin, Texas, have bucked the trend by exceeding pre-pandemic levels of stays by 10% to 40%. These cities pale in comparison to Houston and San Antonio, where demand is more than 60% above 2019 levels. Of the largest markets, the Tennessee cities of Gatlinburg and Pigeon Forge have the highest growth, where demand has more than doubled in the past few years (+106%).

Guests are booking at a lower rate, though, this year than last. Overall, nights booked in April were down by 3.6%, but given that this time last year vaccines were broadly rolling out—and travelers were getting a late start on booking summer travel—17.6 million nights booked last month was still a strong figure and 14.6% higher than we reported in April 2019.

We expect this to be the last month where bookings will fall below 2021 levels. The spring surge in booking last year eased to more typical levels in May. 

Double-Digit Growth, ADRs Up 11.6% in April

Prices to stay in STRs continue to rise, and ADRs rose by 11.6% in April, which was higher than the 10.6% increase from March. ADRs are growing the most in mid- to large-size metro areas, where ADRs are growing more than 15% compared to last year. 

The highest growth rate in ADRs for April was in Augusta, Georgia, where rates averaged 68.2% higher. Augusta hosted a return of the Masters Tournament to a full-capacity field and crowd, which led to the big increase in demand over 2021.

The overall rate of ADR growth should moderate some as we head into summer. As of mid-May 2022, ADRs are pacing 7.9% higher for the summer than last year. Spurred by strong booking activity at the beginning of the year, ADR growth is highest in coastal destinations, with ADRs on the books for the upcoming summer 12.1% higher than last year.

Strong Pacing Continues Throughout 2022

Bookings so far in 2022 have set the stage for a record demand year. Looking ahead to the summer, there are already 16% more nights booked than at the same time last year.    

Granted, the booking window is a bit longer than last year—for example, people are booking further in advance—but we still expect a wave of summer bookings as guests begin planning their summer travel. Assuming demand will end up 20% higher this summer than compared to last year, less than half of demand (43%) for the summer has already been booked. 

As we look forward to the summer months, the largest cities are going to continue to see the largest growth in new bookings. Urban areas are already pacing 45% higher than the same time last year for summer bookings. Even with occupancy levels expected to slide further as we head into the summer months, all location types should realize significant incremental growth in demand, especially during peak travel periods, which were supply-constrained last year. 

Economic uncertainty may delay some activity as guests hold off booking as they wait to see what direction the U.S. economy is headed. As of today, most signs point to robust times ahead and a record summer for STRs.