AirDNA Market Review | U.S. December 2021

Over 35% increase in host earnings in a record-breaking year for short-term rentals

The short-term rental (STR) industry ended 2021 on a strong note, despite the emergence of the Omicron variant.

Demand for U.S. STRs was up 12.9% compared to December 2019 (+52.6% vs. 2020). Statistics show this was down slightly from the 14.3% increase in November.

Overall revenue per available listing per night averaged $148.59 in December, up 51.8% from 2019. The increased revenue for short-term rental owners comes from a combination of higher occupancy, which averaged 53.9% in December—17.9% higher than 2019—and higher average daily rates (ADRs), which have grown by 28.8% over the past two years to $275.87.

Looking at holiday travel demand, the week of Christmas (Dec. 18 to 25) ended 8% lower than 2019, despite that week pacing 4% higher as of the end of November, prior to news of the new variant breaking. The following week (Dec. 26 to Jan. 1) saw solid demand, 36% higher than in 2019. The two holiday travel weeks ended up 11.8% higher than in 2019.

Demand Rises for Urban STRs

Tracking demand across location types, urban STRs were the only type to incrementally improve their growth rate in December. Although demand for these properties is still 24.3% lower than in 2019, this is the highest it's been since the start of the pandemic and an improvement from the -27.0% recorded in November. 

As guests looked to “get away,” STRs in small city/rural and destination/resort markets maintained demand levels 30% to 60% higher than in 2019. More than 70% of trips in December were to locations outside of the largest 50 cities. Pre-pandemic, large cities would have attracted more than 40% of demand, with Orlando, FL, New York, NY, and Los Angeles, CA, as the most popular cities for December trips.

Travelers Fly Away to Hawaii

In December 2021, guests took to the skies for their trips, a big change from the 2020 holiday season. The U.S. Transportation Security Administration (TSA) reported 58.9 million travelers passing through checkpoints in December, up 122% over last year.

Benefiting from the return of air travel, the Hawaiian Islands took the top four spots in a ranking of markets with the highest occupancy for the month. Each of these markets had more than 70% occupancy, significantly higher than in 2019 and 2020.

Maui, featured on our best places to invest in short-term rentals in 2022, achieved the highest occupancy of any market in December at 77.3%. This was also the first month since the start of the pandemic that demand for Maui STRs surpassed 2019 levels. While nights stayed rose 5.5% this year over pre-pandemic levels, available listings are down by 6.3%, which helped propel occupancy levels.

Putting a Bow on 2021

There is no doubt that 2021 was the best year ever for STR performance. After a slow start to the year, new bookings surged in March and April as guests scrambled to book spring and summer travel. Short-term rental nights stayed jumped by 22.5% over 2020 and 2.7% over 2019.

Revenues Rebound

Revenues also rose in 2021. Short-term rental hosts earned 37.5% more revenue than in 2020 and 25.8% more than in 2019 by charging significantly higher ADRs. During 2020, ADRs increased by 9.1%, primarily because of a shift in the types of short-term rentals being rented, with more large homes in destination markets as opposed to smaller apartments in large cities. This past year, ADRs were able to grow by another 12.3% due to some major drivers:

1. A scarcity of available rentals in high-demand markets pushed prices and ADRs higher during peak seasons in destination/resort areas.
2. The flexibility of remote work gave guests greater ability to travel outside of typical peak seasons, which boosted occupancy in the shoulder seasons to near peak-season levels. This meant that hosts didn’t necessarily need to discount as much during shoulder months as in past years.
3. The recovery of demand in large cities allowed hosts to increase rates after they dropped in 2020.

Banner Year for Occupancy

Last year was also a record-breaker for occupancy, which reached an all-time high of 60.8%, 14.1% higher than last year. Urban areas saw the largest gains in occupancy with a 19.3% year-over-year jump after they fell by more than 17% in 2020 compared to 2019.

As outlined in our 2022 outlook report, we expect occupancy levels to soften some in 2022, especially in the last half of the year. The factors that will impact occupancy most are: 

1. New supply: We expect a 15% increase in available listings in 2022.
2. Difficulty in continuing to grow demand in some destination areas once travel patterns begin to normalize.

The “normalization” of the industry includes both less flexibility as employers bring workers back to the office and a recovery of overseas trips for American travelers. This will more than likely benefit international destinations at the expense of domestic ones.

Listings Lag

If there was one surprise from vacation rental data in 2021, it would be that the number of listings continues to lag in the recovery. Overall, the U.S. ended up with an average of 1.067 million monthly available short-term rental units in 2021, an increase of 2.4% from 2020 but still 9.4% lower than in 2019.

Traditionally, supply follows demand, and that has also been the case throughout 2021. After a brief drop in available listings at the start of the pandemic, significant investment has been made in short-term rentals in rural areas and small/midsize cities. Throughout 2021, these areas increased supply by more than 11% over 2020 levels and are projected to see even more gains in 2022.

Destination/resort area supply also rose in 2021, with 5.2% more listings than in 2020. By the end of 2021, destination/resort markets had only just recovered to 2019 levels.

While available listings still declined on average year-over-year in large cities during 2021, supply grew month over month in the last half of the year, and we expect those gains to continue into 2022. As of the end of 2021, the 50 largest U.S. cities still had 19% fewer available listings than prior to the pandemic. Orlando, FL, and New York, NY, listing numbers were 35% below 2019 levels and Boston, MA, New Orleans, LA, and Seattle, WA, showed almost 30% fewer listings.

Diverse Investment

When we look at the markets receiving the most investment in 2021, we see a good mix of larger Southeastern cities and mountain and beach destinations.

Myrtle Beach, SC, saw the largest net increase in listings for the year, with almost 3,000 more available listings in 2021 than in 2020, a 29.5% gain. Panama City and Fort Lauderdale, FL, were also popular coastal destinations for new supply in 2021, with Panama City averaging almost 15,000 listings for the year, a 15.5% increase from 2020.

The Southeast and Texas provided attractive opportunities for investment in larger cities in 2021, with four cities in these areas making the top 10 list. Atlanta, GA, led large cities with 2,500 more listings in 2021, a 28.5% increase over 2020. Other top cities for new listings included Houston, TX, Tampa, FL, and Dallas, TX, which all eased travel restrictions early in the pandemic.

Gatlinburg/Pigeon Forge, TN, was the top mountain destination for investment, adding around 2,000 more listings in 2021. However, areas outside of the Southeast finally made the list in 2021, with the Ozark Mountains adding 43.9% more listings in 2021 and the Pocono Mountains in Pennsylvania adding another 25.9%.

On Track for 2022

The Omicron variant has done little to slow momentum as we head into 2022. In December 2021, 3.6% more short-term rental nights were booked than in 2019 and 26.1% more than in 2020. Coming into 2022, both the first and second quarters look very promising based on bookings through the beginning of January. For the first quarter of 2022, nights booked are 17% higher than in 2019 and 72% higher than at the start of 2021.

While almost all markets will start out 2022 stronger than in 2021, large ski markets in Colorado and Utah are leading booking growth. Aspen/Snowmass, CO; Vail/Avon, CO; and Park City, UT all have more than doubled the number of bookings in Q1 2022 over Q1 2021. Other hot markets for Q1 2022 bookings include the Outer Banks, NC; Napa Valley, CA; and Orlando, FL.

Just three markets (Atlantic City/Ocean City, NJ (-42%); Cape Cod, MA (-30%); and Maine Downeast/Acadia Coastal, ME (-22%)) showed significantly fewer bookings for Q1 over last year, when we reported our surprise at the strong demand.

Bookings are looking even better in Q2 2022, with booking pace 37% higher than 2019 and 88% higher than 2021. This is more than likely a response to the scarcity of available listings in 2021 as  occupancy hit all-time highs, leading guests to book even further in advance. Our current outlook calls for a 14.1% increase in demand in 2022 year over year.

Guests are also paying a premium to reserve top properties for both spring break and summer travel. ADRs are up 21% in Q1 2022 over 2021 for properties already booked and 7% higher in Q2.

With a record year for STRs behind us, 2022 is starting out with solid gains in both demand and ADRs, even with record numbers of COVID-19 cases being reported on a daily basis. Our outlook calls for robust performance for the industry, based on continued growth in the U.S. economy, strong consumer confidence, and limited restrictions on travel in 2022.