U.S. Market Review 2022

Record Short-Term Rental Demand Drives Higher Average Daily Rates in 2022

Record-setting momentum continued for the American short-term rental (STR) industry in February, with year-over-year bookings not only exceeding 2021’s numbers but 2020 and 2019’s pre-pandemic numbers as well.

A total of 16.5 million nights were booked this February, which is a 21% increase from last year but noticeably lower than the 41% surge reported for January 2022. Booking pace for spring travel is also 49% higher than this time last year and 26% higher than at the same time in 2019.

The bottom line is that, right now, STR demand is greater than ever before. Many factors are driving this trend, but it ultimately speaks to both the maturation of the STR industry and to Americans’ habit of making travel arrangements in the early months of a new year.

However, occupancy and supply data are needed to better understand if, when, and how this trend may curtail (which we cover later in this review).

What More Bookings Mean for Spring and Summer ADRs

Average daily rates (ADRs) are also on the rise for two reasons: the recent surge in bookings along with the growing costs of cleaning and operating STRs. For example, ADRs are trending 15.4% higher than last year and have even grown 16.7% in coastal destinations and 19.7% in mountain destinations.

As we look toward summer, we see similar booking trends with 46% more nights booked compared to last year. But ADR growth slows compared to last season’s elevated rates. So far, ADRs are only up 5.5% versus last summer.

The average revenue earned per available listing in the U.S. rose by 16% over the past year. This is largely due to higher ADR, which increased 13.2% from $241 to $273 over the same period. With demand returning to cities—where it has been below average since the onset of the pandemic—the highest ADR growth is now found in properties located in both urban (+25%) and suburban (+19.1%) markets.

Demand Is Driving Record Occupancy Levels—For Now

U.S. STRs hit record-high occupancy levels in February at 56.5%, which is 2.5% higher than last year. This high mark is the natural result of still-growing demand, which increased by 34.6% year-over-year. Overall demand still lagged behind that of February 2020, though, mainly because of depressed demand in large cities, where it’s 30% lower than it was two years ago. It’s also worth noting that urban areas in winter months typically generate a larger share of overall demand as demand drops elsewhere across the country.

Urban Areas Are Slowly Recovering

Urban areas are now the only location type where demand has yet to recover to pre-pandemic levels. Coastal cities such as Boston, MA, (-49.4%), New York, NY, (-47.2%), Los Angeles, CA, (-46.6%), Oahu, HI, (-41.55%), and San Francisco, CA, (-38.9%) are lagging the most in terms of demand compared to 2019. However, demand recovery is progressing; February 2022’s demand was 22.7% below February 2019, compared to -25.3% in January. 

These markets have been highly reactive to the ebb and flow of COVID-19 cases, with demand recovery declining as a result of both the Delta and Omicron variants in October 2021 and January 2022, respectively.

Demand recovery in urban areas has also been hampered by diminished supply and restrictions on inbound international travel. As more people return to in-person workplaces and begin traveling between cities, we expect demand recovery to pick up, but it will probably take years to fully recover in these markets.

As Supply Grows, Occupancy Rates May Fall

For the second month in a row, Maui, Hawaii, had the highest occupancy rate of any U.S. market at 80.7%. It also achieved the most occupancy growth in February 2022, with an increase of 29.4% over last year. Boston and Washington, D.C., recorded the second- and third-highest growth in occupancy rates, with occupancy growing more than 20% in both markets versus the same period in 2021.

A combination of slowing demand and growing supply has reduced occupancy in some coastal and mountain destinations. Of the 50 largest U.S. markets, Big Bear, CA, experienced the largest year-over-year occupancy drop in February at -27.6%. A 7% decrease in demand and a 22% increase in available nights contributed to the dip.

The largest supply gains have been in small cities and rural areas, where there are now 30% more listings than before the pandemic. Certain destination areas have been popular investment targets versus last year, too, with listings in mountain/lake areas up 18.5% and coastal areas up 16.6%.

We expect to see significantly more investment throughout 2022, as most hosts are still experiencing record levels of occupancy and revenue. However, a lack of available homes for investment could prove to be a major headwind. In February, Zillow reported that the available inventory of homes for sale plunged below 900,000 listings, a record low that is down 42.4% from January 2020.

Conversely, the number of available STRs should continue to grow throughout 2022, which will likely lead to falling occupancy rates in more markets throughout the country. In February, another 55,000 new listings were added over January, which pushed supply to roughly 1.5 million listings. This is 14.7% higher than last February and 2.5% higher than the pre-pandemic supply peak.

Possible Implications of the Russia-Ukraine War

As the tragic war rages on in Ukraine, we have been touched to see the innovative use of the Airbnb platform to house refugees and donate to people on the ground. We are still in a time of uncertainty and are closely monitoring data so as to better understand the war’s impact on global economies and the travel industry specifically.

Many leading American economists are anticipating inflation, disruptions to supply chains, increases in commodity prices, and material declines in equity markets. The war has also already caused gasoline prices to spike, which adversely impacts car and airplane travel—both of which are essential to the STR industry.

We don’t expect current oil prices (around $100 per barrel at the time of this review) to significantly stunt domestic travel and tourism. However, gas prices could skyrocket if continued military tensions lead to a significant drop-off in Russian oil exports. (For reference, prices exceeding $125 per barrel could impact our expectation of STR demand growth.)

It’s important to note that not all markets are equally exposed to rising oil prices. The chart below shows the top and bottom markets based on the distance that STR guests traveled to reach them in 2021. The markets most exposed to rising gas prices include fly-to areas such as the Hawaiian Islands and Miami, Florida, as well as markets near national parks such as Glacier in Montana and Yellowstone in Wyoming.

Other markets that are near large metropolitan areas, and require relatively short trips, are more insulated from higher gas prices. These include destinations such as the Pocono Mountains, Big Bear in Southern California, and the Jersey Shore in Coastal New Jersey.

Other areas that are near large metropolitan areas and require relatively short trips are more insulated from higher gas prices. These include destinations such as the North Georgia Mountains, Lower Hudson Valley, and Coachella Valley.

A Promising Outlook for 2022 So Far

Record booking numbers for the new year indicate that the future definitely looks bright for the STR industry. However, an influx of new supply alongside slow-to-recover urban markets will likely prompt occupancy levels to dip in coming months. Additionally, the effects of the Russia-Ukraine war or new COVID-19 variants could further influence current trends during the popular summer travel season. We’ll certainly be keeping an eye on all of these factors in the coming months, so stay posted to our Resources center for the latest insights.