AirDNA Market Review | U.S. January 2021

Jamie Lane | February 10, 2021

Pent-up Demand Leads to Record U.S. Bookings in January 2021

New bookings for U.S. short-term rentals surged in January 2021 to their highest level on record, even exceeding June 2020 by 22%, which saw bookings skyrocket after initial lockdowns eased and Americans felt confident planning their summer vacations. 

January is traditionally one of the most popular months for booking new short-term rentals and, as it turns out, 2021 is no different. It also appears once again that Americans will avoid large cities and international destinations and instead travel domestically to the beach, mountains, lakes, and small towns throughout the country. Markets in coastal and mountain destinations generated 64% of all booking value in January, or the total revenue for all reservations made during the month of January for future trips, compared to just 52% in 2017 – 2020.

Coastal and mountain destinations that cater to spring break travelers are capturing most of January’s new bookings. Florida’s typical family spring break markets like Sarasota, Cape Coral/Fort Myers, and St. Petersburg are all reporting over 50% occupancy for March 2021.

Despite growth in new bookings’ revenue for future travel, data for trips in January shows that revenue earned by U.S. short-term rentals was down 27% in January compared to 2020 levels. This is the steepest drop in demand since April 2020, when revenue dropped by 32%. A combination of higher COVID-19 case counts and further travel restrictions continue to weigh on consumer travel decisions. 

Figure 1: Booked Occupancy Levels
Figure 2: U.S. Y-o-Y Change in Short-term Rental Revenue

When we look at trends at the market level, revenue only rose in four of the 50 largest short-term rental markets in January: Big Bear, CA (+98.5%), Lower Hudson Valley, NY (+67.7%), Gatlinburg/Pigeon Forge, TN (+41.6%), and Lake Tahoe, CA (+12.3%). In these and similar markets, demand for larger rentals and home-like amenities drive ADRs higher. 

Occupancy averaged just 45.6% in January, down slightly from a year before. Coastal markets like Cape Cod and Myrtle Beach, along with beach markets across the Florida Panhandle, all recorded occupancy below 30% in January. While usually low in January, demand for STRs was about 40% below 2020 levels.

Weaker demand in January also translated to lower average daily rate (ADR) growth, up just 5.3%, which was the lowest increase since May of 2020. Small and mid-sized markets made up for softer (ADR) growth across the rest of the country, increasing by an average of 17% and 15%, respectively. 

Figure 3: January 2021 Y-o-Y Change in ADR

Throughout the past year, a shift in demand towards larger units with higher ADRs has led to an increase in ADRs nationally. As recent as October and November 2020, demand was actually up on a year-over-year basis for homes with 3 and 4 bedrooms, where one-bedroom/studio unit demand was consistently down 20-25% for the balance of 2020. Larger homes with full kitchens, washers/dryers, and pet-friendly homes have earned consistently higher occupancy and ADRs throughout 2020, according to new research from AirDNA.

Last month, the preference towards larger homes dissipated as all entire-home rentals finished the month down, regardless of room count. Demand declined 15-25% for all 1–4-bedroom units, and for the first time, those with 5+ bedrooms experienced the largest decline in demand of 35% in January.

Outlook – Recovery on the Horizon

AirDNA expects that record-high bookings in January for this spring and summer for U.S. short-term rentals are a positive indicator of substantial pent-up demand for travel.  The continued stimulus from the U.S. government and sustained high savings rate of consumers should give many people the financial ability to travel again once they feel comfortable that it’s safe to do so. These factors, combined with an increased preference for lodging accommodations with home-like amenities when they travel, will support a sustained recovery for the short-term rental sector throughout 2021.

Figure 4: January 2021 Y-o-Y Change Demand (Nights)

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