U.S. Market Review November 2021

Joyful Season for Short-Term Rentals Despite Omicron

November was once again a blockbuster month for short-term rental demand, benefiting from a strong Thanksgiving week. Demand rose by 14.9% compared with November 2019 (+39% vs. 2020). This surpassed October’s 11.8% increase to net the highest growth rate since the onset of the global pandemic.

Demand for the week of Thanksgiving was up 22.7% over 2019, peaking on Friday, with more than 637,000 listings sold. This year, however, more Americans decided to travel for the entire week instead of just the holiday weekend, with demand on Monday and Tuesday rising more than 30% compared with 2019. Growth on Friday/Saturday nights was half that, at 14.9%.

This aligns with a trend we have observed throughout 2021 in which demand growth on Monday through Wednesday (4.6%) has been double that for Friday and Saturday nights (+2.3%) compared with 2019.

Omicron Impact Emerging, but Good Tidings Continue

After three consecutive weeks of 20%+ demand growth vs. 2019, demand has pulled back with the emergence of the Omicron variant, averaging just 9.6% growth in the past two weeks. This mirrors the impact of the Delta variant, which caused growth to slow for a few weeks, but fortunately had little long-term effect on positive momentum.

Holiday Bookings Grow Ho Ho

Surprisingly, booking activity still grew relative to 2019 over the past few weeks, especially for travel around Christmas and New Year. Prior to the first breaking news about Omicron on November 26, the week of Christmas was pacing 4.1% higher than in 2019. Since then, booked nights have increased 14.1%, compared with an 8% increase in 2019 for that week. Pacing is now up 10% for the week of Christmas.

Guests are paying an average of $360 per night for a short-term rental over Christmas, which is 28% higher than in 2019 and 15% higher than 2020. Average Daily Rates (ADRs) for the year will peak on New Year’s Eve at $392, also 28% higher than in 2019.

The most popular market for Christmas in 2021 was once again Orlando, FL, which is averaging 25,804 booked listings throughout the week of Christmas (December 24 through 30). However, that is still 30% fewer nights booked than in 2019. New York, NY, drops from its no. 2 spot on the Christmas list to no. 3, with half as many listings booked compared with 2019.

No. 2 Gatlinburg/Pigeon Forge, TN, has emerged as a top destination for Christmas, growing 54% since 2019. Other fastest growing areas for Christmas travel include popular beach markets such as Panama City, FL (+110%); Myrtle Beach, SC (+93%); Santa Rosa/Rosemary Beach, FL (+83%); and Destin/Ft. Walton Beach, FL (+52%).

Miami, FL, and San Diego, CA, have maintained their high spots with the ability to appeal to travelers seeking coastal amenities in a larger city. ADRs being paid by guests have risen considerably in these markets, with the highest growth rates in those markets where demand has been increasing.

Urban Recovery Snowballing

As outlined in our 2022 outlook report, one of the keys for continued growth in 2022 will be a return of demand to cities. Urban areas seem ready to meet that challenge, with demand increasing by 47.2% over 2020, the highest growth rate of any location type in November. Demand is still down 26.7% relative to 2019 and has a long way to go. But it has made a remarkable recovery from being down 55% in December of 2020 vs. 2019.

Investors are also making bets on the growth of demand in certain cities. Markets like Dallas, TX, (10.1%), Houston, TX, (9.9%), Atlanta, GA, (9.6%), Fort Worth, TX, (9.4%), and Reno, NV, (8.5%) saw the highest gross investment in new listings for November, measured as a percentage of new listings added to the market, divided by the existing listing count. Not surprisingly, short-term rental demand in these markets has exceeded 2019 levels, and new units help these cities accommodate even more guests. 

Even as guests return to the cities, the popularity of short-term rentals in small cities and rural areas throughout the United States has not ebbed. Demand in these areas in November was 63% higher than the same period in 2019 and 46% higher than in 2020.

Occupancy remained in record territory in November at 54.3%. This was 18.7% higher than in 2019 and 10.4% higher than in 2020 when the third wave of the coronavirus caused bookings to pull back. Large cities have made the strongest gains in occupancy compared with 2020. While suburban occupancy has risen 17.8% year over year, urban occupancy has grown 23.8%, from 48.1% in 2020 to 56.7% in 2021.

The only location type where occupancy declined was in mountain/lake destination areas, with occupancy falling by 1.3% compared with November 2020. The drop resulted from gains in available listings, which outpaced the 21.8% increase in demand for the month. Popular locations for adding supply include the Poconos, North Georgia Mountains, and Gatlinburg/Pigeon Forge, with available listings growing by over 30% in each area.

Luxury Properties Shine

Increased interest in luxury properties has factored significantly in the success of short-term rentals throughout the pandemic. Typically, these luxury listings had relatively low occupancy, averaging just 46.7% in 2019, and relied on high ADRs during peak seasons to remain profitable. AirDNA defines luxury as the 20% of listings with the highest ADRs in a market, controlling for listing type (entire home/apartment vs. private room) and bedroom count.

As international travel shut down and travelers looked for drive-to locations, many guests booked rental homes for the first time. The result was that the higher-priced luxury properties that appealed to many of these first-time guests saw the largest gains in occupancy over the past two years. In November 2021, occupancy at luxury properties was over 30% higher than in November 2019, with the strongest occupancy gains going to the properties with the highest ADRs.

High Hopes for a Bright 2022, Tempered by Unknowns

With another variant impacting global travel and the efficacy of existing vaccines still unknown, the outlook for the lodging industry is once again in flux. So far, booking activity in the U.S. has remained strong, but December is typically one of the slowest months for booking new travel. January will mark the first big test for 2022 as travelers book their spring break travel and begin to plan for summer vacations. Any uncertainty could delay or negatively impact 2022 bookings.

Fortunately, short-term rentals have proved resilient in the face of the global pandemic, and even if new restrictions are put in place, domestic travel within the U.S. should continue to support strong demand. As of early December, booking pace looks strong for the rest of the month but is pacing below 2019 levels for the first quarter of 2022. As long as current sentiment holds, we expect 2022 to be a bright year for travel, booking pace to pick up, and short term rentals to have another record-breaking year.