U.S. Market Review October 2021

Short-Term Rental Demand Momentum Grows as Borders Re-Open

Demand for U.S. short-term rentals accelerated in October, reaching the highest growth rate since the onset of the global pandemic.

As concerns about COVID-19 eased, demand in October shot up by 12.2% compared with October 2019 and 35.8% higher than in October 2020. This was a significant gain from the 4.3% increase in September and a drop of 1.5% in August.

Average daily rates (ADRs) are increasing as well, growing to $243.28 in October, up 24.7% over 2019.

The combination of rising rates and demand means that more revenue than ever is coming into the sector. Strong growth should continue, building on rising booking and revenue numbers reported by Airbnb and Vrbo in Q3. U.S. short-term rentals generated 40% more revenue in October 2021 than in October 2019, up from an average of 24% more in Q3 2021 over Q3 2019.

Opening U.S. Borders Should Spur Demand

In November, the U.S. once again opens its borders to international travelers. In 2019, approximately 15% of all U.S. short-term rental stays were by guests from outside the U.S. Since the beginning of the pandemic, that figure has stayed at around 3%, but should begin to recover with travel restrictions lifting.

Total spend from foreign travelers visiting the U.S. was down more than 80% in September compared with 2019, while outbound spending by U.S. travelers was only down by 46%, according to the National Travel and Tourism Office.

Lifting inbound travel restrictions will have a bigger impact on some markets than others. In 2019, seven U.S. short-term rental markets had more than 30% of their stays come from international travelers: New York, NY, (43%), Jersey City/Newark, NJ, (42%), Oahu, HI, (36%), Miami, FL, (35%), San Francisco, CA, (33%), Big Island, HI, (32%), and Los Angeles, CA, (31%). These gateway cities have generally seen little recovery in demand thus far and are poised to reap the benefits from recovery of international travel.

Demand for Large Cities May Soon See Upswing

Even with record numbers of people staying in short-term rentals, guests have yet to find their way back to cities. A combination of remote work, closed international borders, unvaccinated children, and avoidance of large crowds has limited demand recovery. 

As of October, demand was still 20% below 2019 levels in the 50 largest U.S. cities, while demand outside of those cities, including destination/resort markets and small and midsize cities, was 33.8% higher than 2019 levels.

However, from January 2021 through July 2021, demand recovery rose consistently. The percentage of decline over 2019 improved from 50% lower in December 2020 to only about 22% lower in July. After that, the increase in COVID-19 cases associated with the Delta variant caused demand to shrink again in urban areas. However, with cases falling since August and consumer confidence rising, urban growth once again seems to be headed in the right direction.

A Tale of Two Different Types of Cities

East and West Coast cities have seen some of the slowest demand recovery since 2019. Of the largest cities, New York, NY, (-55%), Los Angeles, CA, (-45%), San Francisco, CA, (-44%) and Boston, MA, (-42%) significantly lag behind the rest of the country, with demand down more than 40%.

On the other end of the spectrum are a handful of cities where demand has surpassed 2019 levels. These cities—generally located in the South, where many COVID-19 restrictions were eased earlier in the year—potentially provide a roadmap for other cities as they begin their own recovery.

The strongest demand growth in major cities is found in Texas. In San Antonio (+41%), Houston (+32%), Dallas (+14%), and Austin (+8%), demand has surpassed 2019 levels. Demand has also grown in Phoenix, AZ, (+24%), and Atlanta, GA, (+17%) has seen positive demand for most of 2021.

Within these largest 20 cities, dense urban areas are generally underperforming suburbs. On average, demand in urban areas is down 30.3%, while suburban areas are only down 6.9% over 2019 levels. Orlando and New Orleans offer exceptions, with demand for urban areas higher than for suburbs.

Los Angeles and Austin have the largest divergence in October demand within the same city over 2019. It's most pronounced in Austin, where urban demand was down by 10%. Meanwhile, suburban demand in Austin was up 34% and hit its highest level ever, spurred by the return of Formula 1 racing to Austin’s suburban Circuit of the Americas. The return of racing events also resulted in higher ADRs, which rose 32% from 2019 to $299 for the month.

Demand Sees a Never-Ending Summer

As summer ends and kids head back to school, demand for short-term rentals generally falls dramatically. While October demand is down from summer peaks, it's significantly higher than in years past. Demand in October was 31.5% higher than in 2019, led by mountain destinations such as the Poconos (+126%), the Ozarks (+107%), the Adirondacks (+69%), and the North Georgia Mountains (+66%), which see a second peak “leaf peeping” season when the leaves change colors. In mountain/lake destinations, occupancy was 55.7% in October, just below the peak occupancy level for all of 2019, which was 56.2% in July.

Likewise, October occupancy in coastal areas remains atypically high at 58.5%, 25.5% higher than 2019 levels. Puerto Rico occupancy rose to 53% in October 2021 in what is typically the low season of the year—a 50% increase over 2018 and 2019, when occupancy averaged just 35%. Other markets extending their season include Key West, FL; Pawleys Island/Georgetown, SC; and Hilton Head, SC, which all saw occupancy rise by more than 35% for the month.

2021 Thanksgiving Travel Could Set Records

While the 2020 edition of Thanksgiving was canceled for many families, 2021 is shaping up to be a record year for holiday travel. Overall, bookings for Thanksgiving weekend (Wednesday  through Saturday night) are up 22% over 2019 and 53% over 2020. This year, however, it appears that more people are traveling for the full week, taking advantage of the ability to work remotely. Demand for the three days prior to Thanksgiving (Sunday through Tuesday) is pacing 33% higher than in 2019.

Meanwhile, Christmas week demand is pacing just 4% higher than in 2019 (+82% over 2020), and tracking in line with what we reported last month. ADRs have pushed higher over the past month and are now pacing 36% higher than 2019 levels, compared with the 30% we reported last month. As Christmas approaches, we expect both demand and ADRs to rise even higher.

Strong holiday pacing is propelling expected demand for the rest of the year. Demand for November is 10% higher than in 2019, while December is pacing 6% higher than in 2019.

Bookings Should Get a Boost in Coming Months

Many more families may feel comfortable traveling again—some for the first time since the start of the pandemic—now that COVID cases are declining and children are eligible for vaccination, which should boost the country’s vaccination rate.

Along with borders opening to international travelers, we expect this to result in a wave of new bookings in the coming months as guests start planning for spring 2022 travel. While risks remain, the near-term outlook for the short-term rental industry looks bright.