The real source of demand for short-term rentals in any given market is the size and strength of the metropolitan areas from which visitors come–that is, feeder cities. You can use feeder city data to predict future demand and make smart investment decisions.

Best Vacation Rental Markets in the Next 5 Years

Understanding where your guests are coming from (feeder cities) can help you predict future demand.

Weigh population growth in feeder cities against the cost of purchasing a home in your market to determine a realistic return on investment (ROI).

Utilize our interactive dashboards to analyze feeder city trends and optimize your marketing and investment strategies.

Are you tired of feeling like you’re missing the boat on the best investment opportunities? Our annual Best Places to Invest report may feel like a race against time for would-be Airbnb hosts that can’t quite swing an investment within the calendar year. If you need more time to get your finances in order and do your homework, you need a different kind of roadmap. 

Enter our guide to the Best Places to Invest in Short-Term Rentals in the Next 5 Years. This is your go-to resource for future-proofing your investment strategy. We give you the insights needed to scout, prepare, and make a calculated investment when the time is right.

AirDNA’s powerful yet easy-to-use tools make hosting and investing a breeze. This means having every insight you need, all in one place, always up-to-date.

Whether you’re a well-seasoned investor or a first-time buyer, you probably have a good grasp on the basics—expected income and operating expenses are obvious considerations when you’re seeking to purchase a rental property. 

Future demand, on the other hand, is tricky. Predicting which markets will be hot in the next 5 years can feel like looking into a crystal ball.

We’ve cracked the code by analyzing Airbnb reviews and Oxford Economics forecasts. We track where guests come from—their "feeder cities"—and combine this with forecasts on population, employment, and income growth local to those areas. The real source of demand for short-term rentals (STR) in any given market is the size and strength of the metropolitan areas from which its visitors tend to come. Essentially, if a feeder city is booming, the vacation spots its residents love will likely thrive too.

Airbnb reviews give us the hometowns of guests, showing where demand originates. Oxford Economics forecasts reveal how these feeder regions will grow over the next five years. In merging these insights, we create a picture of future demand. This ultimately helps you to make informed investment decisions.

Let’s look at Houston, Texas as an example. Houston is a feeder city for several vacation destinations in the region. Within Texas, Fredericksburg, Corpus Christi, and Galveston all benefit from an influx of vacationers from Houston. Many Houstonians also venture a bit farther afield, frequenting Broken Bow, Oklahoma and Hot Springs, Arizona. If the population in Houston grows, then it follows that the number of demand nights in these popular vacation spots will increase, too.

Our methodology is grounded in historical data that proves the relationship between feeder city population growth and STR market demand. Here's how it works:

We tracked guest origins and linked them to feeder cities by analyzing historical Airbnb data (primarily guest reviews). We then examined population, employment, and income trends in these regions over the past five years. 

Our data reveals a statistically significant relationship: for the last two years (2022 and 2023) every 1% population growth in feeder cities correlates with a 2.5-3% increase in STR demand.

The historical perspective on how employment, population and income have actually evolved in the metro areas from which Airbnb guests are hailing provides strong evidence that growing feeder cities drive demand in STR markets.

Many of the same markets that are expected to perform well in coming years, such as Corpus Christi and Fredericksburg, Texas, rose to the top of the leaderboards for population and employment growth between 2018-2023. Keep in mind that the COVID-19 pandemic spurred an unusually high degree of migration, and it's unlikely we’ll see as much population movement in the coming years. 

The similarities in STR market rankings for the last 5 years and the next 5 years is no coincidence. Historical population growth points to movements that have already happened and will continue to impact demand in the future. Anyone who moved somewhere in the last couple of years will contribute to future demand for the next decade. Historical and projected population growth in feeder cities has a compound effect on the short-term rental markets that serve residents of those cities.  

However, a wider range of Western markets made the list for historical income growth: Pinetop-Lakeside and Flagstaff, Arizona; Provo/Orem, Utah; and Durango and Crested Butte, Colorado.

High housing costs and limited housing supply will begin to deter migration to major Western metro areas, or push people out of them entirely. Those metropolitan areas will begin to lag the population and income growth of places like Texas that continue to make room for new arrivals.

While we can't guarantee that past trends will continue, historical data offers strong evidence for how short-term rental demand growth is tied to projected population increases in feeder cities. Our future predictions are based on these proven trends.

Best STR Markets in the Next 5 Years Based on Feeder City Growth

They say everything’s bigger in Texas, and that’s definitely true for population growth. During the COVID-19 pandemic, lots of people moved to Houston and Dallas. These cities added over 250,000 new residents each between 2020 and 2024. Houston is projected to gain another 345,000 people and Dallas 225,000 people by 2028.

What is the impact of this migration on the long-term growth prospects of nearby vacation rental markets? For each short-term rental market on the list below, we averaged the projected growth rates of their feeder cities, weighted by visitor numbers. Population growth in feeder cities translates to more demand nights in the short-term rental markets serving those cities. 

Powered by projected 5-year population growth of 8.0% in Houston, 10.1% in Austin, and 7.3% in Dallas, the central Texas wine country town of Fredericksburg has the highest projected population growth among its origin regions (6.7%). Along with Corpus Christi, which shares the same feeder cities, these two vacation destinations lead the pack for future STR demand.

We tallied up the reviews left by guests—along with their hometowns that they included publicly with their reviews—to map out where guests staying in these top 10 short-term rental markets are coming from. Assuming future residents of booming Texas feeder cities travel similarly to current residents, we expect population growth there to boost STR demand in places like Fredericksburg, Corpus Christi, and Galveston over the next five years and beyond. 

The first non-Texas market to crack the top 10, Broken Bow Lake in Oklahoma, benefits from the same influx of metropolitan Texans. Half of the recent Airbnb reviews there were written by travelers from the Dallas area.

We've mapped out the top 3 origin metro areas for all 10 of the best places to invest in short-term rentals in the next 5 years.

Explore feeder cities for other top markets

Let's put data on promising STR markets into action. If your vacation rental is located in Broken Bow, Oklahoma, digging into Houston data feels irrelevant at first glance. Why focus on origin metro areas? Knowing where your guests are traveling from can give you a huge advantage in predicting demand and tailoring your offerings

Whether you’re an investor hunting for the next hot spot or a host wanting to fill up your calendar, leveraging feeder city insights will give you an edge. 

Identify Growth Markets: Use data to find STR markets with strong feeder city growth, promising a steady flow of future guests.

Informed Property Purchases: Keep an eye on travel trends in feeder cities to understand guest preferences, which can inform your choice of property types and locations. For example, if travelers from Houston prioritize access to water, consider investing in waterfront properties or properties with a pool.

Market Research: Scour reviews from guests in feeder city areas to gather insights on what travelers are looking for. If guests praise specific amenities or experiences, use this information to guide your investment strategy and the upgrades you choose to make before listing.

Targeted Marketing: Focus your marketing efforts on the top feeder cities, tailoring ads and promotions to attract travelers from those regions.

Seasonal Planning: Use monthly STR performance and booking lead time information, accessible through the AirDNA dashboard, to anticipate peak travel times from specific feeder cities and adjust your pricing and availability accordingly. Keep an eye on the school calendar in your feeder city as well as any regional holidays specific to that area.

Local Partnerships: Forge partnerships with local businesses in feeder cities to create travel packages or special deals.

Worst STR Markets in the Next 5 Years Based on Feeder City Growth

Not all markets are poised for growth. Some vacation destinations around the Great Lakes and the southern Sierra Nevada face slow population growth in their feeder cities, affecting future STR demand.

Lake Geneva / Alpine Valley, Wisconsin, sits at the bottom due to the huge influence of Chicagoland visitors. Chicago is expected to lose nearly 1% of its population in the next five years. 

The overall projected population growth rate affecting Lake Geneva / Alpine Valley is still positive at 1.1%, though. This is thanks to forecasted in-migration to Madison, another major feeder city to the Lake Geneva area. 

All of the short-term rental markets in the bottom 10 rely in large part on vacationers from New York City, Los Angeles, Chicago, and Detroit. It’s no coincidence that 3 of these major metropolitan areas experienced huge population declines between 2020 and 2023. New York City lost a staggering 656,000 people. Los Angeles experienced an outmigration of approximately 437,000 residents and Chicago 250,000 residents. 

By 2028, Chicago is projected to lose another 183,000 residents and Los Angeles another 65,000 residents. New York City’s population loss is expected to slow, bumping it off of the bottom 15 list for forecasted out-migration. 

Detroit, on the other hand, is a close third to Los Angeles with an estimated loss of 60,000 residents in the next 4 years. The STR markets in Michigan West and North Coastal will be hit particularly hard by this exodus from the Motor City—6% and 17% of their vacationers come from Detroit, respectively.

For investors, it’s crucial to recognize population growth trends and to connect the dots on what it means for various STR markets. 

Understanding the dynamics of feeder cities can help you make informed decisions and avoid markets with slower growth prospects.

Population growth isn’t the whole story when it comes to predicting STR demand. More people in a feeder city doesn’t mean much for the STR markets poised to benefit if the new residents don't have disposable income to fund their vacations.

That’s why we also look at personal income projections in each region. This extra layer of data reveals intriguing differences and surprising similarities in our rankings.

For example, Broken Bow, Oklahoma ranks high for population growth in its feeder cities but it doesn't crack the top ten for income growth. Whatever positive effect population growth in Texas would’ve had in Broken Bow is likely to be made milder by modest income growth. The effect of these conflicting trends might be seen on a more granular level in years to come—perhaps demand will indeed increase in Broken Bow, but primarily for budget-friendly accommodations.

Conversely, cities like Lubbock, San Antonio, McAllen, and Killeen in Texas don’t show up high in the population growth rankings for their feeder cities but they shine in terms of income growth (ranked 7-10, respectively). This could mean that whatever visitors are drawn to these short-term rental markets will spend more, on average, than vacationers that are coming from feeder cities with little to no income growth.

Conversely, weak income growth can reinforce the negative effect of slow population growth. The Wisconsin and Michigan STR markets that rank lowest for population growth also rank lowest for income growth. The worst STR markets are a clean sweep for the Midwest and a few Appalachian destinations, like the Red River Gorge in Kentucky, and Deep Creek Lake, Maryland. 
While population growth in feeder cities may be the strongest indicator of short-term rental demand growth in benefitting markets, it can’t be considered in isolation. There are other variables at play. Income and employment growth play a crucial role too, providing a fuller picture of future market performance.

Plan your STR strategy based on real booking activity and trends—plus, see how things change year over year.

Investing today: Balance Future Strength with Current Yield

If you’re considering a short-term rental investment, it's crucial to weigh future demand against today's revenue potential. One key metric for this is current yield, which AirDNA tracks for every market. Current yield is calculated by dividing the annual revenue potential of properties in a market by the purchase price of homes in that market. We use our database of STR performance to calculate annual revenue potential and we get home prices from Zillow.

Current yield helps investors understand the potential return on investment (ROI) in the short term. It's not the only factor to consider, but it does serve as a major guidepost. High yield indicates a market where properties make substantial money relative to their purchase cost.

Charting all the destination markets in our database by projected 5-year population growth and current yield helps us find investing sweet spots. “Sweet spot” markets are already delivering a high ROI (higher on the y-axis) and they’re projected to see continued growth in demand from their feeder cities (further to the right). 

This way of visualizing markets helps to differentiate vacation destinations with similar growth projections but differing barriers to entry. Take the Sawtooths in Idaho and Hot Springs, Arkansas, for example. The STR markets have similar projected population growth, with the Sawtooths slightly edging out Hot Springs (4.9% vs 4.7%). However, the Hot Springs market emerges as the clear winner in terms of current yield (15% vs 5%) when you consider the relatively affordable home price ($255,000 vs $1.4 million). 

Current yield can also paint a more nuanced picture for short-term rental markets whose low projected population and income growth might initially scare investors away. Wisconsin Dells, for instance, which ranks third lowest for forecasted population growth in its feeder cities, has an impressive current yield of 26% due to low home prices and high revenue potential. 

Similarly, Red River Gorge, Kentucky has a low projected population growth and income trajectory (11.7% growth compared to 16% or more in top STR markets), but the $137,000 average home price brings its current yield up to 28%. 

Remember, current yield figures are rough calculations of gross revenue divided by home values. They don't begin to account for operating costs like cleaning and property management services. Investors should use these metrics as a starting point and dig into property-level specifics when approaching a purchase decision. Market-wide averages can’t speak to the specific revenue potential and actual sale price of a particular property. 

A comprehensive approach that takes into account both current performance and future earnings helps balance short-term gains with long-term potential.

The following scatterplot is interactive! Hover your mouse over a point on the graph to see more information about that market.

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Explore Your Market’s Top Visitor Origins

Ready to see where your future guests will come from? Our interactive dashboards make it easy to apply the insights from this article to your specific short-term rental market.

The first dashboard is a map of the United States, accessible through the button that follows this instructive image. Select an STR market from the drop-down menu, and watch as lines appear, connecting your market to its feeder cities. This visual representation shows the flow of travelers and highlights the regions driving demand.

Try our interactive dashboard and visualize from what areas of the country guests are traveling from for any given market in the United States.

The second dashboard features a horizontal bar chart, displaying the percentage of travelers from each feeder city for the selected STR market. This breakdown helps you understand the dominant origins of your guests, providing valuable insights for targeting your marketing efforts and optimizing your investment strategy.

The following dashboard is interactive! Select or search for a market from the drop down menu to see feeder cities for that location. 

Hover over any bar in the chart to see the exact percentage of total visitors that each feeder city contributes to the selected STR market.

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This "Best Places to Invest in the Next 5 Years" guide isn't just data—it's fodder for daydreaming. It’s a chance to really start picturing yourself as a short-term rental investor.

Even if signing off on the dotted line for a new property feels far off, the reality is that your journey to successful Airbnb ownership begins right now.  By diving into the data well in advance of making an actual purchase, you can make informed decisions that align with future trends.

Remember, a booming feeder city means a thriving STR market. Armed with this knowledge, you can tailor your investment and management strategies to maximize returns. Dive into those reviews, track demographic trends, and make those savvy property upgrades that will attract guests and boost your revenue.

With the right insights and a bit of foresight, you’re already on your way to a future filled with happy guests and lucrative returns. Start prepping today, and watch your daydreams turn into a thriving reality!

Even if signing off on the dotted line for a new property feels far off, your journey to successful Airbnb ownership begins right now.

Best Vacation Rental Markets in the Next 5 Years

Explore feeder cities for other top markets

We've mapped out the top 3 origin metro areas for all 10 of the best places to invest in short-term rentals in the next 5 years.

See feeder cities for your market

Try our interactive dashboard and visualize from what areas of the country guests are traveling from for any given market in the United States.

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