Galloping Profits: Kentucky Derby Effect on Louisville's STR Market

Key Takeaways

• The Kentucky Derby remains the biggest event for the Louisville STR market, with more than 7,000 nights booked for May 2-4, 2024. 
• 2024 Airbnb occupancy in Louisville around the Kentucky Derby is pacing 22.1% above 2023.
• In 2024, travelers seem to prefer lower-priced offerings, with high occupancy rates for Budget, Economy, and Midscale listings.

As spring fills the air in Louisville, Kentucky, anticipation mounts for the arrival of one of the most iconic events in American sports and culture: the Kentucky Derby. 

For hosts in Louisville's short-term rental market, the Kentucky Derby weekend represents not only a time of excitement but also a lucrative opportunity. With more than 7,000 nights already booked for May 2-4, 2024, and Airbnb occupancy pacing 22.1% above the previous year, it's evident that the Derby continues to reign as the pinnacle event for the city's hospitality industry. 

Let’s dive into the dynamics of the Louisville STR market surrounding this iconic event to uncover valuable insights and strategies for hosts to maximize their earnings and provide unforgettable experiences for guests during this peak time.

About the Kentucky Derby

Every year, as Louisville’s magnolias and dogwoods bloom, the city eagerly anticipates the arrival of the Kentucky Derby, often referred to as "The Most Exciting Two Minutes in Sports." Since its inception in 1875, the Kentucky Derby has remained a pinnacle of American horse racing, steeped in tradition and spectacle. The Derby is not merely a horse race; it's a cultural phenomenon, symbolizing elegance, southern charm, and the spirit of competition.

During Derby week, Louisville transforms into a bustling hub of activity, attracting visitors from across the globe. The city comes alive with a whirlwind of events, from glamorous parties and celebrity sightings to bourbon tastings and extravagant hat parades. The air is filled with the sounds of thundering hooves, the clinking of mint julep glasses, and the melodies of traditional Kentucky bluegrass music.

For hosts in Louisville's short-term rental (STR) market, the Kentucky Derby weekend represents a golden opportunity. Just as the Derby is a sporting calendar highlight, it’s also a peak season for the city's hospitality industry. Hosts can capitalize on the surge in demand by strategically pricing their rental properties and offering unique Derby-themed experiences to guests.

STR Stats for the Kentucky Derby

2024 marks the 150th Kentucky Derby, and if short-term rental performance has anything to say, the infamous horse race is aging like fine wine. Guests are still flocking to Louisville and willing to pay primo prices to spectate this event.

Average Daily Rates (ADR) for the Kentucky Derby are $714, a staggering $422 higher than the average over the past 12 months. Occupancy rates are also significantly higher at 78%, compared to a 50.2% average.

The Kentucky Derby remains the biggest event for the Louisville STR market, with over 7,000 nights on the books for May 2-4 this year. This is about 2,600 more booked nights than the weekend before or an average of about 880 more nights per day.

As the Kentucky Derby approaches, demand for STRs in Louisville soars. Overall, STR demand in Louisville around the Derby is pacing 22.1% above 2023.

A Closer Look at ADR

Supply and demand generally influence STR average daily rates (ADR). Often, during peak times, ADRs soar because demand is high. In areas with lots of STRs, high demand can actually lower ADR because competition among properties can drive prices down.

Interestingly, in 2024, ADR for Airbnbs in Louisville is pacing between 37-44% higher the weekend before the Derby but is pacing about 20% lower for the actual weekend of the Derby. The higher pacing the weekend before the big event is likely a reflection of Louisville’s overall growth as a short-term rental market since this time last year.

In 2023, ADR for occupied listings versus listings that never got booked had similar prices. Empty vacation rentals offered nightly rates about $30 lower than what occupied listings charged guests, likely in an effort to incentivize reservations as the date drew nearer. 

Interestingly, Airbnbs that are already booked for this year’s Kentucky Derby have much lower ADR ($726 versus $945 in 2023). Short-term rentals that are still on the market, on the other hand, have an average ADR of $1,338—perhaps a strategic move by STR hosts who hope that last-minute attendees scrambling to find accommodations are willing to book at any cost.

It remains to be seen whether these expensive listings will get booked. Our data suggests that guest preferences lean towards lower-tier accommodations.

Budget Accommodations for the Derby Are the Way to Go in 2024

To assess STR performance according to their cost, we organize them into 5 pricing tiers:

• Budget
• Economy
• Midscale
• Upscale
• Luxury

In the graph below, budget, economy, and midscale listings can be understood as lower-priced listings, while upscale and luxury properties are considered higher-priced listings. Data for Airbnbs in each tier paints a picture of the property types guests are renting for the Kentucky Derby this year.

In 2024, the data shows a slight preference for lower-priced listings in Louisville around the Kentucky Derby. On-the-books occupancy rates for these tiers during Derby weekend are 3% higher than those of higher-priced properties. 

Occupancy is also substantially higher for lower-tier Airbnbs in 2024 compared to Derby weekend 2023—year-over-year change in occupancy for budget and economy Airbnbs is between 10-15%.

Meanwhile, occupancy rates for higher-priced Airbnbs have changed negligibly this year compared to 2023. 

Comparing ADR by Pricing Tier Year-over-Year

Airbnbs at every pricing tier are seeing lower ADRs in Louisville around the Derby weekend in 2024 compared to 2023.  

ADRs for budget listings have remained relatively stagnant year-over-year, declining less than half a percent. Meanwhile, ADR is about 14% lower for Economy listings and 22-23% lower for Midscale, Upscale, and Luxury properties. 

Don’t Overlook the PGA Championship

2024 is a monumental year for Louisville, marking not only the 150th Kentucky Derby but the return of the PGA Championship to the area after 10 years. Just two weeks after the Derby, which is held on May 4, the world’s best golfers will take to Valhalla Golf Club for the PGA Championship tournament from May 16-19.

Occupancy Rates

Occupancy rates for the PGA championship are 23% higher than the trailing 12-month (TTM) average, and we expect this number to go up as the event gets closer.

ADR

Guests traveling for the PGA championships who booked their accommodations by May 1st were able to snag nightly rates in line with the yearly average (about $290), while golf enthusiasts who have yet to book their short-term rentals will encounter inflated pricing ($850). 

Demand Growth

Although STR demand in Louisville is technically higher around the weekend of the Derby, the PGA Championship is proving to be the event with greater growth. Why, you ask?

There was no PGA Championship in Louisville last year, making for a strong year-over-year (YOY) comparison. Demand for STRs around the PGA Championship is pacing 107% to 262% above the previous year—that’s double or quadruple the demand! 

Bet Big on the Louisville STR Market This May

As the Kentucky Derby gallops into Louisville, it's not just the horses racing for victory—local short-term rental hosts are also poised for a lucrative run. This annual event isn't just a race; it's a cultural extravaganza that transforms the city into a hotbed of activity, drawing in visitors from far and wide.

Clearly, May represents a peak season for STR hosts in Louisville. You can start preparing for 2025 by:

• Timing is Key: Align your rental calendar with the surge in demand during the Derby weekend. Prepare your property well in advance to ensure it's ready to welcome guests during this busy period.
• Dynamic Pricing: Take advantage of the heightened demand by implementing a dynamic pricing model. Adjust your rates based on market trends and past performance to maximize revenue during the Derby festivities.
• Operational Efficiency: With demand at its peak, efficiency is crucial. Streamline your operations to deliver exceptional guest experiences, from seamless check-ins to prompt maintenance and support services.
• Strategic Marketing: Stand out from the competition by showcasing your property's unique offerings and Derby-themed experiences. Leverage targeted marketing tactics to attract guests looking for an unforgettable Derby weekend getaway.
• Long-Term Vision: While the Derby may offer a short-term windfall, it's essential to maintain a balanced business strategy year-round. Continue to focus on securing bookings during off-peak seasons to ensure consistent profitability.

By implementing these strategies, Louisville STR hosts can bet big on the Derby weekend and set themselves up for a successful season ahead, ensuring a healthy bottom line and satisfied guests.