As we cross the decade’s finish line, arguably the most profound theme in travel over the last 10 years has been the evolution of the accommodations industry. Vacation rentals have taken the world by storm, plain and simple.
In order to gauge the current state of the industry, we teamed up with CBRE using data from MarketMinder to produce a thorough deep dive into some of the most interesting trends and insights. Scroll down and download the report for actionable insights and tips on the future makeup of short-term accommodations.
Increasing Market Share at a Decreasing Rate
By now, most industry professionals are well aware that vacation rentals have been a disrupting force for a good chunk of time. That said, the rate at which short-term rentals are growing is clearly slowing.
In fact, short-term rental supply grew by just 26% in 2019 compared to 39% in 2018 — and in 2020 that trend is likely to continue.
Suburban Hotspots and Resorts Responsible for Most Growth
Over the last few years, there’s a reason we’ve made the nominal transition from “vacation rentals” to “short-term rentals” — the industry has effectively outgrown the term. In 2014, nearly 50% of vacation rentals were located in urban areas — places that don’t exactly put the vacation in vacation rental.
Since 2014, however, that trend has slipped. Urban listings lost a significant chunk of the total market share, and most growth is now more evenly distributed between rural, suburban, resort, small metro, and interstate regions.
The Hotel Industry Hasn’t Experienced Positive ADR Growth Since 2016
When we talk about disrupting the accommodations market, perhaps the clearest example lies in the data for average daily rates.
Since 2016, the U.S. hotel industry has not experienced any significant boost in inflation-adjusted average daily rates. Since mid-2018, the hotel industry has steadily lost ADR growth quarter after quarter. Over that same time period, occupancy rates have plateaued at about 66%.
Regulations With Mixed-Bag Results
The recent growth of short-term rentals has been matched with a huge wave of regulatory policies. As seen in the report, however, it’s still tough to see the regulations’ clear-cut impact. In some locations, short-term supply has taken a significant hit but eventually recovers in the long run.
One clear theme seems to be the regulations’ influence on the market share between private rooms and entire home listings. In New York, private rooms have been gaining significant ground on entire home listings over the last few years.
The Rental Arbitrage Model Has Gone Professional
Many pioneers in the early days of the vacation rental industry operated under the model of rental arbitrage: rent a property long-term, and then re-rent it on Airbnb. As opposed to the buy-to-rent model, arbitrage (if done right) requires little up-front cost, less risk, and positive monthly cash flow.
Today, up-and-coming industry giants are operating this model at scale. Sonder, Stay Alfred, Lyric, and Domio are renting huge swaths of real estate and converting them into apartment-style short-term rentals.
Think spacious accommodations with kitchenettes and entertainment areas coupled with the hospitality standards of a hotel. It’s a business model that, for now, remains a niche contained in urban areas. However, there’s no real obstacle preventing apartment-hotel arbitrage from infiltrating rural and suburban areas in upcoming years.
For more key findings and information on the industry’s outlook, download the report below.
Download the Full Report
Get exclusive access to the latest joint report from AirDNA and CBRE