What Is a Market and What Does it Mean in Short-Term Rentals?

Summary

What is a market?

A market is the defined area where a vacation rental operates—from broad regions to specific neighborhoods. Markets can be categorized by both geography (regional, metropolitan, and local submarkets) and type (coastal, urban, mountain/resort), each with unique demand patterns, competitive dynamics, and performance metrics that shape success.

Why it matters

Your market shapes every aspect of your short-term rental's success—where to invest, how to price, who to target, and how to compete. Understanding your market is the first step to making smart decisions that drive revenue and growth.

Who should know it

Hosts setting up new properties, property managers optimizing their portfolios, and investors analyzing opportunities all need to understand the market.

Where you’ll see it

Inside AirDNA, we analyze data from over 120,000 global markets and assign each a Market Score to measure performance and investment potential. You'll see detailed market analysis in our Monthly Market Reviews and Best Places to Invest report.

Market Overview

In the short-term rental industry, a market is more than a location—it's where properties, guests, and revenue opportunities converge. At AirDNA, we track over 120,000 global markets, and each has its own unique DNA: a specific blend of pricing dynamics, guest preferences, seasonal patterns, and competitive forces that shape rental performance.

Unlike traditional hotel markets, short-term rental markets are influenced by distinct factors beyond location alone. Property type diversity, local events, community characteristics, and emerging travel trends all affect booking patterns and revenue potential.

At AirDNA, we analyze markets at multiple levels—from broad geographic regions down to specific neighborhoods—to uncover both wide-reaching trends and granular insights. This layered approach reveals opportunities in everything from high-performing metropolitan regions to promising local submarkets that might be overlooked in broader analyses.

Characteristics of Short-Term Rental Markets

Short-term rental markets are complex and influenced by many factors. Here are five key characteristics that significantly impact market performance:

• Regulation: Local laws and restrictions that govern short-term rentals, from permitting requirements to operating restrictions. These regulations vary significantly between markets and directly impact operational flexibility. 
• Seasonality: The natural ebb and flow of demand throughout the year. Whether it's winter peaks in ski destinations or summer surges in beach towns, these patterns influence pricing strategies and revenue potential. Check out our full guide on mastering Airbnb seasonality to boost your profits year-round.
• Revenue growth: Trends in Average Daily Rates (ADR) and annual revenue over time. Markets with steady or increasing revenue growth indicate strong potential for profitability.
• Rental demand: The steady flow of booking requests and guest interest, reflected in occupancy rates and booking patterns. High-demand markets maintain strong occupancy levels even during shoulder seasons.
• Investability: The potential return on property investments in a given market. This factor considers costs, operating expenses, and revenue potential, helping you decide if a market is worth pursuing.

AirDNA combines these five characteristics into a Market Score—a single metric that rates a market's overall strength and potential. This score helps hosts and investors quickly compare opportunities across different locations, with higher scores indicating stronger market performance potential. Learn more about how we calculate Market Scores.

Market Types and Submarkets

AirDNA organizes short-term rental markets into categories to help you explore opportunities and identify trends.

Market types

These represent broader classifications based on the nature of the location:

• Urban/Metro: Large cities with dense populations. These markets include a mix of business and leisure travelers and are further divided into suburban areas.
• Coastal: Markets near beaches or waterfronts.
• Mountain/Lake: Retreats near natural attractions like hiking trails or serene lakes.
• Suburban: Residential areas outside major cities with lower population density.
• Mid-sized cities: Cities with moderate populations, offering both leisure and business travel opportunities.
• Small cities/rural areas: Smaller towns and less populated regions. Guests here often prefer unique or peaceful stays away from cities.

Get detailed information on how AirDNA’s market types are determined and their role in rental analysis.

Submarkets

Submarkets are smaller divisions within a larger market. These divisions often depend on factors like how densely populated an area is or its unique characteristics. 

For instance, a single submarket in Kansas might cover a large area with multiple towns due to low population density. Meanwhile, in a city like Atlanta, submarkets are much smaller, sometimes spanning just a one-by-one-mile radius to reflect the denser population and varied neighborhoods.

By breaking down markets into submarkets, hosts and investors gain the precision needed to analyze performance and identify the best opportunities.

Learn how to analyze submarkets and identify the best opportunities for your short-term rental in our full guide.

How to Use Market Data

Market data is an important resource for planning a successful short-term rental strategy. Here’s how you can use it:

• Submarket analysis: Look at smaller, specific areas within a market to understand trends and guest needs. For example, one neighborhood might have higher occupancy rates than another, helping you decide where to focus your efforts.
• Market trends: AirDNA helps you analyze key performance indicators such as occupancy rates, revenue growth, and seasonality. You can identify markets with strong potential for growth and long-term profitability by spotting trends in demand and pricing.
  For up-to-date market insights and trends, check out our Monthly Market Review to stay informed about short-term rental opportunities.
• Investment planning: Compare data from different markets to see where you’re likely to get the best return. Consider things like property costs, rental income, and expenses to choose a location that fits your goals and budget. Learn how to identify profitable short-term rental locations with our detailed guide on investment planning.

Things to Consider in Short-Term Rental Markets

Running a short-term rental is full of opportunities, but there are a few things to be aware of as you get started:

• Regulations:  Local and state governments have different rules about running short-term rentals. Before getting started, check both your city and state regulations to understand if you need permits, what zones allow rentals, and any specific requirements for hosts. This important first step helps avoid problems down the road.
• Seasonal trends: Every market has high and low seasons that affect occupancy and pricing. Understanding these patterns helps you maximize revenue during peak times and maintain bookings in slower periods. You can also read our full guide with 10 tips to improve your off-season rental performance.
• Property positioning: Success in your market comes from both your property's standout features (location, design, amenities) and your chosen target market (pet-friendly, eco-conscious, business travel). Analyzing your market helps you determine which combination of amenities and specialization will drive the most bookings.
• Know your ideal guest: Markets shape guest expectations—a beach market draws families seeking kid-friendly amenities, while business districts attract travelers needing workspaces. By understanding these patterns, you can either target your market's primary guest type for consistent bookings or spot opportunities to serve overlooked travelers at higher rates.