Midyear STR Outlook: Demand, Supply, & Economic Signals

The STR Data Lab podcast stands as a leading source for short-term rental market analysis, bringing together industry experts to dissect the latest trends and forecasts. In this midyear outlook episode, Jamie Lane, Chief Economist at AirDNA, is joined by is Bram Gallagher, Senior Economist at AirDNA and frequent podcast contributor. Together, they provide a comprehensive analysis of the 2025 short-term rental market forecast, offering actionable insights for hosts, property managers, and investors navigating an evolving landscape.

Short-Term Rental Market Performance: First Half of 2025

Supply and Demand Dynamics

The short-term rental market in 2025 has demonstrated remarkable resilience despite economic uncertainties. Year-to-date demand growth has reached 5.7%, while listings growth stands at 4.6%, creating a favorable balance that has pushed occupancy rates higher. "Occupancy for the first six months of 2025 was 54.9%, and it's currently at 55.5%," notes Jamie Lane, confirming predictions that occupancy had bottomed out in 2024 and would gradually recover.

Supply dynamics have shifted significantly from the rapid expansion seen in 2022 and 2023. While high interest rates and elevated home values continue to constrain the housing market, the short-term rental sector has shown surprising strength. Bram Gallagher observes that "supply has actually surprised me a bit on the upside," despite the frozen housing market conditions.

The data reveals interesting patterns in supply growth throughout 2025. After hitting a low of 3.1% year-over-year listing growth in December 2024, the market has experienced a reacceleration. June 2025 saw available listings grow by an impressive 6.1%, with the trend continuing upward. Perhaps most notably, new listings—which had been declining for 11 consecutive months—finally showed positive growth in June 2025.

This renewed interest in expanding short-term rental supply appears driven by optimism about future economic conditions. Most economists predict at least one or two interest rate cuts in 2025, with some forecasting even more aggressive easing. Property owners and investors are beginning to see "the light at the end of the tunnel," as Gallagher puts it, recognizing that leisure demand remains strong and positioning themselves to capitalize on continued market growth.

Average Daily Rate (ADR) and Revenue Trends

Average daily rates have maintained positive momentum in 2025, contributing to overall revenue growth across the short-term rental market. The combination of controlled supply growth and steady demand has created an environment where hosts can maintain pricing power. As Jamie Lane summarizes, "ADR is also growing. Overall, the short-term rental market has been robust, showing signs of maturity while continuing to grow at a good pace."

This ADR growth reflects the market's evolution from its pandemic-era volatility to a more stable, mature phase. While the explosive growth rates of previous years have moderated, the consistent upward trajectory in both rates and revenue per available rental (RevPAR) indicates a healthy, sustainable market environment for property owners and managers.

Economic Factors Influencing the STR Market in 2025

Macroeconomic Overview

The broader economic context for short-term rentals in 2025 presents a mixed but generally positive picture. Unemployment has remained remarkably low, hovering around 4.1% after declining from 4.2% earlier in the year. This stability in employment, combined with continued job growth that outpaces population expansion, provides a solid foundation for travel demand.

Consumer spending patterns, while showing some deceleration, remain positive overall. The economy continues to operate near its potential output, though warning signs have emerged. Inflation, which had been successfully controlled earlier in the year, showed an uptick to 2.7% in June 2025, up from 2.4% in May and 2.3% in April. This increase, while modest, has caught the attention of both the Federal Reserve and market watchers.

The impact of trade policies and tariff announcements has created additional complexity in the economic landscape. The announcement of new trade deals with the EU and Japan in July 2025 helped alleviate some concerns about escalating trade tensions, though uncertainty remains about the long-term effects on consumer prices and business operations.

As Bram Gallagher notes, the relationship between inflation and travel spending is direct: "When prices rise, people have less to spend on vacations." This dynamic makes inflation monitoring crucial for understanding future demand patterns in the vacation rental market.

Recession Risk and Economic Scenarios

Economists remain divided on recession probabilities for the remainder of 2025 and into 2026. Gallagher takes a relatively optimistic view, placing the recession risk at 10-15%, roughly in line with historical averages. He argues that while policy uncertainty exists, the economy benefits from "a lot of strength momentum" and "positive inertia."

Jamie Lane expresses more caution, estimating recession odds at 35-40% over the next 12 months. His concerns center on several factors: the pull-forward effect of consumer spending in early 2025 ahead of tariff implementations, the resumption of student loan payments, deteriorating credit scores, and early warning signs in consumer financial health.

The debate highlights the complexity of the current economic environment. While fundamental indicators remain strong, multiple risk factors could converge to create challenging conditions. As Gallagher acknowledges, "A lot would have to go wrong for the US to fall into recession, but there are several potential risks."

Shifting Travel Patterns and Market Segmentation in 2025

Domestic vs. International Demand

International travel patterns have shifted notably in 2025, with implications for different segments of the short-term rental market. Domestic demand now comprises 93.1% of total US short-term rental demand, up from 92.6% in June 2024. While this half-percent shift might seem modest, it represents a meaningful change in travel patterns.

International travel to the US declined 3.6% overall in June 2025, but the most dramatic change occurred in Canadian visitation. Canadian travelers, traditionally one of the largest international source markets, decreased by a striking 35%. Their share of total demand fell from 1.6% in June 2024 to just 1% in 2025, reflecting both economic factors and the impact of political rhetoric.

Markets dependent on Canadian visitors—such as upstate New York, Maine beaches, and Washington state—face particular challenges. The combination of a weaker Canadian dollar and what Gallagher describes as a "Canadian travel boycott" has created localized impacts that exceed the national averages.

Despite these headwinds, Jamie Lane summarizes the situation pragmatically: "International inbound is definitely a headwind right now, but it's not causing any major correction in performance." Domestic travelers have largely filled the gap, though the distributional effects create clear winners and losers among different markets.

Urban, Resort, and Regional Market Trends

Market segmentation has become increasingly pronounced in 2025, with divergent performance patterns across location types. Urban areas have shown remarkable resilience, transitioning from declines in 2024 to positive growth in 2025. This turnaround reflects both recovering business travel and the appeal of city destinations for domestic leisure travelers.

Resort markets continue their strong performance, particularly those focused on drive-to leisure destinations. As international visitors stay home, domestic travelers have redirected their vacation plans to these accessible resort locations. The combination of steady demand and controlled supply growth has maintained favorable conditions for property owners in these markets.

Coastal and mountain markets present a different story, with persistently weak growth attributed to their higher concentration of full-time investors who are more sensitive to interest rate conditions. These markets, which saw explosive growth during the pandemic, are now experiencing a more challenging environment.

Small and midsize cities maintain their position as growth leaders, though Gallagher notes they're "slowing as they catch up to other location types." This deceleration reflects the natural maturation process as these markets approach equilibrium after years of rapid expansion.

Booking Behavior and Lead Time Trends in 2025

Changes in Booking Lead Times

The short-term rental industry has witnessed a fundamental shift in booking patterns throughout 2025. Lead times, which dropped dramatically during the pandemic and rebounded strongly in 2022, have been declining across all market segments. This trend reflects both changing consumer behavior and market conditions.

The most striking change appears in last-minute bookings. "In 2022, about one in six reservations were last-minute; now it's about one in four," Gallagher reveals. This increase in bookings made within five days of arrival represents a significant shift in how travelers plan their trips.

Different property segments experience these changes uniquely. Budget and economy properties have seen the most rapid decline in lead times, while luxury properties maintain relatively longer booking windows. Interestingly, the luxury segment also shows an increase in very long lead times exceeding six months, creating a barbell effect in booking patterns.

These shifts reflect multiple factors: increased market inventory giving travelers confidence in availability, economic uncertainty driving more cautious planning, and the normalization of flexible travel arrangements post-pandemic. Understanding these patterns is crucial for revenue management and marketing strategies.

Implications for Pacing and Forecasting

The evolving lead time dynamics create significant challenges for traditional pacing analysis. As Gallagher explains, the current booking patterns create a complex forecasting environment where pacing data can both overpredict and underpredict actual demand depending on the time horizon.

Before the six-month mark, early bird reservations create an overprediction of demand. Between six months and the stay date, the missing medium-term bookings cause pacing to underestimate demand. Only as the arrival date approaches do last-minute bookings bring pacing predictions in line with actual performance.

This complexity requires a more nuanced approach to revenue management. "Don't lower your prices too soon or too often," Gallagher advises, acknowledging the surge of last-minute bookers who might pay full rates. However, he emphasizes the importance of understanding local market dynamics, recommending that hosts "subscribe to AirDNA for example to get some context" about their specific market conditions.

Forward-Looking Forecast for 2025–2026

Occupancy and Demand Projections

The outlook for the remainder of 2025 and into 2026 suggests a market finding its equilibrium. While summer months (July through September 2025) are expected to show slightly lower occupancy compared to 2024, this softness should be offset by strength in the shoulder seasons.

The expanding shoulder season phenomenon, first observed in 2023 during economic uncertainty, continues to reshape demand patterns. Travelers seek value and flexibility by booking outside traditional peak periods, spreading demand more evenly throughout the year. "I expect occupancy to improve for the year, with some dampening in the summer months made up for in the shoulder seasons," Gallagher predicts.

Looking ahead to 2026, the forecast calls for stability rather than significant growth or decline. Occupancy rates are expected to remain flat as the market achieves balance between various headwinds and tailwinds. This projection reflects a maturing market where explosive growth gives way to sustainable, predictable performance.

The October through December period in 2025 looks particularly strong based on forward pacing data, suggesting that the traditional off-season may become increasingly important for annual performance. This shift has implications for pricing strategies, marketing efforts, and operational planning across the industry.

Key Risks and Metrics to Watch

As the short-term rental market navigates the remainder of 2025 and prepares for 2026, several critical factors demand close attention. Inflation tops the list of concerns, with both economists emphasizing its importance. "I'll be watching inflation figures closely and digging deeper into them, since some goods are more affected by international trade than others," Gallagher states.

The inflation concern extends beyond simple price increases. The lag between tariff implementation and consumer price impacts creates uncertainty about future effects. Initial absorption of costs by foreign producers has given way to pressure on US importers, with eventual pass-through to consumers likely.

Interest rate policy represents another crucial variable. If inflation remains controlled and the Federal Reserve cuts rates as expected, it could provide "a good aggregate demand boost," according to Gallagher. However, this same scenario could accelerate supply growth, potentially impacting unit-level performance in 2026.

Labor supply constraints, influenced by immigration policy changes, add another layer of complexity. These constraints could drive wage inflation in service industries, affecting both operating costs for property managers and overall economic conditions.

The interplay between these factors creates a delicate balance. Success in the short-term rental market will require careful monitoring of economic indicators, nimble adjustment to changing conditions, and strategic positioning to capitalize on emerging opportunities while mitigating risks. As the market matures, data-driven decision-making becomes increasingly critical for maintaining competitive advantage in this dynamic industry.