The Future of STR Demand: Fall 2025 Outlook

Jamie Lane serves as Chief Economist at AirDNA, where he's recognized for his market forecasting expertise and ability to translate complex economic trends into actionable insights for STR operators. His co-host Scott Sage brings a practical, operator-focused perspective to their discussions, grounding the data in real-world experience.

Together, they're tackling the big questions facing the industry in 2025: Where are occupancy rates heading? How will AI reshape the booking experience? And what do recent Fed rate cuts mean for your investment strategy? Their analysis combines AirDNA's comprehensive market data with on-the-ground insights from operators across the country, creating a unique vantage point for understanding short-term rental market trends in 2025.

Vrbo, Expedia, and the Evolution of Short-Term Rental Platforms in 2025

The integration of vacation rental inventory into Expedia's broader ecosystem marks a pivotal shift in how short-term rentals reach potential guests in 2025. As Jamie Lane explains, "The main problem for many hosts is not enough demand for their properties, and Vrbo...sees its job as driving bookings to your property." This focus on driving incremental demand has led to innovative approaches for expanding market reach.

Expedia's strategy leverages its massive user base to introduce vacation rentals to travelers who initially searched for hotels. Picture a family planning a trip to Destin, starting their search for a hotel room. When Expedia's algorithm recognizes that a vacation rental might better suit their needs—more space, a kitchen, multiple bedrooms—it seamlessly presents STR options alongside traditional accommodations. This cross-platform exposure represents a game-changer for hosts looking to fill calendars in 2025.

The expansion doesn't stop at Expedia's main platform. Vrbo's inventory is now being pushed across Expedia's extensive B2B partner network, which powers booking engines for countless travel sites. This multiplier effect means a single listing on Vrbo could potentially appear across dozens of booking platforms, dramatically increasing visibility without additional effort from hosts.

Quality Over Quantity: Listing Standards and Platform Policies

The days of quantity-first approaches are firmly behind us. Both Airbnb and Vrbo have made decisive moves toward curating higher-quality inventory, with significant implications for hosts in 2025. "They're very focused on quality listings over quantity. If you're not meeting their quality expectations, your listing will be removed from Vrbo," Jamie notes, highlighting the platform's commitment to maintaining standards.

The numbers tell a compelling story: Airbnb has removed 500,000 listings over recent years, while Vrbo eliminated 100,000 listings in just the past year. This aggressive pruning reflects a broader industry trend where platforms prioritize guest satisfaction and booking conversion over sheer inventory numbers. For hosts, this means maintaining high standards isn't just good business—it's essential for platform survival.

Machine learning and AI now drive decisions about which properties get premium exposure. The algorithms analyze conversion rates, guest satisfaction scores, and booking patterns to determine which listings deserve top placement. Properties that consistently deliver positive guest experiences see increased visibility, while underperformers face reduced exposure or outright removal.

AI and Technology Innovations in Short-Term Rentals for 2025

Artificial intelligence is transforming the guest booking experience in ways that seemed like science fiction just a few years ago. Vrbo's new AI-powered features address common friction points in the booking process, starting with AI-generated property highlights that instantly communicate a listing's most compelling features.

The AI guest review summary feature tackles information overload head-on. Instead of scrolling through dozens of reviews, potential guests receive concise bullet points highlighting what previous visitors loved (and didn't love) about a property. This streamlined approach caters to different booking styles—whether you're like Jamie, who reads every review, or Scott, who focuses on photos and location.

Perhaps most revolutionary is the AI property Q&A feature. "There's now a question box on the Vrbo listing where you can ask anything about the property...a great use of technology," Jamie explains. This tool answers common questions about parking, pet policies, or check-in times without bothering the host, potentially improving booking conversion rates by providing instant answers.

The introduction of guest-uploaded photos alongside reviews represents a bold move that could reshape how properties are evaluated. While this transparency benefits high-quality operators, it poses risks for properties that don't maintain their photo-ready appearance. As Scott observes, "For high-quality operators, it's good, but for others, it poses risks."

Macroeconomic Factors Shaping the Short-Term Rental Market in 2025

Federal Reserve Policy and Interest Rate Trends

The Federal Reserve's September 2025 decision to cut rates by 25 basis points marks the first reduction in nine months, signaling a shift in monetary policy that reverberates through the short-term rental investment landscape. "There was a 25 basis point cut in the federal funds rate—the first cut in nine months, which was largely expected," Jamie notes, adding context to this pivotal moment.

The FOMC's dot plot reveals consensus expectations for two additional cuts in late 2026, potentially bringing the Fed funds rate closer to 3% by year-end 2026—a significant drop from the current 5% level. This trajectory suggests a more accommodative monetary environment ahead, though the path isn't without complications.

For STR investors, the relationship between Fed policy and mortgage rates proves more complex than simple correlation. Despite the Fed's rate cut, 30-year fixed mortgage rates actually increased by 20 basis points immediately following the announcement. This counterintuitive movement reflects how market expectations often price in anticipated changes well before official announcements. Jamie predicts mortgage rates will drop below 6% in early 2026, offering a more favorable environment for property acquisitions.

Economic Indicators and Investor Considerations

The economic landscape in 2025 presents a mixed picture for short-term rental investors. Weak job growth and rising unemployment create headwinds, while persistent inflation—partly driven by tariff impacts—complicates the Fed's dual mandate of maintaining employment and price stability.

"To get down to 4% or 5% next year, we'd need to go into a recession, and the Fed would have to cut significantly to prop up the economy," Jamie explains, outlining the conditions necessary for dramatically lower mortgage rates. This sobering assessment underscores the delicate balance between hoping for lower borrowing costs and maintaining a healthy economy that supports travel demand.

The current environment demands careful consideration from investors. While lower rates would reduce borrowing costs, the economic weakness required to achieve such rates could simultaneously dampen travel demand. Smart investors in 2025 must weigh these competing factors when timing their market entry or expansion plans.

Short-Term Rental Performance Data: Summer 2025 Review

Summer 2025 delivered a milestone moment for the short-term rental industry, with RevPAR (Revenue per Available Rental) climbing 3.5% year-over-year. "RevPAR increased 3.5% year-over-year, pushing national RevPAR to a new milestone," Jamie emphasizes, noting that trailing 12-month figures have consistently exceeded the post-COVID high of $169 throughout the summer.

The supply side showed measured growth, with average active listings reaching 1.79 million—a 4% increase year-over-year. This steady expansion reflects continued investor confidence in the short-term rental market, even as economic uncertainties loom. Demand kept pace admirably, with nights booked increasing 4% compared to the same period in 2024.

However, the occupancy story proves more nuanced. At 58.6%, occupancy rates dipped 1% year-over-year, indicating that supply growth slightly outpaced demand expansion. While this might alarm some operators, Jamie maintains perspective: "I feel good that we got through this weakness with only a 1% decline in occupancy."

Demand and Supply Dynamics

The summer's demand trajectory tells a story of resilience and recovery. After a sluggish start with May, June, and July hovering around 3% growth, August 2025 saw demand growth accelerate to 4%. This improvement aligns with broader travel industry trends, including airline travel and hotel bookings, suggesting the early summer weakness may have been a temporary blip rather than a sustained downturn.

Supply growth maintained remarkable consistency, holding steady between 4% and 5% throughout recent months. This predictable expansion allows markets to absorb new inventory without dramatic disruptions to pricing or occupancy. The balance between supply and demand growth—while slightly favoring supply—remains healthier than many predicted earlier in 2025.

The data reveals an important truth about market resilience: despite 34 of the top 50 markets experiencing occupancy declines, the overall market avoided the dramatic drops some forecasters predicted. This speaks to the short-term rental industry's maturation and its ability to weather economic uncertainties better than in previous cycles.

Location and Market Segment Analysis

Geographic performance in summer 2025 painted a picture of stark contrasts. "In August 2025, [coastal and mountain markets] were the only location types where we saw occupancy increases," Jamie reveals, highlighting the continued strength of traditional vacation destinations. This divergence underscores the importance of location selection for investors and operators.

Urban and suburban markets faced stronger headwinds, with occupancy declining 3% in large metro areas. Mid-size cities fared slightly better with a 2.5% decline, while small city and rural areas saw modest 1% drops. These variations reflect changing travel patterns and the ongoing impact of remote work on destination preferences.

International travel emerged as a significant concern, particularly for markets dependent on cross-border visitors. "In August 2025, international travel in short-term rentals was down almost 15%. Canadian travel to the US was down nearly 48%," Jamie notes, highlighting a dramatic shift that particularly impacts border states and snowbird destinations. With Canadians representing the largest international traveler group to the US, this decline poses challenges for specific markets heading into the crucial winter season.

Pricing Power, Rate Trends, and Revenue Insights for 2025

Rate Growth and Pricing Power

Despite occupancy pressures, short-term rental operators maintained impressive pricing power throughout summer 2025. "Our repeat index went up another 4% in August 2025. While there's some weakness in occupancy, most hosts still have pricing power," Jamie observes, pointing to a crucial advantage for STR operators.

This 4% rate growth outpaces the 3% general inflation rate, demonstrating that vacation rentals continue to command premium pricing even in a challenging environment. The contrast with the hotel industry proves particularly striking—while STRs pushed rates up 4%, hotels managed only 1.5% increases. This divergence reflects the unique value proposition of short-term rentals and their ability to maintain pricing discipline.

New York's market offers a fascinating case study in supply constraints driving pricing power. The city's strict regulations limiting STR inventory have allowed hotels to increase rates by 5-6% this summer. This dynamic illustrates how regulatory environments can dramatically impact pricing dynamics, creating opportunities for compliant operators while constraining overall market growth.

Segment Performance: Luxury vs. Budget

The bifurcation between luxury and budget segments intensified in 2025, mirroring broader economic trends. Upscale and luxury properties continue to outperform, benefiting from resilient demand among affluent travelers. These high-end rentals see stronger forward bookings and maintain higher occupancy rates compared to their budget counterparts.

Budget and economy properties face persistent challenges, though the situation has stabilized somewhat since early summer. Expected occupancy declines persist, but the rate of decline has moderated. This improvement suggests the bottom of the market may be finding its footing, even if recovery remains elusive.

Lead time normalization represents another positive development. The market's reduced reliance on last-minute bookings indicates growing consumer confidence and more traditional booking patterns. This shift benefits operators who can better forecast demand and optimize pricing strategies with longer booking windows.

Market Outlook for Fall and Beyond: Short-Term Rental Trends into Late 2025

Forward-Looking Demand and Occupancy Projections

The outlook for late 2025 brightens considerably compared to the challenging summer months. "As we look into the fall, both occupancy and demand in October, November, and December 2025 are up, which makes me more confident," Jamie shares, signaling a positive shift in market momentum.

This improvement appears broad-based, with traditional vacation rental markets leading the charge but gains extending across most segments. The contrast with 2024's election-related uncertainty is notable—with political questions largely settled, travelers show renewed confidence in planning future trips.

The easing of uncertainty extends beyond politics to economic factors. Greater clarity on tariff policies and stabilizing inflation expectations contribute to improved consumer sentiment. While challenges remain, the removal of several uncertainty factors creates a more favorable environment for travel planning and STR bookings.

Risks, Opportunities, and Investor Takeaways

The investment landscape for short-term rentals in late 2025 requires careful navigation of both opportunities and risks. "It's still better on the upper end. Upscale and luxury properties are seeing stronger performance," Jamie emphasizes, reinforcing the importance of market positioning.

Research from Moody's provides crucial context, revealing that spending growth comes predominantly from top income percentiles. These affluent consumers drive travel demand and gravitate toward premium accommodations. For investors, this data point suggests focusing on properties that appeal to higher-income travelers rather than competing in the budget segment.

The risk side of the equation centers on international travel, particularly the Canadian market. If the 48% decline in Canadian visitors persists into winter 2025, markets from Florida to Arizona could face significant occupancy pressures. Operators in these areas must prepare contingency plans and potentially pivot marketing efforts toward domestic travelers.

"The bifurcation we're seeing across the economy is showing up in short-term rentals, hotels, and consumer spending," Jamie concludes, encapsulating the key theme for 2025. Success in this environment requires understanding these divisions and positioning properties to capture demand from resilient market segments. Whether through property improvements, strategic pricing, or targeted marketing, operators who adapt to this bifurcated reality will find opportunities even as others struggle.