2026 STR Outlook: Growth, Risks, and Opportunities

Jamie Lane, Chief Economist at AirDNA, and Bram Gallagher, longtime colleague and recurring podcast guest, bring decades of combined experience analyzing the short-term rental (STR) market. In their annual STR Data Lab outlook episode in December 2025, Jamie and Bram focus on reviewing the past year's performance and forecasting the short-term rental market for 2026.

"2025 has been an especially interesting year to forecast, probably the most interesting since 2020," Bram notes, highlighting the complexity of current market conditions. Their proven track record includes accurately predicting the market deceleration in 2025, demonstrating their ability to navigate uncertain economic environments.

Supply and Demand Dynamics

2025 Supply Growth Performance and 2026 Outlook

The short-term rental market experienced a dramatic shift in 2025, with supply growth slowing to approximately 4.5%, down from 9.5% in 2024. This deceleration marked a turning point in the market's post-pandemic expansion phase. Available listing growth remained under 5% for much of 2025, indicating a maturing market finding its equilibrium.

Looking ahead to 2026, the experts predict a notable change in trajectory. "Supply will reaccelerate in 2026, and it will accelerate just a bit faster than demand," Bram forecasts, suggesting a shift in market dynamics. This reacceleration will be particularly pronounced in resort destinations and suburban markets, driven by improving investment conditions and declining home values in key STR markets.

The investment thesis for short-term rentals appears increasingly attractive, with mortgage rates stabilizing around 6.3% and home prices softening in major vacation rental markets. Florida markets, mountain resorts like Gatlinburg (7% decline) and Broken Bow (8% decline), and destinations like Joshua Tree, Austin, and Orlando (5-6% declines) are creating new opportunities for investors who've been waiting on the sidelines.

Demand Growth and Occupancy Trends

Demand growth in 2025 successfully matched supply expansion, resulting in stable occupancy rates that slightly exceeded 2024 levels. The year demonstrated remarkable resilience, with occupancy remaining "neck and neck" with previous year performance despite economic uncertainties.

However, 2026 presents a more complex picture for occupancy trends. While demand is expected to continue growing, the slightly faster pace of supply growth may lead to minor occupancy declines. "We saw occupancy go up this year, but in 2026, it may go down slightly," Bram explains, though he emphasizes this represents a minor adjustment rather than a significant downturn.

The pattern of demand throughout 2025 revealed interesting seasonal variations, with very strong occupancy at the beginning of the year softening somewhat during summer months. This uneven distribution suggests travelers are becoming more selective about timing, potentially concentrating trips during traditionally slower periods to find better value.

Location-Specific Trends

Geographic variations in supply growth reveal important shifts in investor preferences and market opportunities. Resort locations and markets experiencing home value declines are expected to see the most significant supply increases in 2026, as investors recognize improving entry points in these traditionally strong STR markets.

Small city and rural markets, which led supply growth in recent years at 9.3% in 2025, will see expansion slow to approximately 7.7% in 2026. "As affordability spreads to other location types, we'll see a decline in small city/rural growth and reacceleration in resort and suburban locations," Bram notes. This shift reflects the natural evolution of market opportunities as previously hot rural markets mature and traditional vacation destinations become more accessible to investors.

Suburban markets are emerging as particularly attractive for their versatility, serving both traditional vacation rentals and the growing medium-term rental segment. These locations benefit from proximity to urban centers while offering more space and amenities that appeal to extended-stay guests.

Pricing and ADR (Average Daily Rate) Projections

2025 ADR Performance and Influencing Factors

Average Daily Rate growth in 2025 fell short of initial projections, delivering softer increases than the anticipated 2.5-3% that would have matched inflation. This underperformance reflected cautious consumer behavior in response to persistent inflation and economic uncertainty.

"When we have inflation in the rest of the economy, people do look for places where they can save," Bram observes, explaining how travelers adjusted their booking patterns. Rather than canceling trips entirely, guests opted for shorter stays, smaller properties, or off-peak travel dates to manage costs.

The impact of inflation on ADR growth revealed the delicate balance between maintaining pricing power and meeting consumer expectations for value. Properties that successfully communicated their value proposition and offered competitive amenities maintained stronger pricing, while those relying solely on location saw more pressure on rates.

2026 ADR and Pricing Power Forecast

The 2026 outlook for ADR presents a nuanced picture, with overall rates expected to rise modestly despite potential occupancy softness. This apparent contradiction stems from the composition of new supply entering the market, with higher-priced resort properties lifting market averages even as individual properties may exercise pricing restraint.

The Repeat Rent Index (RRI), which tracks pricing changes for existing properties while excluding new listings, will likely remain flat in 2026. "Prices won't decrease; they'll hold steady at 2025 levels, which were higher than 2024," Bram clarifies. This stability strategy reflects operators' recognition that maintaining occupancy through competitive pricing trumps aggressive rate increases in a softening market.

By 2027, both ADR and RRI are projected to resume meaningful growth, with RRI increasing 1.5-2% and overall ADR rising slightly more. This return to pricing power assumes supply and demand will realign as the market absorbs new inventory and economic conditions stabilize.

Economic Environment and Its Impact on STRs

Macroeconomic Overview for 2025 and 2026

The U.S. economy demonstrated remarkable resilience in 2025 despite numerous challenges, with GDP growth of 1.9% following 2024's robust 2.8% expansion. Looking toward 2026, economists project a modest improvement to 2.0% growth, suggesting the economy will maintain its footing without dramatic acceleration.

"That 2% growth rate is kind of a threshold—below that is not so good, above that everything is gravy," Bram explains, contextualizing the forecast within historical norms. The economy's ability to adapt to policy changes, including tariffs and fiscal adjustments, exceeded many expectations.

Unemployment remains historically low at 4.4%, with projections keeping it below 5% through 2026. This labor market stability supports consumer confidence in booking travel, though wage growth moderation may constrain spending power for some segments.

Inflation presents a more complex challenge, with current levels around 2.8-2.9% expected to peak near 3.5% in 2026. This persistent price pressure will continue influencing traveler behavior and operator pricing strategies. Mortgage rates, steady at 6.3%, are unlikely to drop below 6% through 2026, maintaining current investment hurdles while creating opportunities in markets with declining home values.

Consumer Confidence and Spending Patterns

Despite solid economic fundamentals, consumer sentiment remains paradoxically negative, with confidence surveys showing all-time lows even as GDP and employment data suggest stability. This disconnect between perception and reality creates unique challenges for the short-term rental industry.

"People are looking for value and rewarding short-term rentals that offer it," Bram observes, highlighting how economic uncertainty drives booking behavior. Lower-income travelers increasingly seek deals and promotions, while maintaining their desire to travel by adjusting trip parameters rather than canceling entirely.

The K-shaped recovery continues influencing travel patterns, with higher-income consumers maintaining robust travel spending while budget-conscious travelers become increasingly strategic. STRs benefit from their inherent value proposition, as properties "on average are still a really affordable option in many places compared to individual hotel rooms," particularly for groups splitting costs.

Policy and Fiscal Impacts

The fiscal landscape for 2026 includes several potential catalysts for short-term rental market growth. The return of 100% depreciation for STRs provides meaningful tax advantages for investors, potentially accelerating supply growth in attractive markets.

"We might see a big shift in consumer confidence as people realize tariffs aren't as big a threat as once feared," Bram suggests, pointing to potential upside surprises. The implementation of deferred withholdings on tips and overtime could result in larger tax refunds in early 2026, perfectly timed for summer vacation bookings.

Policy remains "the biggest wild card" for 2026, with potential changes in Federal Reserve leadership and ongoing trade negotiations creating both risks and opportunities. The administration's willingness to adjust policies based on economic feedback suggests flexibility that could benefit the travel industry.

Market Segments and Travel Trends

International and Domestic Travel

International travel to the U.S. experienced significant disruption in 2025, pausing after strong growth that had returned volumes to 2019 levels. This pullback, influenced by policy rhetoric and global economic concerns, created a gap that domestic travel partially filled.

The 2026 World Cup emerges as a potential game-changer for international arrivals. "The World Cup is a huge international draw and could be the biggest short-term rental event the US has ever seen," Bram emphasizes. The event's impact will depend heavily on policy implementation and international perceptions of U.S. hospitality.

Currency dynamics favor international visitors, with the euro's appreciation against the dollar making U.S. destinations more affordable for European travelers. This pricing advantage, combined with the World Cup's draw, could reignite international demand despite lingering policy concerns.

Traveler Segmentation and Preferences

Market segmentation reveals increasingly distinct traveler behaviors based on economic status and trip purpose. Luxury travelers continue spending robustly, though equity market volatility could moderate this segment's growth if stock valuations correct significantly.

Budget-conscious travelers demonstrate remarkable adaptability, leveraging STRs' value proposition to maintain travel frequency while managing costs. The ability to split costs among groups makes mid-range STRs competitive with budget hotels while offering superior space and amenities.

Medium-term rentals represent a fast-growing segment, particularly in suburban markets. These extended stays, typically 30-90 days, blur the lines between traditional vacation rentals and temporary housing, creating new revenue opportunities for operators willing to adapt their service models.

Investment and Operator Landscape

STR Investment Climate in 2026

The investment environment for short-term rentals in 2026 appears the most favorable since the post-pandemic boom. Declining home values in key markets, stable mortgage rates, and strong operational fundamentals create compelling entry points for both new and experienced investors.

"The investment thesis for short-term rentals looks as positive right now as it has in years," Bram states, highlighting the convergence of favorable factors. Markets experiencing the steepest home value declines—particularly in Florida and mountain resort destinations—offer the most immediate opportunities.

The composition of new market entrants differs markedly from the pandemic-era rush. "This time, supply growth will reaccelerate, but it will lean more toward experienced operators or those serious about hospitality," Bram notes. This professionalization trend suggests new supply will be better operated and more responsive to guest expectations, potentially raising overall market quality.

Risks and Wild Cards for 2026

Policy uncertainty dominates the risk landscape for 2026, with potential changes ranging from Federal Reserve leadership to immigration and trade policies. The administration's "move fast and break things" approach creates both opportunities and challenges for market participants.

Equity market valuations present another wild card, with AI and tech stock bubbles potentially impacting wealthy travelers' spending patterns. However, Bram remains optimistic: "Even if we lost recent gains in home and stock prices, Americans' wealth positions and balance sheets are still in good shape relative to incomes."

Upside risks deserve equal attention, including potential trade liberalization, fiscal stimulus effects, and improving consumer confidence as policy impacts prove less severe than feared. The market's demonstrated resilience through 2025's challenges suggests capacity to navigate whatever 2026 brings while maintaining fundamental growth trajectories.