STR Market Update: April Trends, Rising Rates & World Cup Demand Surge 

Welcome to the STR Data Lab. Hello and welcome to the STR Data Lab. I'm Jamie Lane, chief economist at AirDNA, and I'm joined again this week by good friend and colleague uh Bram Gallagher. Bram, welcome to the show. Thanks for having me, Jamie. Always a fun time on the Data Lab. Yeah, so we're digging into April performance today. It feels like it's been uh a at least uh a more normal April. And we're getting past the weak snow. Uh we're getting back into conference season. Uh so there was a good group out in Denver 2 weeks ago for VR Nation. I was just out in LA this week for the VEMA Executive Summit. I know you were on the road this week going uh you were what in the Midwest? Where were you? No, I well, I've been in Midwest a lot this this season. I was in Galveston earlier this week. Um Galveston, that's right. Yeah.

They had their uh tourism summit there. It was great. Tourism Economics was there. Future Partners was there. Saw some really good presentations. Their Short-Term Rental Alliance was there. So, had someone asking about buying a historic home and making it a wedding venue. So, I said, "Go for it."

[laughter]

I thought you would have said, "Let's let's run the numbers." Come on, Bram.

[laughter]

She said she was going to subscribe. So, uh so I I would assume that she definitely that's the next thing on her on her list to do. Yeah, I was also up in Michigan last week for the Michigan Short-Term Rental Investment Conference, and it was it was it's always fun for me to dive into a market that I'm not looking at regularly. We don't really talk about Building an AI app with YouTube data? YouTube Transcript API → LLM-ready text in one GET request. Try Free — No Card → what's going on in Michigan, but they've got some incredible markets up there. Uh highly highly seasonal, but uh yeah, I was talking with someone about uh Holland, Michigan and and it's tulip time right now and they're seeing incredible demand this year. Well, yeah, and they had they had their Michigan had their uh conference, I think, in Holland just this last year. Oh, or was that Sense Stay? No, I believe it was the Michigan Michigan conference.

Beautiful city. Yeah. So, let's dig into the data. We also saw an Airbnb Expedia booking report last week uh which and made me feel pretty good uh hearing and and their overall outlook, uh what they've seen in the first quarter, what they're expecting to see uh in the second quarter. Uh so, no real red flags there. And they they all sort of called out stronger overall nights booked. They each called out the ac- and pretty good strength in ADR growth uh in the US that I think I'm we're seeing as well. So, you want to do a a quick rundown of what we saw in the US in April? Sure, yeah. So, we did see the average daily rate go up about 4.5 on a year-over-year basis, which is pretty strong. Uh our repeat rent index even higher, 6.4. And you know, of course, what that tells us is that new the new listings coming in are coming in a little more affordably priced than the existing uh market. So, it's dragging the ADR average down.

So, if you're an existing operator, 6.5% 6.4%, I'm sorry, year-over-year, very very attractive. Uh it's higher than inflation. Um which is which is really nice. Um we did see uh you know, listing growth also increase. We did predict that at the beginning of the year. We saw that go up 3.5% demand a little bit behind that at 2.4, but you know, that makes a bit of sense to me because we've got all you know, a lot of people putting their listings on for the World Cup. I think and World Cup demand doesn't arrive until June. So occupancy was down just a touch about 0.3%, but I think over and all you know, it was a good it was a pretty solid month and it follows a lot of the pattern that we've been been seeing over the last year.

Yeah, so and it does look like a strong month. How are you feeling about the overall economic situation in the US right now? We just and I think last week got and this week got jobs numbers. We got inflation read. We I know we we've been tracking and what's been going on with interest rates. We have a new Fed chair that that just got confirmed. How you feeling about the overall economic picture? Ooh, now this this is the elephant in the room especially coming off of first quarter earnings, you know, because the first quarter kind of excludes the effects from some of these high energy prices or at least sort of truncates those effects that we've seen you know, with the with the war in Iran, but that is going to be I think very very troubling. That's very troublesome because we did see inflation go up about 3.8% on a year-over-year basis. Very hot, you know, so jumped up from 3.3 which was already a little uncomfortable.

And we're running into the summer season which we know is very energy intensive. So demand is going to go up. Supply doesn't look like it's it's going to be able to match it. So we've got some more coming more coming. And as far as the new Fed chair goes, you know, I'm I don't believe that we're going to see rate cuts because of this high inflation and combined with that, you know, why would you cut rates? Well, if you start start seeing the labor market fracture, then you would want to cut rates maybe to stimulate that, but the labor market did just fine. 115 new jobs in April. Very strong considering the immigration that we've got right now, which is, you know, pretty pretty low on a historical basis. I think Moody's has been saying that, you know, we we don't need very many jobs to be added on a month-to-month basis to maintain our unemployment rate, and we we came in, you know, over that.

So, I think the job market looks pretty firm. So, I don't expect there to be any rate cuts. On the other hand, I I was always very, you know, impressed with Jerome Powell and, you know, his his backbone or his spine. You know, even the first Trump administration, he made it very clear that he was not going to be political. He was not going to take orders from the president. And who knows, you know, Trump 2.0 is is a little bit more is a little bit more, you know, daring, I guess, a little bolder than they were in the first time around. So, we'll see if if if Warsh is going to to um is going to follow the same lead or or maybe bow to to some of Trump's demands to to lower interest rates. You know, as a former real estate developer, we know Trump loves low interest rates more than anything.

So, I hope I think it would be a mistake because of the inflation right now. I hope it doesn't happen, but we're going to be paying attention to that, certainly. So, once again, ambiguous readings. We get the inflation report, we get the jobs report, and it's tearing us in two different ways. It gives a pretty clear signal what the optimal I think rate policy is, and that's to either hold or maybe even by the end of the year there's a small chance we could see rate increases. Um but, you know, we'll we'll see what actually happens. Yeah, so I know you dug some into the um inflation report. Is it all just gas prices, or is there other things that are causing inflation to go up in in April? Yeah, so large fuel is a big component of it and it was the last month as well, but even when you look at the core CPI, which strips out both food and energy, those are volatile and of course they depend on each other pretty closely.

Even if you strip that out, we still saw a pretty significant increase. The index, but also shelter. Which which was interesting. Now that that that is interesting. Shelter's been expensive. It went up a lot during the the pandemic when we saw inflation there and it hasn't gone back down. So it's always a little it's a little unnerving to see shelter start to increase again. It's given me flashbacks and I to a period I'm not really fond of.

[laughter]

So overall, what what are the chances are that we actually get below 6% on 30-year fixed rate interest? I know we we were dancing with it at the beginning of the year. I know your initial outlook for the year thought that we would not quite dip below, but that we'd be close. And now we're sitting at 6 and 1/2% again. So it does I know investors are are hoping. And do you think there's much hope or do you think we're sort of stuck here at 6 6 and 1/2 for for the rest of the year? Yeah, well and you know, I could point out I was made to look like a fool because we did in fact dip below 6% very early on. It was February 26th. We went to to 598. But it looks like right now we don't have I don't see a real avenue for for lowering these rates. You know, we've got inflation is on the march. Got to adjust rates up to account for inflation.

Now if it was very transitory, then you know, the 30 years would probably spread out. It wouldn't really matter. But now we're starting to get into you know, the third month of this conflict. It doesn't look like we've got a real uh, you know, clear path to to getting out of it. Um, I think energy prices are going to be pretty high for a little while and this could, you know, have trickle-down effects for for some time. The other thing is inflation has a lot to do with expectations and we saw really high inflation during the pandemic. It started to come down, but then we had the tariffs and then those were transitory effects, but they increased inflation. And now we're seeing the energy prices go up and that's increasing inflation. So, you know, it's been several years now that we've had really above normal inflation.

So, uh, I think expectations naturally are just going to start are start going to start going up. I don't think that they're I think cutting the rates from a the Federal Reserve standpoint would be a mistake, so I don't see an avenue for us to see a return to February's rates in the near future, unfortunately. Some of the supply growth that we're seeing now, I think is, you know, because there's a huge pretty huge sizable lag between, um, you know, purchasing a home and putting it on the short-term rental market. So, I think some of the supply growth that we're seeing right now is a reflection of earlier rates and that may carry us through for the rest of, you know, this year, but then we're going to start wondering towards the end of the year, next year, what's going to happen with supply if the housing market, which has been in a deep freeze for years, continues along that path. All right.

So, when we think about, and now uh, supply in April, uh, you mentioned the World Cup. Uh, so there's a lot uh, to think about with the World Cup. Uh, supply is one of them, uh, but maybe we'll start with just what's happening on the demand side, uh, because there's been so much sort of plotter around what's happening around the World Cup. Is demand over-performing? Is it under-performing? Uh, what were the initial expectations? Who set those expectations? The FIFA president famously said that it's we should expect 104 World Cup Super Bowls throughout the summer, which uh

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I think maybe I thought Moody's said people's Or no, I attended a webinar for Moody's earlier and they they corrected it to 10 Super Bowls. So, still using the Super Bowl metric. So, maybe 10 Super Bowls, but maybe the expectations were set a little high by FIFA versus what's maybe more reasonable. I was looking at the data yesterday and we're still seeing and we look at aggregate demand that's on the books today for the group stage and look at that relative to the same time last year for the same days. We're seeing overall demand up 32%. So, that is still very elevated. Some markets obviously pacing better than others. And the markets like Kansas City, Dallas, Miami pacing significantly stronger than ones like Seattle, Vancouver, San Francisco.

But, I think it is important to note that a lot of those Pacific Northwest markets, like they typically during June and July are running 80 plus percent occupancy. And so, to get that much higher in peak season is a is a tall order even with the World Cup coming to town. Exactly. That's that's the exact point. I had someone asking about San Francisco in particular and it's very difficult to put a new short-term rental in San Francisco. In fact, we've seen listings decline in San Francisco. Whether it's due to regulations, prices, I'm not exactly sure. But, the demand is going to be there. It is going to be full in San Francisco. But, you know, a very, very full San Francisco is not too much different than a regular, you know, summer in San Francisco, which is pretty darn busy all as it is.

Yeah. So, the the other point and we're looking to make was around expectations around supply. Uh cuz that is something that and we typically see during major events, whether it is a Super Bowl, Olympics, uh that there can be anywhere from 30, 40, even 100% doubling of overall inventory. What are we seeing right now across the the the the World Cup markets in terms of inventory growth? Yeah, great question because we've been paying attention to this, obviously, since last uh June. And they we hadn't seen very much supply growth. Um Things have been sort of going at a 1 or 2% pace. And we're like, this is not an exciting uh sort of pace. Um on the other hand, you've been saying since the beginning, you know, calm down, people. A lot of action happens right before the the World Cup. And it looks like in April, that is starting to, you know, that that point of view is starting to to bear some fruit here.

Kansas City, of course, the leader with 37% year-over-year growth in listings um in April. You know, so we're not talking about when the World Cup demand is getting here. These are people just sort of gearing up for it. Um there's no real other explanation for that. I was just talking to a reporter in Atlanta. Atlanta, you know, uh as well as I do that the regulatory environment in Atlanta is is sort of up in the air. And we've been stuck at at the same number of listings uh for about the last three, four years. Haven't really moved at all. And then, uh we've just added, just over the last 2 months, 2,000 listings to Atlanta. It's up 9% on a year-over-year basis. It's a big market, too. We were talking about 29,000 total listings on a usual month. So, you know, very significant. Some other big ones, Fort Worth up 14% year-over-year in April.

Jersey City, New York, where a lot of people are going to the final because you know, New York is not going to be able to have a lot of short-term rental listings available that are you know, for less than a month. So, it's up 12% year-over-year. Dallas up 12% year-over-year. Seattle up 9%. That's kind of surprising to me because you know, I would have thought Seattle would have been in the San Francisco boat. They're you know, San Francisco's down a bit as I said, but Seattle growing pretty big. Even some large, very large metros, Boston, Miami, and Houston up about 5%, 4 to 5% each in April. So again, these are people just and again, some of this may be you know, just regular supply expansion because of some of the lower mortgages, but in some places like Atlanta, like in Kansas City, like in Fort Worth, Dallas, the timing is very, very suggestive that some of these people are are starting to gear up their listings, sort of warming up their listings for June and July.

Oh, that's that's exciting to see and and given what you've seen in prior events, do you think and the additions that we're going to see in May will accelerate even further or do you think most people looking to add their listings have already done it? Well, no, I think that people are going to start you know, we're we're going to have some more casual, very casual people. You know, these are the forward thinkers. You know, these are the people that are like, well, I you know, they've been planning ahead. They've been thinking to themselves, I got to get my place ready and let's have a couple test runs. You know, we're we're going to have our our place open up a few months early. And you know, not everyone is as forward-thinking as that. You know, it may well be we get to you know, we get to May, we get to June, early June, people are like, oh shoot, the World Cup. I can put my home on.

So no, I think supply listings are going to continue um to to increase in many of these markets, particularly where it's it's it's less um cumbersome to open them where the regulations aren't aren't, you know, uh so difficult to get over. So, we're probably not going to see a whole lot more in, say, you know, San Francisco, but in some of these places, the Texas markets, uh you know, we might see some more. Uh we might see some more even in Atlanta. People that live close to the venue that hadn't put their home on may consider it. So, we've got about 30 25 days. We've got about 3 and 1/2 weeks. Um so, we could still see some pretty dramatic action. Really looking forward to getting full month May data, as well.

Yeah. So, as we look out into the summer, um it has, at least in terms of overall pacing, it's looking good, right? Like, no matter and if we're looking at and the FIFA markets, which are obviously pacing uh stronger than we've seen in prior years, but even when we look at non-World Cup markets, things seem to be looking good. Can you get a sense of and what we're seeing there? Yeah, our uh our, you know, your your friend and mine, Linda Rollins, she's put together an interesting analysis that we're going to be putting in the US review this month, uh looking at what she calls spillover markets. So, these are markets that are sort of close by, and you take that with a grain of salt close by uh because, you know, we're seeing uh Broken Bow Lake uh up, you know, in uh Oklahoma, you know, right in 2 hours north of Dallas, saying, you know, that's that's the proximity we're talking about. It's up 32% year-over-year, right?

It's it's uh usually a regional sort of drive-to kind of market that services uh, you know, locals, but we're seeing a lot of interest in Broken Bow, but there's lots of other places like that, you know, whether it's Fort Lauderdale, that's the famous one with Miami. We we've considered that. That's close enough to be a host city. Um but, you know, it's it's certainly um up. There's, you know, others that she's pointed out, Columbia, uh Missouri, 43%, Lubbock, Texas, 38%. And, you know, an interesting thing that I was thinking about that um that we were discussing earlier is that, you know, we've got we know that these these the length of stay has lengthened out a bit for these World Cup um matches. If you're making, you know, a long trip, whether it's by plane or even driving cross-country, makes makes sense to be able to stay there and soak up some of the uh surrounding areas while you're there.

And it may be too that you've got people that are deciding that, well, you know, I'm only going to be going to one game, but I'm staying here for 2 weeks. So, maybe I'll make my home base in Broken Bow, and then just travel down for the game, and then uh uh go back and sort of enjoy the sort of natural beauty. Or, you know, take take vacations around take visit many, many spots. It was uh a big point, I guess, that the uh uh uh that uh tourism economics and and uh future partners agreed in this Galveston trip that pe- people that are coming for the World Cup are trying to see a bunch of different destinations. So, we're seeing a lot of spillover effects, too. One last point about that is also you may see locals, if you want to rent out your house during the World Cup, you've got to go someplace.

So, you may want to to you know, rent an STR that's not necessarily convenient to the location, but it's within driving distance um while your home is being rented. So, there's that possibility as well. Yeah, I know that that makes sense. And it it is fun seeing I mean, both the the close by and a lot of the markets that international guests are sort of attracted to um in their maybe their their World Cup road trip that they're coming to the US uh sort of maybe taking a game or two, travel and see the sights. Uh so uh I expect we we are going to see pretty widespread uh demand across the country. I was looking at the and uh pacing figures uh when we look at overall occupancy levels in in June and July like obviously the urban markets are seeing strongest and averaging up and and 10 roughly 10% in in July, but even when you look at uh the um coastal markets, they're up 5%. Uh mountain markets, they're up 5%.

So I it does look like and now that we're starting to lap uh some of the easy comps from last year so if you remember and April last year we had Liberation Day, we had and pretty significant declines in the overall stock market uh when we were sitting at April and May last year, we weren't seeing a lot of incremental bookings because there was all that uncertainty on what might happen. So and that said, we did see lead times contract last year. Um so uh I am giving some of the pacing data a little bit of grain of salt uh given that and how volatile things were last year and that people were more maybe uh waiting to book and that it's it it might not be a one-to-one comparison there. Yeah, that that is going to be difficult. And last year too, we had, you know, real strong first half and then a weaker second half. And of course the summer was right in the middle. Um so does muddy the picture quite a bit.

Yeah, so Bram, as we um sort of wrap up here, uh are there any things that you're sort of keeping your eye on as we uh head into end of May, early June in terms of how you any indicators on like and if we should be expecting a really strong summer, if we maybe need to sort of temper our expectations some. What are you you sort of monitoring these days? Well, there is some, you know, interesting conflicting pictures coming out of some of the Well, some of you know, I've heard some reports from the hotel data, but I shouldn't really comment on that. We don't have a whole lot of hotel data cuz short-term rentals I've been paying attention to these you know, the occupancy rates and sort of the demand growth figures and it looks like everything is is steaming forward in you know, full speed ahead. And some of the things that have got me worried are sort of these energy prices. I've heard about, you know, particularly in Europe, you know, some flights being canceled as jet fuel becomes scarcer.

So, you know, is that going to lead to last-minute cancellations? I really hope not. On the other hand, you know, we've seen a lot of strength from our domestic market as well. So, you know, just paying attention I guess to again, the international mix, how that's that's developing is is going to be important. And I'll continue looking at equities markets. There's a little bit of There's a little bit of suspicion there. We're at very, very high levels and we know that, you know, high wealth individuals have been driving a lot driving a lot of consumption. So, sometimes that's worrisome, but on the other hand, you know, it looks like that so far has been tending to support demand rather than take away from it.

So, you know, it's just some of the things I'm going to be thinking about moving into the moving into the summer. Well, with that, I think those are some good things to keep an eye on. If you want to follow along, Bram and I will be sharing our thoughts uh throughout uh the summer uh and uh wish to everyone the best. Thanks for listening. Thanks for having me, Jimmy.