Why July Was So Strong for Short-Term Rentals

Welcome to the STR Data Lab.

Hello and welcome to the STR Data Lab. I'm Jamie Lane, Chief Economist and I'm joined today by my trusty co-host, uh friend, colleague, Bram Gallagher. Bram, welcome back.

Thanks for having me, Jamie. Always a pleasure on the Data Lab.

Yeah. Uh and and for those that celebrate, happy eclipse day. Uh we're we're getting uh recording here on August 12th and we're getting the eclipse, I think going through or having already gone through uh Iceland and and um Spain.

Yeah, if any of our listeners um subscribe to the Financial Times, I would invite them to look below the fold. There is an interesting story about that.

Yeah. I I think as soon as I get off this recording, Bram, we are I'm going to go grab a copy. I was actually just asking Claude where I can actually get a copy of the Financial Times here in Atlanta and it suggests I go to Barnes & Noble. So, I'm going to venture over there uh and see if I can uh get a copy.

That's an excellent idea. You know, I might do the same.

[laughter]

So, um yeah, uh last week uh I dug in to the World Cup um with Linda, uh our colleague, um and our friend Susan Brown with the um Kansas City Short-Term Rental Alliance. And I don't want to spend a lot of time today talking about World Cup, but and it it it feels like if we're going to and recap July and get a sense of what happened, what's going to um be happening going forward, and and World Cup is part of part of the narrative. Uh so, interested in getting your sort of high-level thoughts on how it im- impacted the country uh this year or this uh past month. But, before you get started, I haven't talked with you live on air since I was gone for the summer. So, how's your summer been?

Oh.

[laughter]

Wow, what a summer it has been. Incredible summer. You know, World Cup. Thanks so much for to Linda. If no one's listened to that that episode, they really should. She has done She had done so much work and we had spoke to so many people, but incredibly busy summer with the World Cup going on. Just just a lot of press, a lot of interest in it, a lot of excitement. And you know, it was a really positive event for the short-term rental industry. In a period where you know what, hospitality could use a little little you know, little little bright bright spot or nice nice story. You know, with all the geopolitics and all that kind of stuff that that is going on. It was is really great to hear. You know, Kansas City in particular had a lot of heartwarming stories, a lot of interesting stuff. So, yeah, summer's been really summer's been really good.

You know, it's not not once-in-a-lifetime vacation to Iceland, you know, but on the other hand from a professional standpoint, you know, one of the highlights all-time highlights of my entire career this last summer.

Yeah. How many interviews around the World Cup do you think you did over that like three or four month period?

Oh gosh. It was like three or four a day, so multiply that out. It's a lot. It's a lot. It's a few hundred it seems like. But, you know, it was really exciting to talk to so many people all across the country.

Well, hopefully we get a little break before What's the next big event? With the Olympics coming up in LA?

Yes. People are already interested in that. You know, we've got of course college football also is is warming up and and there's some Labor Day you know, games that are I think topping our charts at the moment as far as pacing goes. So, yeah, you know, I'm looking forward to the next next thing, but I don't know if we'll see an event quite like this one in a long time.

Yeah. So, and think I I definitely want to dig in to I'm the top line figures, Bram, but maybe want to ask first um since it was I'm top of mind for me coming and uh back and and was Airbnb's earnings call uh from last week. And I feel like it's it's always a good indicator sort of level set around what we're seeing and how does that relate to uh the public companies, the OTAs, so we get and Booking, Expedia, and Airbnb are reporting and their view on sort of the health of the market. And are things growing? Are they contracting? Are we seeing and ADRs growing? Are they and are they seeing that pull back? And I think in general from my view, like it was a really healthy conversation about short-term rental demands across really all three major OTAs, and Airbnb and then Expedia talking about Vrbo, and Booking, they all called out and mid to and upper mid single-digit growth in the US in terms of overall nights booked.

Uh they all talked about healthy ADR growth. Airbnb even dove in specifically around and how they're seeing just so much stronger demand for larger listings. Uh and they they quoted what a um a room night growth figure and that's sort of counts the number of nights sold per room as opposed to per listing. Uh and that grew I think like 12% versus overall nights up 10%. Uh so they're clearly seeing some of the same trends that we're seeing around I'm stronger bookings for for larger homes.

Right. That's a That's a trend that we've been harping on for at least the last few years. And it's it's really strengthened, I think, this last year. So, I'm really glad that they pointed that out, too. So, it's it's it's been reflected in the the Airbnb data as well. Yeah.

And then And another one that And I found interesting And And one of your sort of thoughts on it was what they called out as like the hotel flywheel. And where hotels essentially act like top of the funnel and driving more people And to the Airbnb site. So, a traveler that would have never opened Airbnb for a one-night city trip now does. And because that And they finally have that inventory. And Airbnb now acquires that user in a hotel booking. That person then comes back for a home trip. And they earn some And loyalty dollars then build to spend. And And it sort of creates the cycle of And more inventory, even if it's non-short-term rental inventory on the platform, can actually And drive incremental more demand for homes by listing hotels on the platform. And the example that Brian gave on the call was like Amazon. And they started with books. Then they started selling CDs.

And then they started selling other things. And like Just because they sold a CD doesn't mean someone now isn't going to try to get a book. But someone that And came to buy a CD Maybe they'll buy a book now. And they wouldn't otherwise And use that site.

Yeah, you know, it That's a great comparison because you Why did people buy so much stuff off of Amazon? I think it is the convenience of having, you know, a lot of this stuff in one in one spot with a vendor that you trust and you understand their process pretty well. So yeah, having hotel and short-term rentals, I mean that's I think it's I think it's really smart move. Um and I do agree with the with the premise that you're going to be bringing people to this site. Now they're not exactly, you know, exact substitutes as well. So you may have someone that maybe is unfamiliar with short-term rentals, gets on the site looking for a hotel room even though it's not an ideal fit for them whether it's family travel or something like that. And yeah, sees all the opportunities, all the alternatives, I guess.

Um as well. So, you know, I think just and of course, you know, having this sort of one one-stop shop for hospitality general generally is is I think good for travel as well. Just just just travel, you know, encouraging travel.

Yeah. And and then the other one and that was not on my 2026 bingo card was Airbnb I'm leaning into AI pricing and identifying it as the single biggest lever for host success and that's something that they think can drive I'm significant growth in their own business by getting people to more dynamically price their listings throughout the season, make it more competitive throughout the year.

Yeah, I think what what happened was that they they got wind of adapt um our product which helps with with AI pricing. They said, "Dang, that's a good idea." Um and and jumped on it. But no, no, I think, you know, there is there's really big opportunity there. And this is, you know, there's there's lots of different sort of machine learning algorithms. So you know, you say AI these days we think of large language models pretty exclusively, but there's you know, lots and lots of uh uh machine learning and and you know, ways to take all of this data, this huge amount of data that Airbnb has and translate that into, you know, useful pricing directives.

Yep. So, all right, that's enough on on earnings calls. I just wanted to call out that I'm it did feel positive.

Oh, very well. Well, particularly for Airbnb, right?

Yeah. A lot of fun topics there and them being able to re-accelerate growth up the over 10% was was was big news and their their stock was up 15% I think up after earnings, so and that sustained afterwards, so uh uh definitely I mean, a positive for them and I think I mean, generally when there's a positive for them is a positive for the industry as they're one of the biggest companies uh in our industry. So, I mean, my question for you going in and and is I mean, let's first like run through what we saw in July. I mean, obviously, World Cup was happening which I mean, may skew them I mean, you tell me whether it skewed the numbers or not. Uh but did July for US I mean, short-term rental operators hosts play out as good as sort of Airbnb portrayed it?

It was a great It was a great month.

Um you know, just RevPAR increased 7.2%. Uh which is great. That's incredible. Uh it's really nice. You know, and I will say that yes, some of that has to do with the World Cup, but it's not just the World Cup. That's one of the things that I wanted to look at because, you know, we we we've covered the World Cup cities and the host cities and how well they've been doing. Well, what about the rest of the country? Um and it appears that, you know, that not just World Cup, in fact, the rest of our inventory has also done pretty darn well and chiefly, you know, it has been in rate in July. And I will say occupancy also increased. Uh and you know, occupancy was pretty good in the first half of of last year and has been following that pretty uh pretty closely for the first half of this year. Um but now we've got an actual increase over last year. But the main contributor to that RevPAR growth was rate.

Now, the leaders of rate increases were the World Cup host cities, but we really saw broad-based rate increases, you know, across all the location types in July. They really sort of blew uh you know, blew the uh previous month's growth out of the water. Um very impressive. Uh both RRI and ADR growth um sort of jumped up at a at a nice at a nice rate. Some of that has to do with the weak comp from last year, but on the other hand, it it appears that um it looks like that uh yeah, we did we had a really strong month.

Awesome. Um I definitely want to dig into some of those themes. Uh but maybe before we dig into that, like let's talk about the economy. Uh because and we did get the jobs numbers. Uh I went through that report. I couldn't find anything uh positive in that report. It was an objectively a very weak weak release. Um we look across and CPI data still looks relatively and strong. So, weak economy, strong inflation. And we've got a Fed that it appears that is going to be and it is is clearly not going to be cutting rates. Uh it might be raising rates. Um so, maybe what's the what's the Bram Gallagher read on how I'm your sense of an overall economy and health of the economy is these?

Well, I don't want to say the S word just yet, right? Um stagflation cuz we But but that was a weak job report. Um we lost jobs. But even you know, even worse than that is that you know, last month we said, "Wow, the labor market's doing great. What a great jobs report do we have with 120 some odd thousand jobs?" Well, now we marked it down by 66,000. So, more than half of those jobs we thought we got last month in fact were were artifacts of the polling. And so, those are evaporated. So, that you know, it was it was pretty disappointing. Uh the other problem was we did see unemployment rate go down. You know, so you say, "Well, we have a really weak jobs report, unemployment rate went down." Uh and went down very, you know, very slightly.

I think it's now at 4.1, which is, you know, pretty low. But, the labor force participation also slipped pretty pretty significantly. In fact, this year it's been the fastest decline in the labor force participation rate. Now, those are the people that are actually actively participating in the job market, either working or looking for a job. And that actually has gone down an an entire percentage point just from the beginning of the year. Um you know, from 62.4 at the end of 2025 and and now we're at 61 61.5. So, or 61.4 actually. 61.5 was last month. So, to some extent that unemployment rate declining is is describing, I guess, a shrinking pool of people that are are actually looking for for for work.

So, it it doesn't mean quite as much as as we would like. Um on the other hand, the rate of firing is still pretty pretty low. Uh the job market is still, you know, pretty pretty good. And even with a low participation rate, 4.1 unemployment is a low unemployment rate historically speaking. It it seems like, you know, we've got all of these sort of things that have been buffeting the economy, whether it is the sort of inflation, energy prices, uh you know, uncertainty about, you know, international relationships and all that kind of stuff. But, the labor market just keeps sort of chugging along. Um we also got the inflation numbers today, and those were a little bit better. Um so we actually dropped our inflation rate, which which was nice and expected because oil prices had gone down pretty dramatically.

Uh so they're at three, I believe 3.3 right now on seasonally adjusted uh basis. So that's that's good, you know, that it went down. On the other hand, it's still much very, very much above the 2% uh target the Fed has has wanted. So, you know, that's not so good. But on the other hand, it's gone down for 2 months in a row right now. So that that that's a trend, right? We've got a downward trend. Um but on the other hand, we're expecting oil prices to go back up as sort of our our conflict in the Middle East kind of proceeds. We're at sort of an impasse. Oil's gone up around 6% in the last 2 days, in fact. So, you know, we've got all of these sort of things that are tearing at us, you know, one way and sort of the other way. The other thing that I've noticed is that long these sort of longer run interest rates certainly went up during the month, even as inflation seemed to cool. So it seems like that the market right now is not anticipating necessarily that this cooling of inflation means that we're going to see, you know, dramatically lower inflation rates for a long, long time horizon.

Um rather the opposite, you know, we've saw mortgage rates increase by around 20 basis points, 10-year Treasury about the same. So now we're looking at mortgage rates of, you know, 6, 7. Um where we were hoping for, you know, below six by the beginning of the year. So we've got a lot of kind of ambiguous data. Um you know, the but but it looks like right now we do have kind of weak weak labor, you know, there's there's it's it's kind of a frozen market. There's not a lot of hiring, there's not a lot of firing. Um on the one hand, you know, that that, you know, tells us that maybe it's not as strong as it could be. On the other hand, because people are not switching jobs a whole lot, they're also not arguing for higher income or higher wages as often.

That is one of the main drivers of wage increases is job switching. So, that is helping our inflation out and also these higher interest rates, of course, are cooling the economy as well. It has sort of that that effect and aggregate demand as it slides may also help to cool inflation. So, right now I think we're still at a very uncertain kind of ambiguous point. It looks like for the travel market, you know, the just this last you know, these last year and a half, I guess. With a lot of policy changes, a lot of stuff going on with inflation, with with energy prices. I think people are just throwing up their hands and saying, you know what? We live in an uncertain world and I'm going to just have to live my life and that includes taking vacations. It all makes sense.

It paints a picture that is I would say and worrying some, not frightening, maybe. And for for what could portray, but ultimately we're in this no layoff scenario, weak sort of growth scenario, but it's still translating towards people traveling. I more stays than ever happening in short-term rentals, record demand. Hotel demand is holding up and it does feel like there was some weakness on the TSA and throughput. But that could just be noise and and and during peak season and air capacity. So, I don't want to put too much into that given that the hotel and short-term rental data and pointed clearly to growth and like it does feel like you tell me, but like on the occupancy side, what I care most is earning more money as an operator or as an investor. Like if occupancy is falling it it's it's hard to have pricing power if occupancies increasing. And it it makes you feel a bit better about pushing rates.

Um and if those are and it it does finally feel like they're moving in the in the right direction. So he talk a little bit more about the trend that you're seeing on sort of those core metrics there.

Yeah, um absolutely. And you know, once again, to to reflect that that earlier point you had, you know, it's it's not frightening. You know, uh we're we're back to this, you know, this really nice we're quibbling about, "Oh, is growth going to be 1.6 or 1.8 for the year?" instead of, you know, are we going to have a recession or not? Nobody's really talking about a recession right now. We're talking about marginal effects on on slowing productivity. So that that I think is something that we've, you know, always want to keep in mind. Occupancy has been trending up. Now, it was really strong last uh the first half of last year. Uh and this January is recalls big snow drought. So we started the year off with, you know, lower occupancy, which which, you know, wasn't wasn't great. We were down about a a point and a half in January.

But then, as each month went on, we're starting to sort of close that gap. We saw occupancy gains in May. We saw a tiny little uh um tiny little reduction in June, but now we're back up to growth. So it's this kind of this halting upward movement in our growth rate uh that, you know, started out in the low in January and is is now growing again in July. And because of last year's comps were pretty weak in the second half, I'm expecting that this is going to continue. We're going to see higher occupancy uh um for the remainder of the year. Now, you know, on on average and I think the entire year, too, we're going to see uh somewhat higher occupancy than we did in 2025. We're seeing uh ADR growth has been pretty strong over the entire year. It got really, really strong over these last 2 months.

Some of that is the World Cup, but again, we've we've we've also running up against some really weak comps uh last year. Uh So, what I've observed in the past is that when we have these sort of inflation shocks as we did in say 2022, you know, the initial reaction from the short-term rental market is we're going to hold rates. New listings are going to price lower. We're going to start appealing to the budget, the economy side of people. However, as time goes on, those expenses have gone up and you have to sort of recoup at some point. So, ADR eventually does sort of increase commensurate with that inflation. So, last year, as you recall, we were doing sort of the we were doing the tariffs. The tariff faster was starting to hit. People were kind of concerned about that. Inflation turned. It had gone down to 2.4 and it started increasing and reached a high in October of last year before it started receding again.

And we saw prices do exactly what they did in 2023. They actually went negative in September. You know, they sort of uh they lowered pretty significantly in July. They sort of were at standstill in in August. They went negative in September. Meanwhile, you know, we've gone forward here. We still have inflation, but I would argue that it's not quite the shock that maybe it once was. Right? I think at this point a lot more people are sort of accustomed to this sort of inflation around 3%. Uh it's it's not maybe as frightening as it as it was. We've also got things like the World Cup um that are helping out pricing and the fact that expenses have been going up and the operators have to increase prices whether they, you know, whether they like it or not. Combined with, you know, the weak growth that we saw last year, I'm expecting that some of this rate growth, even though it's probably not going to be as high as, you know, World Cup uh rate growth, it's still going to be very strong for the rest of the year, which should help RevPAR out.

Right? So, if we're maintaining our occupancy or even increasing our occupancy and strong rate growth, combined with the fact we haven't even got into the supply stuff yet, but combined with the fact that you're not going to be seeing new competitors rush into your market for the rest of the year, I think you've got if you're you're an operator right now, you're looking at really nice unit level increases for the rest 2026.

Love that. So, that sort of leads into the um trends. And may maybe the the question then for you is like I I I know in the review, I know right up you could do and you sort of dug into and and World Cup and like the large expectation going into the year was that it was going to be a major driver for inbound demand. It was going to be a major driver of supply. Um and that and it could meaningfully move the numbers this summer. So, now given hindsight of all those things, like what did it do? And did it meaningfully change the numbers? Did it meaningfully change the narrative this summer?

For rate, absolutely. Uh I would say it is, you know, as a closed book case, you know, rate was huge in July. It was real big in June, especially for those World Cup cities saw gigantic rate increases. And again, like I said, enduring rate increases. They still have those high rates and and may for the foreseeable future. Maybe not as high as during the World Cup, but they've they've seen incremental improvements there. So, I think, you know, we've we've definitely leveled up these these host cities. As far as the demand goes, we had good demand. Um we had improving occupancy in July. It went down a little bit in June. Um we did see demand nights up around 2%, which was somewhat, you know, somewhat stronger than than we've seen in the in the past uh year or so.

Yeah, about about year or so. June and July having some of the stronger sort of demand increases, so that that did help. You know, so it's a little bit more it's a little bit more difficult to say with demand because of the incredible flattening of demand growth that we saw that started last year in in in the second half in August and September of last year we really did see a a very big flattening of of uh demand in the US. So, I'm hoping that, you know, that this is going to be the start of a perhaps the start of a trend, especially as we have these weaker comps, but, you know, those were two two of the strongest demand growth that we've seen in 2026 in June and July. So, you could also argue, I think, that it did help with demand.

It It boosted demand beyond that which it would have been otherwise. Uh but certainly on the rate side um and the RevPAR side has been an unalloyed success. We did see, you know, from the supply growth side, we also did see meaningful increases to supply from these host cities. So, if you're looking at listing growth, it has been pretty low, uh and that makes sense because, you know, mortgage rates are very very high, real estate is extremely expensive, uh the housing market is essentially frozen. I think NAR, the National Association of Realtors, 1.7 We were down 1.7 in existing home sales for July. And that was off a pretty weak month last year. So, the fact that we've got, you know, continued listing growth has been, you know, um pretty exciting. We even saw a slight very very slight acceleration in June and July for the US as a whole. Now, if we were to separate out, however, the host cities for the World Cup versus the rest of the country, we get a different uh a much different um story.

So, if we look at those World Cup host cities, they're increasing their supply by around 9 8% in June and July. Whereas the sort of the rest of the nation rather than seeing increases to supply actually saw declines and saw in both of those months supply increased by less than 2%. So 1.6 in June and 1.7 in July. In fact, if you look at all these sort of cities without the World Cup uh you have seen the sort of steady deterioration in supply growth uh since November of last year. It's been sort of pretty pretty much you know headed downward. And that's what we would have expected with these high interest rates, right? As soon as February hit, boom, right during the um spring home sale season, we you know we we pumped up the mortgage rates. They're still going up. So we would have expected declines in supply and had it not been for the World Cup, I think we would have seen the nation uh see uh to noticeably lower supply growth.

I should point out too a lot of these urban areas too had very very slow supply growth at the second half of 2025. They were actually taking away uh from or or drawing the average for the nation down. It's only been in the last say three or four months that those World Cup cities have started boosting supply.

So do you think an underlying supply growth is closer to one than it is to three or like

Uh well you know these host cities are part of uh uh of the market. Um it'll be interesting to see how many of the listings that came on board for the World Cup remain. You know, particularly in some place like say Kansas City where they saw an explosion. Uh I don't think all of those listings that came on for the World Cup can possibly be supported for you know forever. But uh you know it'll be interesting to see you know how many of them stick around and if that has sort of impacts on our our listing growth going forward. Um with mortgage rates even higher than they were, I don't expect um to see a reversal in this trend. So, I'm thinking for the rest of the year, yeah, we're seeing we're looking at pretty weak supply growth, maybe below 2%.

So, I mean, we talked a little bit about expectations going forward, but is there sort of as we wrap up, is there anything that you think hosts should be keeping an eye on as we think about and heading into Labor Day, um into summer? It's hard to think about fall when it's 95° outside, whatever it is today, and humid. Uh

No wildfires in the winter, though, at least. So, we've got that going for us.

Yeah, what what what are what are you thinking about uh going forward?

Well, one of the things I'm looking at the, you know, looking at the pacing, we're seeing really, really strong pacing for uh September and on. Um I do want to caveat that with two things. First of all, September, we know there's a calendar shift. So, we've got Labor Day moving from August to September, and that may might make the August numbers look a little weak uh when they finally come out. I would say, don't freak out about that. It's not a downturn in the market, it's just a calendar shift, cuz Labor Day weekend is now all the way in September. We'll see a nice blockbuster September as a result of that. However, there's a trend that I've been watching, those lead times, if you have been operating in this space for, you know, last 5 years, then you're probably accustomed to lead times continuously diminishing.

Right? So, this has been the great headache of operators everywhere is that people are waiting and waiting and waiting till the last minute uh to book. However, in 2020 uh '26, for the last 4 months, we've seen either increasing or steady uh lead times, and that's not just for the World Cup. You know, we're going back to April, and we saw really nice, big boost in in lead times there. And I should also point out, the biggest increases in lead times are in the coastal location, which is not, you know, the urban stuff where the World Cup was was having. They've increased their lead time by about 2 days for both June and July on average um this year. So, you know, uh uh that's something that's a a reversal of a long-standing trend. So, if you are in the mindset of ever-decreasing lead times and, you know, therefore, you know, you got all these last-minute bookers that you're you're worried about, well, keep in mind that maybe people are actually planning a little bit farther uh ahead.

Uh you know, try to reach out um and try to capture some of of that sort of early demand um if you can and, you know, also price accordingly, right? If you if you haven't seen people book uh make sure that you have data on what your competitors are doing uh because if they you know, if they've figured out this lead time trick before you have, then they they may have priced differently. It is a well and I should point out though that that, you know, longer lead times help really help everybody, especially hosts when they're when they're Uh I've spoken with Linda many times. She's just She's just started her own short-term rental this year and the headaches that that she's had with last-minute bookers um has been, you know, it's been eye-opening. Uh so, definitely it's a good it's a good trend. It's a positive trend. I think it's because people are finally settling into this idea that we are in an uncertain world, but one certainty that we can have is uh we're going to plan our vacation and that's going to be something we can look forward to regardless of what is happening uh elsewhere.

No, that's that's one great advice and two, I think a great trend to keep an eye on especially around pricing and almost nothing more important than the lead times and like and being able to I I think better interpret the pacing figures that you're getting cuz if Yeah, if people are booking further in advance, like pacing's going to look stronger, but you're you you might not have as many last-minute bookings come come in. Um I'm compared to prior booking curve. So, well Bram, this was insightful. I appreciate you taking the time to walk through it. And yeah, I think I think that's it. Anything else to share?

Well, let's see. You know, we are it is it's it's incredible how fast things have gone this year. You know, we're already in the middle of August. Now we're looking at, you know, the college football season. We're looking at autumn travel. I'm going to be paying real close attention to see how many people are going to Asheville this year, how the recovery there has been. Uh we have had a lot of weird weather stuff. However, knock on wood, you know, the the El Nino formation, I think those tamp down Atlantic hurricanes. So, you know, I'm really looking forward to just a bumper crop of of nice shoulder season beach vacations, of which I'm I'm starting to think maybe I should participate in. Um in any case, I think the rest of the the year it does look bright. It does look I think strong for for unit level performance.

Going into 2027, there's a lot of unknowns, but you know, continue racking up those good guest reviews, it can only help.

And I'll look forward to reviewing your your vacation requests.

[laughter]

We got to just run it by the party planning committee a few more times and we'll we'll get there.

Awesome. All right, Bram. Awesome show. Thank you.