What does economic uncertainty really mean for short-term rental (STR) operators? In this episode of the STR Data Lab, AirDNA Chief Economist Jamie Lane and Director of Economic and Forecasting Bram Gallagher take a deep dive into today’s shifting macroeconomic landscape. 

With stock market swings, inflation expectations, new tariffs, and falling consumer confidence, the STR industry is bracing for potential turbulence. Despite these headwinds, however, data-driven strategies can help hosts and investors stay the course.

Whether you're concerned about volatility in international travel, the wealth effect from equity declines, or the impact of inflation on guest behavior, this episode arms you with the insights you need to make smart, proactive decisions.

Here’s what you can expect from this episode:

• Why the Economic Policy Uncertainty Index has surged to its highest level since COVID-19—and what that means for STR operators
• How consumer sentiment and stock market volatility influence travel behavior
• The role of tariffs and trade tensions in reducing international demand (especially from Canada)
• Why certain markets are more exposed to economic instability
• How to interpret current economic fundamentals and what downside risks might mean for 2025

Episode Highlights 

The Rise of Economic Policy Uncertainty

Jamie and Bram open the conversation with a look at why uncertainty is the watchword of the moment. Despite healthy indicators like low unemployment and stable GDP growth, perception is everything—and consumer confidence has been falling. Bram points to the Economic Policy Uncertainty Index, which recently hit levels not seen since the early days of the pandemic.

Why the spike? A mix of factors: political turnover, trade policy changes, and headline-driven market reactions. The lesson for STR stakeholders: even with a solid economic base, psychological signals like consumer unease can drive real behavioral shifts in travel planning.

Tariffs and Travel: A Risk to International Demand

One standout discussion centers on tariffs—both their immediate and ripple effects. The U.S. has implemented broad-based tariffs targeting imports from Canada, Mexico, and China, which not only impact prices but also stir retaliatory action from trading partners. For STR operators, this matters.

Data shows a dramatic 70% to 75% drop in flight demand from Canada to the U.S., and some major routes have been canceled altogether. That’s significant when Canadian travelers made up 2.6% of U.S. STR demand last year. In markets like Buffalo, New York; Fort Lauderdale, Florida; and Maui, Hawaii where international travelers form a substantial portion of bookings, the implications are real and potentially lasting.

The Wealth Effect and Stock Market Volatility

Consumer spending patterns often shift in tandem with the stock market. Even if job numbers remain strong, when consumers see their portfolios shrink, they start looking for ways to cut back—travel included.

This "wealth effect" hits higher-income earners particularly hard. While households earning over $125,000 have maintained strong confidence so far, a major market correction could change that quickly. That means luxury STRs might feel the pinch first.

Business and Government Travel Cutbacks

Another key signal: a sharp downturn in business and government travel. Forward-looking data shows government bookings down 80% and corporate bookings down 45%. Combined, these two segments account for nearly 18% of the overall lodging demand. While short-term rentals lean more toward leisure travel, hotels slashing rates to compete could lead to price pressure across the board.

Operators should take note: in times of economic instability, even indirect exposure to business travel trends can impact your revenue outlook.

Inflation, Currency Fluctuations, and STR Demand

Tariffs are also fueling inflation expectations. With inflation, the value proposition of travel weakens—particularly for international guests facing unfavorable exchange rates. A stronger U.S. dollar makes U.S. stays more expensive, further curbing demand from abroad.

Some travelers may opt to stay local, travel less, or shorten their stays. For STR hosts, that means refining marketing efforts and offering competitive pricing becomes even more critical.

Geography Matters: Markets at Greater Risk

The episode highlights how exposure to international markets varies significantly by region. Canadian travelers, for example, represent more than 10% of STR demand in markets like Buffalo, New York; Bellingham, Washington; Maui, Hawaii, and parts of Florida.

Operators in these areas should monitor booking trends closely and consider domestic targeting strategies to offset declines. Leveraging AirDNA tools to identify emerging domestic demand can offer a strategic edge.

So, Where Do We Stand?

Despite all the red flags, Bram and Jamie emphasize that core economic indicators remain resilient—for now. Employment is strong, inflation was mild last month, and industrial production is steady. That being said, risks are building. Falling labor force participation, equity market vulnerability, and rising tariffs all point to increased downside potential.

The consensus? Economic uncertainty is here, but panic isn’t necessary. STR operators should use data to track demand shifts and be ready to pivot.

Actionable Insights for STR Hosts and Investors

1. Watch the data, not the headlines. Economic fundamentals still support growth, but keeping an eye on emerging metrics is crucial.
2. Know your market’s risk exposure. If your STR relies on international travel or corporate stays, it's time to reassess.
3. Adapt your pricing strategy. Use AirDNA’s Dynamic Pricing tools to stay competitive if demand softens.
4. Promote domestic travel. Redirect marketing to U.S. travelers and highlight value, flexibility, and local attractions.
5. Plan for different scenarios. Develop both conservative and optimistic forecasts based on the evolving economic landscape.

Final Takeaway

Economic uncertainty doesn’t have to spell disaster for short-term rentals. With the right insights and tools, you can anticipate changes and stay ahead of the curve. Tune in to Episode 126 of The STR Data Lab for a thoughtful, data-backed breakdown of how macroeconomic shifts could affect your strategy—and what to do about it.

Listen now and future-proof your STR business.

Signup for AirDNA for FREE

https://app.airdna.co/data 

Connect with Jamie on LinkedIn and Twitter: 

LinkedIn: https://www.linkedin.com/in/jamiehlane/ 

Twitter: https://twitter.com/Jamie_Lane 

Connect with Bram on LinkedIn: 

LinkedIn: https://www.linkedin.com/in/bram-gallagher/ 

Connect with AirDNA on LinkedIn, Twitter, TikTok, and Instagram:

LinkedIn: https://www.linkedin.com/company/airdna/  

Twitter: https://twitter.com/airdna 

TikTok: https://www.tiktok.com/@airdna.co 

Instagram: https://instagram.com/airdna.co