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US: AirDNA has released its US 2024 and 2025 Mid-Year Outlook Report which predicts growth in demand, REVPAR, occupancy and ADR for H2 2024 and 2025,
The report says; “At the end of 2023, we anticipated that the short-term rental (STR) market would begin to grow at a more balanced and stable pace. Over the past two years, RevPAR (Revenue per Available Rental) experienced net negative changes due to rapid supply increases that outpaced demand. With the economy looking up, we expected demand to pick up again and supply growth to slow down in response to flagging unit-level performance and high interest rates.”
Although there have been some big swings in monthly performance so far in 2024, the overall trends are aligning with our expectations. In May, supply growth was less than half of what it was in May 2023. Meanwhile, demand growth jumped to +11.4 per cent, much higher in comparison to the -1.8 per cent seen in May 2023. While not every month in 2024 has delivered such impressive results, we’re seeing an overall trend of stabilising occupancy rates and positive rate growth. Unit-level performance is improving as a result.
Here are some of the key findings:
• Demand: In 2023, demand for short-term rentals grew by just 1.8% because high inflation made people cautious about spending. There was also uncertainty about how well the Federal Reserve could manage interest rates without causing a recession. Now, with inflation easing to more typical levels and recession fears fading, year-to-date demand is already 6.8% higher than in 2023. We expect this trend to continue, with demand growing by 5.9% by the end of 2024. Looking ahead to 2025, we anticipate even stronger growth of 6.8%.
• Supply: High mortgage rates are expected to continue through 2025, regardless of the Federal Reserve’s actions this year. This will make it harder for people to invest in new properties. Despite this, we still expect supply growth to be slightly higher than demand growth in 2024. However, we anticipate this trend will reverse in 2025.
• Occupancy: Occupancy rates have been steadily declining since their peak in 2021 and are down by 1.5% so far this year. However, when looking at the average over the past twelve months, the decline has stopped and should stay stable for the rest of the year. In 2025, occupancy rates are expected to rise slightly for the first time since 2021 thanks to slower supply growth and continued demand.
• Average Daily Rates (ADRs): In 2023, ADR declined due to mix shift, or the introduction of new listings. This trend has already reversed in 2024, with ADRs up by 2.8% so far. These increases mostly happened during the off-season when even small positive changes can lead to larger percentage growth. We expect ADRs to rise by 2.0% for the entire year as the slower growth in available listings eases the impact of mix shift. In 2025, ADRs are projected to increase by about the same amount (2.1%).
• RevPAR: RevPAR began falling for the first time ever in 2022 and continued declining into 2023. However, 2024 will be the year that RevPAR grows again. While a slight drop in occupancy will slow down this growth, RevPAR should still improve by 0.6% by the end of the year. As occupancy rates stabilize and start to rise in 2024, RevPAR growth is expected to accelerate to 2.9% next year.
You can read the full report here.
