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AirDNA 2024 outlook part two: Equilibrium in US STR performance

US: AirDNA economist Bram Gallagher discusses the new phase of equilibrium that will play a part in the performance of short-term rentals in the United States in 2024, as part of the company’s newly-released outlook report.

As we step into 2024, the US short-term rental industry is entering a new phase of equilibrium, a stark contrast to the rapid and often unpredictable growth patterns observed during the post-Covid era. At AirDNA, we apply our decades of combined experience in travel economics, along with the longest and most accurate historical dataset, to provide economic forecast for the short-term rental industry.

This year, AirDNA’s outlook report projects that the US STR industry will experience stable growth in 2024, with demand set to increase by 10.7 per cent year-over-year, a material rise from the 6.7 per cent growth of 2023. This positive change is unfolding against a backdrop of a steady economic climate.

The year 2023 presented a unique set of challenges and achievements for hosts and property managers throughout the country.

While the anticipated recession of 2023 never materialised, largely thanks to the strength of the labour market in the face of the Federal Reserve’s rate increases initiated in 2022 to combat inflation, unforeseen events like the record-breaking heatwave in August, devastating wildfires in Hawaii and Canada, and a hurricane in Florida’s Big Bend impacted demand, particularly in the peak travel season. However, a demand resurgence in the latter months of the year hinted at an extended peak season for STRs. 

Despite achieving a record-breaking 24.1 million nights booked in July and a peak of 1.6 million listings in September, the industry saw its first drop in Revenue per Available Rental [RevPAR] since 2014, decreasing by 4.9 per cent. While nowhere near the “collapse” touted on social media, this was still a concerning development for some hosts, particularly newcomers who only had the boom of 2021-2022 for comparison.

This was a direct response to increased supply and economic pressures that led hosts to lower rates to attract budget-conscious travellers, impacting overall revenue but reflecting a necessary adaptation to market shifts.

The resilience of the STR market was further underscored by a significant expansion in available nights, with a 12.8 per cent increase in 2023. This growth, set against the backdrop of high mortgage rates and soft per-unit performance, indicates a robust market adjusting to new realities. 

Looking ahead to 2024, the economic forecast is encouraging. We anticipate a continued moderation in inflation, setting a positive note for the STR market. ADRs are expected to increase by 2.1 per cent, contributing to a projected 1.9 per cent growth in RevPAR. Occupancy rates, having declined from their peak in 2021, are predicted to stabilise at around 54.7 per cent, aligning with the levels of 2023 and pre-pandemic averages.

This trend of supply matching demand, projected to grow by 10.9 per cent and 10.7 per cent, respectively, in 2024, indicates a market moving towards a more sustainable and balanced pattern. Location-wise, mid-size and small city / rural markets will be the resounding leaders in demand growth and will continue to increase their share of the US STR market.

This balance indicates a market that is not just resilient, but also adaptable to economic changes. For those managing properties, the focus should be on staying agile and responsive to these shifts. Understanding what travellers want and using data to guide decisions will be key to making the most of this year.

It is an exciting time for those who are ready to keep up with the ever-changing dynamics of the travel industry — and make the most of the opportunities [like huge concerts and sporting events] that come with it.

Read AirDNA’s 2024 outlook report in full at this link.

Hear Gallagher’s insights for the year ahead in our 2024 predictions webinar here and read his thoughts on the future of urban tourism in our forecasts article here.

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