During the pandemic, the US short-term rental sector used its supply flexibility to recover faster than hotels, especially in coastal and mountain destinations, pushing rentals’ market share to a record 17 per cent of total lodging in summer 2020. Hotels retargeted towards leisure guests to reclaim demand, focusing on urban areas, pushing short-term rentals’ market share back to below its pre-pandemic trajectory.
Jamie Lane, vice president of research at AirDNA, said: “During the pandemic, short-term rentals had an advantage over traditional hotels due to consumer perception of better Covid-19 safety. Now in 2022, hotels can compete on price and have claimed demand on key holidays where, pre-pandemic, they typically lost out on leisure travellers.”
Hotels lead in cities
In large cities, short-term rental supply contracted dramatically as demand dropped off in 2020, while government subsidies helped to reduce permanent closures of hotels.
As urban demand began to recover in 2022, hotels were ready to accommodate travellers, while urban rental supply remains 17 per cent below 2019. With strict regulations limiting short-term rentals in cities such as New York and San Francisco, which both lost 25 per cent of their pre-pandemic supply levels, supply is unlikely to fully recover in these areas.
Isaac Collazo, vice president of analytics at STR, said: “Looking to the future, hotel supply will likely remain strongest in urban and suburban locations, with low development in coastal and rural areas due to higher barriers to entry, where short-term rentals will likely see more opportunity for growth.”
A new STR survey of more than 1,000 travellers shows that value for money is an important factor for rental guests, even more than hotel guests.
Despite the perception that rentals are cheaper, hotels and comparably-sized rentals were priced around the same in 2019, except in urban locations. In large cities, hotels were priced 42.9 per cent higher than rentals, but that gap has closed to 26.6 per cent in 2022.
Hotels are now offering lower rates than rentals in all location types except urban and coastal resorts, where the difference is ten per cent.
While rentals’ market share is highest in coastal and mountain or lake destinations, their share has flattened or declined in urban and suburban locations. Rentals should continue to grow their market share, albeit at a slower pace than pre-pandemic, led by expansion in resorts and small towns less well-served by traditional hotels.