2023 So Far: A Short-Term Rental Industry Outlook
2023 Vacation Rental Industry Update
In the beginning of 2023, predictions for the short-term rental industry were all doom and gloom. With a possible recession on the horizon, soaring supply, and falling occupancy rates, the signs did not look at all promising for vacation rental owners, but fortunately, almost none of the predicted “Airbnbust” has come to pass. But there have been changes in the industry, along with signs of more things to come, and it always helps to be ready for any shift in the economic headwinds.
In today’s market update, we’ll take a look at how things shaped up for the short-term rental industry in Q1 and Q2 of this year using AirDNA’s helpful reports, then we’ll dive into a few predictions for the remainder of 2023.
Q1: Defying Negative Expectations, a Solid Start to the Year Despite Lower Occupancy Levels
At the tail end of 2022’s holiday season, predictions for 2023 were all over the map, but economic uncertainty did not seem to bode well for the short-term rental industry. Despite slight slowdowns in occupancy, however, January 2023 was a strong start to the year, with supply rising 21.1% year-over-year according to AirDNA and demand increasing 14.5% year-over-year as well. RevPAR and ADRs also rose slightly in January despite this being a historically cooler month, increasing 1.7% and 3.1% respectively.
In February, the market continued to show strong demand, rising 17.9% year-over-year according to AirDNA, while supply also continued to grow (albeit not at the rate it did in 2022), with available listings increasing 26.1% year-over-year. While the slowing occupancy trend continued in February, there was still an increase in occupancy when compared to 2019’s pre-pandemic numbers. Signs for the coming months were looking better than in January, and RevPAR and ADRs both showed growth in February as well.
In the last month of Q1, we saw much of the same trends continuing, with demand growing 15.5% year-over-year for March according to AirDNA and supply slowing down to 20.3% growth year-over-year compared to 26.1% in February. Occupancy was still down 2.1% year-over-year due to the huge supply gains of early 2022, but it remained 1% higher than 2019’s occupancy rates. RevPAR didn’t budge much in March but ADRs did rise slightly, growing 2.2% year-over-year.
Q1: Defying Negative Expectations, a Solid Start to the Year Despite Lower Occupancy Levels
Q2 began a bit more optimistically than the beginning of the year, and April showed an impressive start to the summer season with a 12.6% increase in demand according to AirDNA. Supply also continued to cool down, slowing to 18.9% year-over-year from 20.3% in March, which has helped to dispel the fear that another overabundance of supply could mean more falling occupancy rates.
While April still showed lower occupancy rates than years previous (-4.9% year-over-year), ADRs continued to rise, climbing 1.4% year-over-year. RevPAR declined slightly during April, falling 3.7% year-over-year.
May of 2023 showed much the same as previous months, with supply growing 15.3% year-over-year, slackening supply growth to its lowest point in the last 18 months according to AirDNA’s report. Meanwhile, demand rose slightly slower than it had in April at 11.9% year-over-year, and RevPAR rose very slightly, hitting a 0.2% increase year-over-year. Occupancy rates also fell 3.1% year-over-year for May, but are still well ahead of pre-pandemic levels. And in good news, ADRs did rise 3.4% year-over-year for May.
As the end of Q2 wrapped up in June, predictions for a successful summer have become even stronger, with more guests staying in a short-term rental during June than ever before. Supply growth continued to cool, slackening off to 15.2% growth year-over-year according to AirDNA, while demand stayed strong, increasing 14.3% year-over-year. RevPAR also increased very slightly yet again, rising 0.3% year-over-year, while ADRs rose in tandem, increasing 1.4% year-over-year. Although occupancy is still down over 2022’s numbers, June represented its smallest gap of the year so far, with occupancy falling only 1.1% year-over-year.
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Despite all of the looming economic uncertainty that dominated the beginning half of the year, the short-term rental market outlook is quite strong for the remainder of 2023, even if occupancy levels are not quite what they were in 2022. Demand will continue to grow throughout the second half of the year, but occupancy rates and RevPAR are both expected to cool a bit as demand isn’t expected to grow as quickly as available listings.
While occupancy rates and RevPAR might see a decline during Q3 and Q4, AirDNA expects that both will stabilize a bit more in 2024, when they will be aided by gains in ADRs.
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Note: Airdna’s findings are from studies regarding the entire short term rental industry. Individual market’s performance and outlook may vary, especially in the mountain towns that we specialize in. If you would like to know about your specific market, please reach out to our team so that we can help answer any questions.
2023 has been a better year than expected for the STR industry, and signals for the rest of the year are looking positive as well. After the huge increases in supply during the early part of 2022, rental owners were not positive about the future, but it’s fortunate that things have begun to level out in terms of occupancy levels and RevPAR rates.
The landscape of the short-term rental world is always changing, and rental owners need a property management company that can change along with it, like LocalVR. For more information about our property management program, check out our homepage.