The Short-Term Rental Industry in 2022 and What It Means for 2023
The Last Year in the Short-Term Rental Market
The short-term rental industry has always been full of ups and downs, but the last few years have been a different breed entirely than what we’ve seen before. Those who began their vacation rental business in 2021 have had an entirely different experience than those who began their business in 2022, and the same goes for those who started in 2019 or 2020. The market changed so abruptly and significantly over the last few years that it has been hard to predict what the future holds.
The good news is that the market has begun to return to a more normal, pre-pandemic state, and while the short-term rental industry is by no means predictable, we can infer a lot for its future tidings by taking a good look at and analyzing the numbers from 2022.
So today, we’re taking a deep dive into 2022's statistics and giving you an overview of what that means to prepare you for the rest of 2023.
Supply, Demand and Occupancy in 2022’s STR Market
During the first half of the year, things looked just as promising as they had in 2021 when demand in the market first spiked during the early stages of the post-pandemic period. According to AirDNA, January was stronger than ever, with demand spiking 41% compared to January 2021 which led to a 10% increase in occupancy. February also saw an increase of 2.5% in occupancy due to this higher demand, which surged up 34.6% over last year’s numbers, as AirDNA reports. This demand pushed ADRs higher resulting in some of the best historical months in the industry.
Unfortunately, by March, supply began to outgrow demand and occupancy started to fall by just 0.2% year over year. This started a trend that would continue the rest of the year. April saw a 1.6% decline in occupancy despite a 25.3% increase in demand. Similarly, May saw a 17.9% increase in nights stayed which resulted in a 1.7% drop in occupancy.
As spring turned to summer, the short term rental market really began to see a surge in increased supply to the new demand. In July, available listings rose by 25.5% combined with only an 18.2% increase in demand compared to 2021, according to AirDNA. A 7.5% drop in occupancy marked the fifth consecutive month of declining occupancy.
Demand began to level out by September, ending the summer on a record note as far as the number of total guest nights booked goes. But the growth of supply still outpaced it in the final months of 2022. Naturally the occupancy began to fall in October and November compared to summer still under the previous year’s benchmarks. As this especially strong year with regard to short-term rental demand came to a close, AirDNA reports that occupancy finally began to level out, as December was just a small percentage under 2021’s performance.
What Does the Short-Term Rental Market Hold for 2023?
One of the biggest themes of 2022 that will extend into 2023 is that vacation rental owners should always expect the unexpected from the short-term rental market, even if the year starts off at record levels. When looking at year-over-year comparisons from 2021 and 2022 especially, it’s wise to keep in mind that the former was an exceptionally strange year in the market. Lockdowns were still ever-present during the first half of 2021 and then we had a strong surge of travel that happened during the summer months, which makes comparing the two years a bit hard since circumstances have differed so much.
2023, by comparison, should show a bit more of a return to normalcy and a more sustained rise over pre-pandemic levels. However, the future is impossible to predict, as there are always factors that may disrupt and confound that prediction, so it’s wise to prepare yourself for an ever-changing and ever-evolving short-term rental market.
Another theme of 2022 that will extend into 2023 is the consequences of this rapid supply growth. Many saw the opportunity to hop onto the short-term rental bus during January and February’s gold rush in 2022, which led to what many termed an “Airbnbust” in the latter months of the year as supply began to respond swiftly to outpace demand. How this strong supply will affect the market remains to be seen, but owners should keep in mind that listings are at an all-time high and that competition has never been stiffer.
Prepare for the Future with a Property Management Company You Can Trust
No matter what happens in 2023, 2022 will remain a year of highs and lows. While the beginning of the year was stronger than ever, growth cannot sustain itself indefinitely, especially with the rapid changes in supply that began around the middle of the year, which led to an inevitable drop in occupancy during the latter half of the year.
The short-term rental market is ever-changing, and owners need a property management service that knows how to change along with it. At LocalVR, we can not only help owners to keep up with and prepare for the rapid changes in the market, but we do it using the latest and greatest in short-term rental management technology. Our LocalPricing algorithm, for instance, was custom-built with the market in mind and is driven by real-time and historical data to price your property and land more bookings. To learn more about how our program can help owners like you, visit our Program page for more information.