Status of the Market and Short-Term Rental Travel Predictions for 2023
The Importance of Pricing
As we reach the end of the first month of 2023, we thought it was a good time to take a look at what the future of this year holds for the short-term rental market. This year, worries of a recession loom, and travel attitudes are shifting in the wake of these strong headwinds. But it isn’t all doom and gloom for the short-term rental market–predictions for supply and demand are optimistic and continue to display promise for the year ahead.
Today, we’ll break down what to expect from demand, supply, and occupancy for short-term rentals in 2023, along with what we expect to see with regards to travel trends for this year as well.
Supply and Demand in the Short-Term Rental Market for 2023
Though fears of a recession may loom over everyone’s minds at the moment, there is still good news for both supply and demand in the short-term rental market. AirDNA predicts that demand should stay steady for 2023, increasing by around 5.5% year-over-year. While this is lower than 2022’s increase in demand, it signals a market that is maturing from its post-pandemic upswing.
Supply will be heavily affected by the predicted price falls in the real estate market in 2023 as well as aggressive interest rate hikes that happened at the end of 2022. For supply, we will see a bit more growth, with AirDNA anticipating a 9% rise in short-term rental listings for the coming year. However, compared with 2022, which saw an increase in listings of 21%, 2023 will be a slower year.
Occupancy Outlook
Despite the fact that demand for short-term rentals reached a recent high, many owners are worried due to occupancy trending downward for the vacation rental industry as a whole. AirDNA predicts that occupancy will once again fall this year to 56.4% from 58.3% in 2022 and 60.3% in 2021.
Part of this is due to the fact that the post-pandemic travel levels reached an all-time-high in 2021 and 2022, something that probably won’t happen again in our lifetime. Even with these drops in occupancy, there is still good news–travelers are beginning to see the perks of traveling during the shoulder season (less travelers and lower prices), and demand is expected to improve during these oft-forgotten periods of time.
Travel Attitudes and Trends
One of the biggest factors influencing the attitudes towards travel is worries about its rising cost. According to Destination Analysts, 45% of Americans said that the reason they aren’t traveling is due to travel being too expensive, a number that rose around 5% over the last six months. Some of this is due to fears about the coming recession–around 62% of American travelers have decided to be more frugal with their money because of the predicted recession.
Even with these worries looming, however, attitudes remain strong for travel in 2023. In fact, around 80% of American travelers say that they are excited to travel this year.
Overall Short-Term Rental Trends for 2023
It may seem like economic headwinds are not blowing as strongly as they once were in the short-term rental market, but that doesn’t mean there isn’t potential to have a strong 2023. Even during a recession (and if this one occurs, it’s not predicted to be severe), consumers will continue to travel for leisure if they can afford to, and this leads to plenty of opportunity for growth for owners of vacation rental properties.
The even better news is, in the event of a recession, the short-term rental industry is not predicted to be heavily affected, nor is it expected to ever return to its pre-pandemic levels, even in the worst case scenario. While there may be economic difficulties in the future as well as a slowing of demand in the industry, there are still many trends that will continue to ascend (albeit in a more mature manner than of years past) and spell out positive news for the future of STRs.
Protect Your Profits With Expert Revenue Management
Dealing with the ups and downs of the economy and the short-term rental market can be a headache for many property owners, but LocalVR’s expert property management services can help you weather any storm. Our local experts are always dialed into the overall trends in the market and can help you set your vacation rental up for success, especially with regards to revenue management. For more information on our property management services, check out our Program page to learn more.