AirDNA’s Chief Economist reveals 2023 holiday rental trends

What does the landscape look like for holiday rentals? Jamie Lane, Chief Economist at AirDNA, shared some of his insights from tracking more than $148bn of revenue across 12m holiday rental properties in 2022.

While speaking primarily to a US audience, here are some of the most interesting insights he shared from around the world based on AirDNA data. 

1. Global markets are all recovering – but at different speeds

According to AirDNA’s data, the US was ‘fully recovered’ in terms of holiday rental demand from April 2021. Europe was about a year behind, recovering during the summer of 2022, while Asia and Oceania are still in recovery mode and expected to reach pre-pandemic levels by mid-2024.

Data from the US Bureau of Labor Statistics also showed that, for the first time since the start of the pandemic, more respondents say they were on holiday than off sick – leaving Jamie optimistic that the worst parts of the pandemic are increasingly behind us.

2. Most of this recovery is driven by domestic demand

Not only had the US recovered by April 2021, but in 2022 it saw year-on-year growth of 25%.

Much of this growth came from leisure options and more remote destinations that are popular with domestic travellers, such as beaches, mountains, lakes and small-town, rural communities. 

Demand for mountain and lake options proved especially resilient during the pandemic, only dipping negative for the three months of April to May 2020, but otherwise continuing to grow. 

Even as social distancing has come to an end, the shift towards rural locations continues with demand for such locations up 156% compared with 2019.

3. International stays are still down

Despite the return of domestic travel, the industry is still awaiting the full return of international travellers to US holiday rentals.

In Q3 2022, international travellers staying in US holiday rentals were down 19% compared to 2019 levels. But there’s cause for optimism. The full return of international travel could prove a major catalyst for 2023, fuelling even more growth within the industry.

4. Urban destinations are hardest hit by these changes

The pandemic naturally affected demand, but it also disrupted supply too.

Big international destinations such as Sydney, London, Barcelona, Rome, Paris, New York and Los Angeles were all down in terms of both supply and demand – with Amsterdam down almost 60% in terms of both supply and demand.

This is broadly as a result of three factors: 

• General decrease in demand caused by the pandemic
• New regulations around holiday rentals (or stricter enforcement of existing regulation) 
• Lower business-traveller demand

Jamie’s summary was simple: “I suspect many of these markets will never get back to 2019 levels.”

5. But smaller cities and suburban areas are reaping the benefits

While supply and demand are yet to return to the big cities of the world, the smaller ones are seeing big increases in both.

In the US, places like Austin, Texas, Santa Rosa/Rosemary Beach, Florida and Gulf Shores/Mobile, Alabama are all seeing an increase in both supply and demand.

In fact, Panama City, Florida, has seen a nearly 80% rise in listings, and nearly 60% rise in demand.

Much of this is driven by changing traveller attitudes, but also non-holiday trade looking for temporary housing – such as those moving to a new area for work.

6. Occupancy is technically down – but it’s from historic highs

One of the few areas where the US saw a decline during 2022 was occupancy. But, while technically down on paper, this doesn’t tell the whole story. The truth is that this is caused by wider market shifts that somewhat skewed the data across 2021.

In 2020, leading into 2021, demand in the US plummeted, leading to a 25% reduction in supply in holiday rental properties. But later that year, demand came back strong and much quicker than the supply could return. As demand outpaced supply, occupancy rates increased. 

Now the opposite is happening – supply is returning and outpacing demand.

To really emphasise his point, Jamie put it that 2021 was “probably a level of occupancy that the industry will never, ever, ever see again”. So, it’s less a worrying trend and more a return to normal.

7. Average Daily Rate (ADR) has increased roughly in line with hotels

Research has shown that, after location, price is the second most important reason why a consumer chooses a holiday rental over a hotel.

Holiday rental options are often price-sensitive, especially for those with children or staying for long periods of time. It’s therefore important to note that prices for holiday rentals are, on average, about 35% higher in the US than in 2019 – growing at a faster rate than hotels. 

However, one challenge of tracking holiday rentals is that each unit is different. That means the units available now aren’t the same as those from 2019, so it’s difficult to offer a direct comparison. There’s also the factor of changing consumer demands – with many travellers favouring larger properties now than they did in 2019.

Once these factors are accounted for, the actual ADR increase in the US is closer to 18% – which is almost the same as hotels.

8. There are many reasons to be optimistic for 2023 

While there is wider expectation of a recession in 2023, there are reasons to be optimistic that the impact on the hospitality industry will be minimal, including:

• Job growth – US research shows an increase of 4.3m jobs in the past year, and previous cycles have consistently shown that if people have a job, they’re more likely to take a holiday
• Consumer spending habits – while there have been changes in consumer spending power, in the US much of the pull-back has been around goods rather than services
• Strong tailwinds – with all the potential uplifts heading into 2023 – such as the return of international demand – there’s plenty that could counteract any downturns

This is being shown in AirDNA’s current activity data too.

In terms of nights stayed in the US, February was up 18% year on year, showing that people are still taking trips. Then, looking ahead, bookings for US destinations made in February for future dates were up 15% year on year.

In fact, AirDNA’s wider forecasts expect demand to be up 10.6% in 2023. They also expect Average Daily Rate (ADR) to be up 1.7%, but predict Revenue Per Available Room (RevPAR) to be slightly down by 0.7% as businesses need to absorb some additional costs themselves.

Those numbers are working under the assumption that a recession does happen. If that assumption is wrong, the outlook could be even better.