AirDNA’s Chief Economist reveals 2023 vacation rental trends

AirDNA’s Chief Economist reveals 2023 vacation rental trends

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Jamie Lane, Chief Economist at AirDNA, walks us through the data behind the vacation rental industry, looking at opportunities and forecasting what the future may hold.

What does the landscape look like for vacation rentals? Jamie Lane, Chief Economist at AirDNA, shared some of his insights from tracking more than $148 billion of revenue across 12 million vacation 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 vacation rental demand by 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 vacation than off sick – leaving Jamie optimistic that the worst parts of the pandemic are increasingly behind us.

AirDNA’s Chief Economist reveals 2023 vacation rental trends

 

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 travelers, such as beaches, mountains, lakes, and small-town communities. 

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

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

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3. International stays are still down

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

In Q3 2022, international travelers staying in US vacation 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, fueling even more growth for the industry.

4. Urban destinations are hardest hit by these changes

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

Big international destinations like 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.

This is broadly a result of three factors: 

  • General decrease in demand caused by the pandemic
  • New regulations around vacation rentals (or stricter enforcement of existing regulations) 
  • Lower business traveler 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 have 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 a nearly 60% rise in demand.

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

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6. Occupancy is technically down – but from historic highs

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

In 2020 and leading into 2021, demand in the US plummeted, leading to a 25% reduction in supply of vacation 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 emphasize 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.

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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 vacation rental over a hotel.

Vacation rental bookers are often price-sensitive, especially for those with children or staying for long periods of time. It’s important to note that prices for vacation 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 vacation 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 travelers favoring 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.

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8. There are many reasons to be optimistic for 2023 

While there are wider expectations 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 4.3 million jobs in the past year. Previous cycles have consistently shown that if people have a job, they’re more likely to take a vacation.
  • 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—like the return of international demand—there’s plenty that could counteract any downturns.

This is demonstrated 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. Looking ahead, bookings for US destinations made in February for future dates were up 15% year on year.

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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 may 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.

 

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Want to discover more vacation rental insights from AirDNA? 

Check out the full video session on our YouTube channel. 

Watch now

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Takeaway

Key Takeaways from AirDNA’s vacation rental data

  • Global markets are recovering well – especially with domestic demand
  • While large cities and urban areas were hit the hardest, smaller cities and suburbs are seeing increases in both supply and demand
  • Accounting for changing supply and consumer demands, ADR is increasing roughly in line with hotels
  • Even if a recession comes, the impact on travel in the vacation rental space should be minimal