The Future of STRs: Where the Smart Investors Are Buying in 2025

Hello, I'm Jamie Lane, chief economist at airdna and I'm here today to talk about global short term rental demand trends. What we're really seeing across the market and really how the industry has been evolving over the past year. So it's actually been a year since I've spoken at the book Direct Summit I was on last February and really excited to talk through how the industry has been evolving when let's see if the slide can move. There we go. So I'm going to be primarily focused on US trends but wanted to give a sense of sort of the global view and at least initially focusing in on U.S. canada, UK and Australia, all all English speaking countries primarily and hopefully covering a lot of the viewership that were are on today. So in the US we have seen a year of stabilization. So occupancy slightly up this year. ADRs in 2024 up three and a half percent. That's after in 2023 that they were down, occupancy was down and total revpar was down pretty significantly. Overall listing growth has stabilized too. Had been growing very strong this year only up about 6.5%. Canada Many markets has actually seen available listings decline overall for the year 2024 they were up 3% occupancy up with the limited supply and ADRs healthy at 3%. We did see much stronger overall ADRs ADR growth in the UK of 5 1/2%. That was part of a broad trend of stronger, stronger pricing power across Europe. Occupancy up a percent and still relatively strong supply growth in the UK up almost 10% for the year and then heading down under Australia. Supply up 7 and a half percent, not nearly as strong as it was. More than double the growth rate last year in 2023 into 2024 up nearly 15%. We're still dealing with some of the impact of that stronger supply growth. Occupancy is down this year but we still see occupancy in Australia up compared to pre pandemic levels, though not as quite as high as they were in 2022 and healthy demand or ADR growth of 1.8% though not growing as fast as inflation has been. We just had all the major OTA so online travel agencies report their earnings for Q4 over the past couple weeks and I don't think there's any ifs, ands or buts about it. There's really strong bookings across all channels. So I know this is the book Direct Summit but and we're all generally on the OTAs. And we want to monitor what's happening with them, which ones are gaining in prominence, which ones are decreasing and where we need to think about also listing our properties. So booking came in booking.com with the strongest growth in the fourth quarter. Overall nights booked up 19% year over year for their alternative accommodation supply listings up 8%. So always love to see when nights booked are growing greater than listings. Does that mean you as hosts are getting more bookings per listing? So very nice to see. At Airbnb we saw roughly in line growth, nights and listings growing around 12 to 13%. Very strong growth. And across booking, AirBB and VRBO we did see an acceleration from Q3 to Q4 in terms of overall growth rates. And then for VRBO we did see the lowest growth rates for VRBO, booking value up 7% year over year and listings up 3% year over year. So VRBO has been going through a massive platform migration. Some of the benefits eventually will be that you'll see your VRBO listings showing up on Expedia. I think we're seeing more and more of that now. But they had to go through a big migration to be able to make that happen. They're through it. Last year we had seen actually pretty significant decline in nights booked through vrbo and now we're sort of coming back to growth. One of data points I love to look at, in addition to supply demand, revenues are actually throughputs through the OTAs. So this is actually looking at global reviews left on listings on Airbnb in 2024 compared to 2023. And what I've done is I've broken up the. And it's essentially like high growth, low growth, large, small countries. So in the top right we've got a lot of demand in high growth. So these are fast growing, these are the areas you really want to be in if you're maybe looking for accelerated growth in a more established country for short term rentals. So you get areas like India, Chile, Japan, Philippines and Brazil are some of the fastest growing areas around the world. Then we get into the bottom right. So relatively low demand still, but high growth. These are emerging high growth areas. So areas like in Saudi Arabia, in the Middle east, we've got very strong growth for Airbnb. And then over on the left hand side we have here in the top right, our top left, high demand, low growth. So these are more established markets, maybe not growing as much, but maybe safe in terms of overall demand. So here you've got areas like Canada, U.S. portugal, New Zealand, UK and Australia, all between 2 and 6% growth in terms of number of reviews left on Airbnb last year. So nothing really to call home about. But and there are lowest growing ones. So of the large countries, none of them saw an actual year over year decline though just overall slowing growth and then low demand, low growth. So these are some of the smaller areas and here we actually saw some year over year declines. Pretty significant ones may take home here is that war is not good for business. So the biggest countries where we see declines are are areas that really impacted by the Gaza war, Israel, Lebanon, Jordan, Turkey and then Ukraine impacted by the war with Russia and then Cuba. So relatively poor performance in those areas around the world. Secondarily, I'm going to take that exact same framework and then and show the US So I'm not going to walk through all of this. I'll sort of leave this to you all to really study. But one thing to call out for high demand areas. Highest growth was in Jersey City, Newark, lowest growth was in Asheville or in New York. So the impact of regulations really impacting that market. And then really across the board on the high demand, low growth markets, top left you've got areas like Asheville and Maui that were impacted in Boone by either fires, wildfires or hurricanes. You've got Cape Coral, Fort Myers, which is on the other side of being impacted by hurricane that came through in 2023. So now it's back on in terms of recovering from that in 2024 and then and some of the areas I really like to look at of emerging markets. So low demand, high growth. So areas like Broken Bow, Lake Logan, Ohio was like the Hocking hills area decree, Maryland seeing greater than 25% growth in reviews. So these are, these are areas where a lot of new guests are finding they're leveraging Airbnb to book those properties and could be areas where as long as bookings are outpacing supply, could be interesting areas to be looking at for future investment. When we look at total bookings now, as sort of the OTAs reported, Q4 was good. First data points we have so far for 2025, we're showing record number of bookings in the US in January, more than 20 million nights booked for stays both in January and February and out into the future. So I, I, I see this as a really strong bellwether for the rest of 2025 that people have started booking. January is usually the top month for bookings or one of the top months, months we see it usually Concentrate in the first quarter. So so far so good in terms of booking behavior and the sort of uncertainties that are out there around the economy and consumer confidence haven't yet started to impact guest bookings. When we look at overall demand trends though, something to really highlight is really a strong performance of larger units. And this is and what I like to call the better property types for short term rentals. Like where short term rentals win over hotels is where we see consumers picking short term rentals for their lodging, where they're really able to differentiate themselves and where the types of trips that people are taking today really really feed themselves towards booking a property. So people traveling with large groups, families and are really seeing strong booking behavior. This looks at past 12 months sort of booking trends, four five plus bedrooms seeing the strongest demand growth. And we look at overall sort of average bedrooms for a night sold. We've seen that continue to increase from roughly 1.6 bedrooms per booking up over 2.4. So people more and more using short term rentals for staying with larger groups and booking larger properties. The other sort of ongoing trend we see here is more and more hosts cross listing their properties on multiple channels. That really accelerated through 2022 into 2023 as competition really heated up and people hosts were looking at ways to increase their performance, increase the number of guests that are seeing their properties and potentially booking. I see this in leveraging really closely into the book direct movement too of having your own own booking channel, trying being able to steer guests towards your own channel, drive organic demand and and rebooking demand through to your property. We do see that 30% cross listed number. Still half the listings in the US are solely on Airbnb. Even 20% of listings are solely on VRBO. So there's still some way to go for people to really get rid of their reliance on single channel to drive their bookings. And all the research we've done really shows that and this is what the professional is doing and that there's a lot of incremental revenue opportunity by listing on, on multiple channels. Some of the other sort of highlights and I like and this is a view of Washington D.C. during the lead up and, and during the inauguration. And what I think it shows is just how Travel through the OTAs through Airbnb has really changed where the Green Line looks at the first Trump inauguration back in 2017, there's almost no travel being booked during the holidays through Airbnb, through VRBO for stays in the D.C. area. When you fast forward to in 2025 we saw massive uptick in holiday travel. Really a leisure oriented traveler booking through the, through the platform and then when we get to the inauguration, almost the exact same number of nights booked. So when we think about urban travel, the platforms have really changed and the types of travelers that they're attracting and how you can really be thinking about the type of guest that might be looking for your property when booking through through airbnb, vrbo or booking.com One of the trends we still see though is that and it sort of plays into the lower supply growth is it's still a relatively weak investment environment. The orange line shows the average premium that you're going to earn for investing in a short term rental compared to the average monthly expense based on mortgage premiums as of today. So take the average home value, take the average mortgage rate, 30 year fixed rate mortgage and what would that cost you to sort of buy a typical home today and then compare that to what the average short term rental is sort of earning on a monthly basis. We saw peak earning potential back at the end of 2020 into 2021 and now that has eroded with both home values and interest rates sort of increasing throughout 2022 into 2023. We are seeing and sort of investability and the attractiveness of short term rental investment tick up a little bit, but it's still very depressed compared to what we saw in 2021. And I think really plays into both what we're seeing and what we're expecting to see for short term supply growth over the next year or two. On their DNA platform, we sort of track this as well at a listing level. So when you're in the US you can go and actually see all the homes for sale, which ones are zoned for short term rentals, what the properties are listed at and what the expected revenue is. And we sort of calculate that yield so you can find sort of the best properties to invest in. That number of properties that sort of meet sort of threshold of being, being decent investments is at a very low level right now. So it can be harder and harder to find decent yielding properties. And that's I'm playing into what we see for supply growth. So back in 2022 we were seeing supply north of 20%. Now that's sort of settled in at just under 5%, 4.6% for now, 4 under 5% for four, five consecutive months. And we do see quite a number of cities markets seeing actually falling supply. So there's until the end of the year over 60 markets with out of the 317 that we sort of break up the country into, that had seen a year over year decline in listings. So for existing operators, that could mean less competition for you going forward. But that may also point out some of the weakness that are out there for certain markets of hosts not earning what they would expect and exiting the market because of it. Looking at Airbnb and this is another way to look at the reviews and really just highlight some of the weakness that we've seen and continue in the urban areas. So Airbnb was very much dominated by urban core listings. That's where most of the demand was coming through. Now we see that still 2030% off of 2019 levels. And from 2023 to 2024 we actually saw a year over year decline in bookings in those urban areas. We saw a decline in supply as well. And where Airbnb was really dominated by urban, it's now very spread out among the six different location types with some of the fastest growth has and continue to be in the small and mid sized cities. This is where we see still see a lot more opportunity for new investment. We still see massive increases in guest demand for traveling to these types of locations. And, and when you look at the type of properties that are doing the best are the ones that have really made themselves the destination and where we see and guests really choosing to go on that trip because the property that they're able to book and it's sort of flipping on its head. The paragraph that you would pick your destination and then find a property, find a lodging stay that sort of met that. And that's something to think about as you're sort of operating your, your listing and making investments in new listings. Weakest performance right now is on the budget side. So when we think about top ADR properties by bedroom count being luxury, bottom on budget, we compare overall occupancies back to 2019 levels. The budget ones are really underperforming 95% of 2019 occupancy levels. While luxury properties are still outperforming. Yes, down from their 2021 and 2022 highs, but still well above what they were operating at in 2019. So yeah, if you're out there and I'm sort of looking at the types of guests that you want to be able to be attractive to, we're still seeing really strong sort of consumer spending from the higher income type travelers staying in the luxury and upscale properties. And we're seeing the most weakness on the lower tier earners and the types of properties that they would be booking. When we look at overall demand growth and now I've broken out data for both hotels and short term rentals. We see actually pretty similar growth, 2 to 3% for both short term rentals and hotels in 2022 and 2023. Hotels have really missed out on the small to midsize city trend. Short term rentals are adding inventory to really capture that demand and they are doing it. Hotels have actually seen supply pullback a little bit in these areas. They're not adding new properties into it and they're really ceding that opportunity to the short term rental industry, which makes me even more bullish on that segment. In 2024 for Coastal Mountain, Lake sort of destination type markets for for both hotels and short term rentals, we've gone back to growth. After 2023 was a very weak year, we saw demand down for both hotels and short term rentals. So maybe we're pushing through that and seeing some stronger sort of spending power go towards those types of trips. We did see large impact from the hurricanes in the Southeast actually driving demand up for hotels and in the impacted areas, driving demand down and actually supply down as a lot of short term rentals were impacted by the hurricane in both North Carolina and down in Florida. Something we're watching going forward is the impact of strong dollar on booking trends. We're already seeing Americans more and more traveling overseas. We're up 40% from pre pandemic in terms of American spending overseas. Well, when we look at inbound spending to the US it's essentially flat versus 2019. And we expect that to that gap to expand further given how the dollar continues to increase. So our outlook for the next few years is continued weak, relatively weak supply growth and sort of 4 to 5%. It's going to be very much an opportunistic environment for people to find sort of diamonds in the rough that are going to make sense as a short term rental for existing homeowners, converting other properties into rental properties that are going to do the best given. And if you've got a sort of low cost basis, low mortgage for that home, we do see demand outpacing supply growth for the next two years, which means that we're going to see occupancy gains in 2025 and 2026. We saw that already in January and February. We expect that to continue. And then while not as strong in terms of pricing power as 2024, we do expect ADR and RevPAR growth to continue to be in that sort of 2 to 3% range going forward, with most of that growth being from sort of appreciation rates, host being able to charge more. We are in a. I expect we'll be in a occupancy growth environment when occupancies are increasing. That allows hosts to charge more for their listings and hopefully cover the additional costs that we're all seeing from operating in the short term rental space. And then some new research I want to show just on Gus favorites in the badges, essentially how many properties are actually getting these guest favorites and badges. We see more than 4.9 million eligible listings out there with five or more reviews out there for Airbnb, about 2.1 million of those or 44% of the eligible ones are getting that guest favorite badge. So maybe not as special as it seems. And then about 12, 13% of those getting sort of top one, top five or top 10% badges that really does vary by country. So they're estimating it at the global level. So there's some countries like the US and UK with more than 15% getting one of those top badges and other countries like Taiwan, Hong Kong getting less than 5% of their listings, getting an eligible badge and then sort of calling out that progression to be able to get to the top 1%. It really is a notion of consistency. So after five reviews you can get into the top 10%. And we see a pretty high percent of five star reviewed properties getting into the top 10% within sort of five to 20, really five to 15 reviews getting in the top 5%. And you've got to keep that five star rating at least to 10 reviews and but really and the majority aren't getting it until about 30 and then the top 1% is really held out for the creme de the crim. Like you've got to have about 30 five star reviews before you're going to get into the top 1%. And it's not even really until you get 60, 70 reviews that you have a really high likelihood if you're maintaining that five star review score of getting into the top 1%. So with that, thank you all for listening in. I'm Jamie Lane, Air DNA and please reach out if you have any questions or need any help with your listing. Thank you.