Short-Term Rentals Gain Big Share on Hotels in Europe’s Shifting Lodging Sector

Europe has upheld the position of a global leader in tourism in the past, with its international arrivals accounting for 40 percent of global international arrivals in 2019. As a result of the pandemic, international tourism arrivals in Europe dropped by 70 percent in 2020 in comparison to 2019. In 2021, Europe recorded the strongest results by region relative to 2020 with arrivals up 19 percent, though they remained 62 percent below 2019 levels.

The hospitality sector is amongst the largest and most relevant contributors of revenue and employment for both the European tourism sector and the overall European economy. 

As we mentioned in our recently published “U.S. Accommodation Sector Market Estimates 2022” report, the pandemic has affected hotels and short-term rentals, the two major sub-sectors of the accommodation industry, differently. While hotels were significantly hit, short-term rentals generally performed better. As with what’s happening elsewhere in the world, the next few years will be very crucial in shaping the state of the accommodation sector in the region with respect to the pace of recovery of different sub-sectors and general market dynamics. 

We published our latest Skift Research report on May 4. Below, we share a snippet of the report.

Revenue and Forecasts

Skift Research estimates that the accommodation sector in Europe generated revenues of €238 billion ($251 billion) in 2019, a 4.4 percent compound annual growth rate (CAGR) since 2008, the earliest year in our analysis. As a result of the pandemic, we estimate that the European accommodation sector suffered 45 percent year-over-year revenue decline in 2020 to €130 billion ($137 billion). The sector grew 14.5 percent to €149 billion ($157 billion) in sales in 2021 and we expect it to grow another 15.6% to reach €172 billion ($181 billion) in 2022, still 28 percent less than 2019 revenues. 

Europe Accommodation Sector Market Size Estimates, 2008–2022E

Source: Skift Research, Eurostat, IMF; historicals from Eurostat 2008-2020, Skift estimates 2021-2022 and estimates for short-term rentals sharing economy 2011-2022, Forecast as of April 2022

As we highlighted in our European Union Accommodation Sector 2019 report, the accommodation industry shrunk significantly in 2009 during the global financial crisis

and struggled once more in 2013 due to the Europe-specific recession caused by the

sovereign debt crisis. The sector bounced back in 2014 (8.2 percent growth rate), and was growing in a balanced manner until Covid-19 hit in 2020. 

The pandemic distorted the longer-term growth rate massively. We expect the CAGR to decrease to 1% between 2008 and 2022, from a CAGR of 4.4 percent between 2008 and 2019. 

The fastest growing segment of accommodations in Europe has been short-term rentals. The sector grew ~two times faster than hotels till 2019. Unlike in the U.S., the pandemic did not boost the growth rate for short-term rentals. However, data shows that, while revenue for hotels decreased by 50 percent, revenue for short-term rentals decreased by 33 percent in 2020. 

Europe Accommodation Sector Market Growth Rates, 2009–2022E

Source: Skift Research, Eurostat, IMF; historicals from Eurostat 2008-2020, Skift estimates 2021-2022 and estimates for short-term rentals sharing economy 2011-2022, Forecast as of April 2022

Skift Research’s Travel Health Index confirmed this discrepancy in the pace of recovery of hotels and short-term rentals as presented in the chart below. 

Short-term rentals represented 10 percent of the overall industry in 2008, 12 percent in 2017, and, due to its above-market growth rate, we expect it to reach the 17 percent mark in 2021. 

Most short-term rental accommodations in Europe are incorporated businesses that operate apartments, bungalows, chalets, cottages, cabins, and youth hostels. Also included in our market estimate is the sharing economy — rooms or apartments let out by individuals who oftentimes share the space with their guests. Because these are not formally registered enterprises, they are often overlooked by government business statistics. 

We estimate that the sharing economy in accommodations grossed €2.8 billion ($3 billion) in sales in 2019. That means it made up 10 percent of the market for short-term rental accommodations and 1% of the overall accommodation market in Europe. However, as a result of the pandemic and guests refraining from sharing spaces with rental hosts, we expect the share of the sharing economy to fall to 7 percent of the total short-term rental accommodation market in 2022 with revenues falling to  €1.9 billion ($2 billion). (See our methodological footnotes at the end of this report for more details)

Also worth noting is camping grounds, recreational vehicle parks, and trailer parks which control a small, but meaningful, niche in the market. These accommodation options held typically between 5 and 6 percent of the overall market until 2019. However, the spread of Covid-19 made air travel and other public transportation unpopular options, while personal vehicles felt more of a safe haven. As a result, travelers actively started opting for recreational vehicle-related activities, culminating in a market share increase of camping grounds, recreational vehicle parks and trailer parks. The share increased to 8% of the overall market in 2020 and is expected to be the same in 2022. 

Europe Accommodation Sub-Sector Market Share, 2008–2022E

Source: Skift Research, Eurostat, IMF; historicals from Eurostat 2008-2020, Skift estimates 2021-2022 and estimates for short-term rentals sharing economy 2011-2022, Forecast as of April 2022

Europe Accommodation Sector Market Estimates 2022

The composition of the European accommodations sector has drastically changed over the last decade with short-term rentals gaining a substantial share. The next few years will be very crucial in shaping the sector in the region with respect to market dynamics.

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