These Markets Could Drive Vacation Rental Growth

Short-term rentals in cities and suburban areas are struggling with their occupancy rates. At Skift’s Short-Term Rental Summit, AirDNA Chief Economist Jamie Lane said the “mass exodus” of people from certain places is redefining where guests stay.

As more people move to states like Texas and Florida, there has been a shift in U.S. travel trends.

“These locations lead to people vacationing in entirely different markets,” Lane said.

Occupancy is below pre-Covid levels. But AirDNA showed how coastal, lake, mountain, small-town, and rural vacation rental markets are faring well compared to 2019. 

Everything’s Bigger in Texas

AirDNA looked at the population change of feeder markets — or origins — for those staying in short-term rentals. For example, someone who moved to a major Texas city may opt for a long-weekend stay in Corpus Christi or Fredericksburg.

Lane explained how AirDNA looked at each of these destinations and their feeder markets, identifying up-and-coming hot spots for vacation rentals. A handful of smaller Texas destinations ranked the highest, with popular areas for migration feeding into them.

Vacation Rental Markets To Watch, Based on Five-Year Population Growth in Feeder Markets

Source: AirDNA

Ensuring Supply Meets Demand

Short-term rental listings aren’t growing as quickly as they have been in the past due to high interest rates, Lane said.

“This is actually a good sign [for current operators],” he continued. “Because we see demand growth growing, and at some point those lines will converge. And convergence means occupancy growth.”

But this isn’t ideal for those trying to enter the market or add new listings. During the summit, Chris Osaka — CEO of the modular-building company Tomu — suggested efficient ways to join smaller markets.

“There are a lot of markets where demand is really surging, and the supply just isn’t there,” Osaka said. In Osaka’s experience, clients typically are “trying to shorten [their] total development time, from a couple years down to maybe a year, and get open and operating sooner.”