Short-term rental supply has emerged in the past decade with Airbnb coming online in 2009. This segment was always there in the hospitality industry, but Airbnb has made it easier to book, easier to host, and has made it more mainstream in urban areas, so it has brought it to the fore.
Just six or seven years ago short-term rentals made up as little as 2-3% of the total lodging supply in the US. Now it’s at 1.5 million listings and 25% of total lodging accommodation. In the US that is evenly split between entire homes and villas - your traditional vacation rental - and apartment condos, so more multi-family housing stock such as condotels, aparthotels, etc. A lot of that is branded units such as Sonder.
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And, like the emergence of the hotel industry, most short-term rentals are still independently owned and operated. Close to 90% of hosts in the industry are managing their own unit; they're not even using a Sonder, Itrips, or any of the other big vacation rental managers. They bought their second home or a variety of homes and they're running them, managing them, and cleaning them themselves.
However, interestingly, what has been the fastest-growing sector in the past two years is the more unique types of units: tiny homes, yurts, farm stays, treehouses, etc.
Comparing short-term rental performance to hotels
This has been interesting to track for the past two years. The recovery in demand has just been outstanding. Overall industry demand recovered back in April 2021, indexing back to 2019 levels.
But what is interesting is that we see a real divergence in performance. In destination resort areas (think traditional and beach mountain markets) demand is now 30% higher than 2019 levels.
When we look at small-town, urban, less dense areas it's 60% higher than 2019 levels.
Then we go back and look in the cities (and I think this data correlates strongly with what we see in some of the hotel data), demand is still 20-25% lower than 2019 levels.
2022 – another record year
The short-term rental market ended 2021 up about 3% for overall demand. It accelerated throughout the year, where at the beginning of the year it was still down about 20%, in the year short-term rentals were up 15%. And so far, Q1 2022 is pacing 14% higher than 2019. But once we get into the summer months that's where we start to accelerate.
On the books for summer Q2 is 34% higher than 2019. And what's interesting is it's not just the US. We're already seeing a strong booking pace for Europe as well. When we look at Q2 2022 we are already up 15% and we never saw a positive month throughout 2021 for European short-term rentals relative to 2019. They were 20-30% down over the summer. Things improved in the fall of 2021, but summer 2022 looks like it could be the summer where they get back to 2019 models.
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