Jan 9, 2025 • 16 min read
A lust for luxury
22.12.2024 - 12:37 / insider.com
When Mike Kelly set up his first few Airbnbs in Fort Wayne, Indiana, in 2023, he figured it would be a successful move. It was meant to be an investment project for him and his daughter to work on together. But as more people moved away from bustling and expensive urban centers and landed in the Midwest, their hopes were quickly shattered.
The Fort Wayne housing market boomed. High demand for homes, coupled with the city's low housing stock, has kept costs relatively high — a Redfin analysis of housing data found home prices were up 9.2% in October compared with last year. The hot housing market has translated into higher property taxes, which is throwing off the short-term-rental business model. "The houses we purchased to turn into Airbnbs have been assessed so much higher than what we put into them that we almost can't afford to keep them," Kelly said. "The return on equity wouldn't be as high."
Owners of short-term rentals across the country have faced a similar reality, sharing stories of declining revenues over the past few years as the market was flooded with new rentals . AirDNA , an analytics firm that tracks the short-term-rental market, found that revenue per rental decreased by nearly 2% in 2022 and by more than 8% in 2023 due to an overabundance of units available for rent. AirDNA forecast that revenues would move back into the green in 2024 as the market corrected. But as short-term-rental owners felt signs of an " Airbnbust ," some realized they needed to pivot.
On one end of the market, however, it's a different picture. While overall demand for short-term rentals rose just 1.8% in 2023, according to AirDNA's data, demand for stays priced at $1,000 or more increased by nearly 8%. For stays over $1,500, demand jumped 12.5%. In fact, demand for rentals costing over $1,000 a night has increased by 73% since 2019. While cheaper rentals are slowing down, luxury, niche, and themed stays are filling their place. Wealthy vacationers are increasingly going after luxe properties such as a secluded Malibu beach mansion or a modern cabin beset by pristine woods — like something off Cabin Porn. Meanwhile, Airbnb alternatives are jumping into the market to cater to the growing demand. A lust for luxury is propelling the short-term-rental market to new heights.
Over the past few years, more travelers have pushed back against the Airbnb model, complaining of outrageous cleaning fees, extensive cleanup requirements, and outright scams. As a result, some travelers have opted to stay in good old-fashioned hotels thanks to their consistent service.
These complaints, however, tend to focus on rentals on the low end of the market — the $200-a-night stay you might book to visit a family member or get out
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