Short-Term Rental Demand and Supply Outpaces Hotels

12.10.2023 - 15:17 / skift.com / Brian Chesky / Srividya Kalyanaraman

The answer to the question “Which is doing better – hotels or short-term rentals?” is “depends on whom you ask and when.”

But in their latest report data firms AirDNA and the CoStar group claim that rentals are growing in demand as well as supply over hotels. 

For this report, the firms aggregated data from 2018 to 2023 to examine changing trends in supply, demand, and ADR for vacation rentals and hotels in the United States. The analysis found that rental shares of supply and demand have accelerated. Small city/rural and suburban locations drove this growth, as they provided consumers with physical space during the pandemic. Among those, larger homes also contributed to growth, with 3-bedroom rental properties accounting for a larger share of growth than 1-bedrooms. In the year ahead, the report predicts that rental share will continue to grow, and hotels are expected to feel the impact.

Demand growth in the accommodation market slowed from the first quarter of 2022 to the second quarter of this year. Specifically, the annual demand growth dropped from 30.0% to 11.7% for rentals and from 26.4% to -0.6% for hotels during this period. 

Despite the overall slowdown in the North American market owing to international travel, rentals continued to outpace hotels in terms of demand growth. The trend of “bleisure” travel, combining work and leisure, likely played a role in the increased demand for rentals.

Rental demand growth has seen a notable rise in all location types, particularly in small city/rural areas. By May 2023, demand growth for short-term rentals reached 24%, while hotels remained at 0%, the report found. 

Mid-sized cities, suburbs, mountains/lake resorts, and coastal resorts also experienced greater demand growth in rentals compared to hotels. However, in urban areas, both hotels and rentals had a more even demand growth rate of 12%. 

This is not surprising as urban areas had a relatively high supply of traditional hotel rooms and stringent short-term rental (STR) regulations, with cities like New York, Los Angeles implementing strict rules. 

At Skift Global Forum held in September, Airbnb CEO Brian Chesky made a remark on this addressed to the hotel lobby. 

“I think that the hotel lobby was absolutely at the table (on deciding on NYC’s short-term rental law). What I’ll just say is: I never felt like for Airbnb to win, hotels had to lose,” Chesky said. “The evidence of that is Airbnb — we had approximately 400 million guest arrivals last year, and yet last year, hotels had profits and revenue significantly higher than before we started. And the reason why is maybe three reasons. Number one, around half of our nights booked for stays longer than a week. Hotels don’t really serve that need of