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Sunday, March 3, 2024

The Future of the Short-Term Rental Market and Its Potential for Growth

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We cannot deny that the short-term rental market is getting bigger and better. Affordable prices and unique locations remain the primary motivators for guests to embrace short-term rental homes. 

According to rental industry statistics, 700 million people stayed in vacation properties in 2022. Of this, 60 million Americans used vacation rentals in the same year. Overall, the US short-term rental industry is expected to be worth $20 billion by 2022.

The short-term rental sector comprises mainly private accommodation bookings. They include private vacation homes as well as houses like Airbnb. Recently, there has been a unification between the companies expanding into the short-term market and traditional hospitality, including those operating more like hotels.

Indeed, the future of the STR market appears brighter. Our article looks at the short-term rental market’s future and growth potential. 

Short-Term Rental Accommodation Insights

According to Grand View Research 2021, the worldwide short-term rental market value was $99.38 billion. Between 2022 and 2030, the CAGR (compound annual growth rate) is expected to be 11.1%. 

Regarding accommodation types, the global STR rental industry has been further classified into homes, resorts/condominiums, and more. Regarding the 2021 revenue, the home accommodation segment triumphed in the global industry, accounting for the maximum share of over 42% of the total revenue. 

This growth is driven by the following:

  • Increased demand for staycations
  • Growing expenditure on travel and tourism
  • Travelers’ rising interest in budget-friendly accommodations

Nonetheless, the home accommodation sector is expected to maintain its lead with consistent CAGR growth. New trends around family travel have also increased the demand for vacation home rentals worldwide. This is a good indication of what the future holds for short-term rentals.

More so, wise rental property investors are carrying out their due diligence. Before investing in rental property, they are doing everything possible to gather adequate information and acquire the best and most reliable short-term rental strategy. With the STR strategy, they can make informed decisions. That way, the investor knows the most profitable way to invest in vacation rental property and grow in the industry.

Indeed, the best STR strategy is the key to ensuring your rental property investment grows and makes a good profit. This is true whether you rent out vacation homes during the peak or off-peak seasons. Thus, a reliable short-term rental strategy will allow you to benefit from passive real estate income. 

Besides, the growing popularity of mini-vacations makes rental resorts the best option due to the numerous benefits and comfortable services. Such include:

  • Upfront costs
  • Seamless services by employees
  • Safe tourist spots, spas, and wellness facilities
  • Exciting adventures and planned activities
  • Favorable social interactions.

Thus, millennials are beginning to travel with larger groups of friends and their young families. That’s why the resort and condominium accommodation sector is forecast to record the fastest growth rate in the coming days. 

Projected Growth of the Short-Term Rental Market

The COVID-19 epidemic in 2020 negatively impacted all industries, not exempting the real estate sector. With restrictions like travel bans and lockdowns, there was declining demand for the vacation rental property. 

True to the facts, we cannot deny that one of the most challenging times in the short-term rental market was during the pandemic. There were periods of unpredictability in the industry. 

This hurt short-term rental bookings, mainly through popular websites like Airbnb and Booking.com. However, following the pandemic, the sites are now filling up with more people booking for leisure and business travel.

The trend is projected to continue, encouraging more people to invest and buy their first rental property. For instance, Airbnb continues to catch the world by storm. After the easing of lockdowns and the surge of tourists, the demand for local accommodation has increased.

There’s an inflow of upcoming investors in the Airbnb field. This is a clear indication that the industry is nowhere to be stopped. Thousands of investors in the residential sector are turning their traditional and long-term rental suites into short-term vacation homes. They’re doing this in pursuit of better earnings and higher profits. 

So, if the COVID-19 pandemic could not hinder the growth of the short-term rental industry, what else could? 

Investors Appreciate that They Can Mitigate Higher Prices with STR Hosting

Presently, external forces are pushing inflation higher not only in the US but all over the world. Thus, income earned through short-term rental hosting has become essential for investors navigating the higher prices. 

Based on the 2022 Airbnb yearly survey of hosts and guests in the rental property investment, about 45% of hosts revealed that the rental income allowed them to continue catering for their homes’ expenses. Over 20% of the hosts reported that their rental income kept them afloat and kept their property from being foreclosed or evicted. 

Further, rental property investors, in response to why they continue to host their spaces on Airbnb, stated the following: 

  • About 35% of hosts worldwide said they host on Airbnb purposely to earn more and manage to cover the increasing cost of living.
  • Approximately 40% said they host to earn money for ends meet. 
  • More than 40% said they host to make money for their needs or spending. 

In 2021, the average host expects to earn around $13,800. This was an increase of 85% from 2019. This trend encourages many investors to buy vacation rental properties. 

The same explains why, when looking for a home to buy, investors look for properties with rental potential. They’re doing this to cover some of their living expenses and grow their STR investment capabilities.

Many anticipate achieving the following:

  • Purchase a duplex apartment
  • Own a home with an outbuilding
  • Have an attic space or finished basement and many other options

Most of these hosts prefer the short-term rental model since it gives them more flexibility. In recent years, hosts have managed to use the short-term rental income to pay back their mortgage plus other living expenses comfortably. The most favorable factor is that most short-term rentals available on booking platforms like Airbnb belong to individual owners.

Thus, they maximize their profits and cater to their personal needs. This has prompted more individual real estate investors to explore the STR market. And, as the years pass, more investors come up. Such factors contribute to the growth of the overall STR sector.

Key Takeaways

It’s evident that both small and large-scale investors buy rental properties to list them on short-term rental marketplaces. From the looks of things, guests and travelers continue to support vacation rentals happily. 

More frequent vacation stays by visitors point to the continual growth of the STR industry. Affordable rates and comfortable stays are more reasons why people embrace private guest homes.

The short-term rental hosts also enjoy using the profits from the vacation homes to mitigate their living costs comfortably. Thus, as interest soars among short-term renters and owners, a rising shift in the rental property sector will enable people to get the most out of this growing industrial segment.

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