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Are vacation rentals a good business to be in? 2021 edition

AirDNA is one of my favorite data tools in the real estate industry. If you plan to get into the vacation rental business and you don’t have access to the vast amount of data available in a platform like AirDNA, you’re not serious about running a vacation rental business. See our recent interview with Scott Shatford, CEO of AirDNA.

AirDNA just released it’s 2021 report (free download). The report looks at data from 10 million properties. Here are a few of the finding I found interesting:

  1. Rural wins. As international and domestic travel ground to a halt, families stayed closer to home. 61% of US families reported being more likely to visit an outdoorsy destination. 59% were more likely to drive than fly.
  2. ExperienceBnB. Be it a tree house or a mud hut, this trend continues to show up with people not only looking to escape but to experience something completely different.
  3. Size matters. When it comes to SFRs, more bedrooms matter. 5+ bedroom performed better before Covid at remained the top performer this year. No surprise that condos dipped. I can only imagine many of those are located in major metro areas that are in various stages of lockdown.
  4. Longer stays. Work from anywhere and you’ve got longer stays possible. While long-term stays spiked in March to record levels, longer stays have remained elevated and make up twice as many trips headed into 2021.
  5. Clean. It better be clean or you’ll get bad ratings which will impact bookings.
  6. Seasonality. Highly seasonal destinations may be experiencing a shift to more year-round activity.
  7. Hotel stays decrease. Short-term rentals only make up 10% of total lodging revenue but that’s been on the rise. STRs experienced less impact on revenue compared to hotels. AirDNA thinks in 2021, the travel sector will fully embrace STRs.
  8. Rates grew. Average daily rates grew. Three- to four-bedroom experienced the biggest increase.
  9. Going pro. Yeah, if you’re a hobbyist in short-term rentals, that’s probably coming to an end.
  10. Supply. Numerous operators closed their doors in 2020. You can’t blame them with demand so high and prices up. Fewer host, higher demand on fewer properties mean good rates.

To watch:

  • If Covid trends will be sticky
  • If hobbyists sell and the space continues to professionalize
  • Affordable housing conversation and cities response to vacation rental when more housing is needed