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The impact of a global crisis resulted in a shift in short term rental booking behavior over recent years. Brought on by a change in people's work/life balance and trends such as remote working and digital nomadism, many flocked to rural destinations including lakeside or mountain properties. However, now the tide is starting to turn. Many are returning to the office for some much needed face time, and there’s been a decline in remote working job listings, suggesting companies are pushing for a return to ‘normal’.
This could be one of the reasons why some believe short term rental city breaks are making a triumphant comeback. As of the final quarter of 2022, Airbnb witnessed a 22% rise in its once-core urban nights. Within the 900,000 listings added to the online booking tool last year, some were re-listings of urban properties that dropped out during the pandemic — indicating that the demand for urban short term rentals may be returning. Is this true? And if so, what does this mean for the future of the short term rental industry?
Is Short Term Rental Occupancy Shifting in Rural and Urban Markets?
So far, occupancy shows little sign of rising demand for city breaks. Short term rental market data as of March 3rd, shows that the annual paid occupancy (percentage of nights occupied by a guest out of the total nights available) for rural markets in 2022 was 16%. This figure falls slightly down to 14% for this year, with the largest occupancy decline in March. The results are somewhat similar for urban markets in the same period, with the annual paid occupancy rate for city destinations falling from 17% in 2022 to 14% this year, with the biggest drops witnessed in the first quarter of the year.
Are Guests Staying Longer in The Cities?
Destination data for 2023 shows a significant rise in guests' average length of stay in urban markets, up 8.7% over 2022 levels. This increase is particularly present from January to April where increases of 10-12% are being recorded. Interestingly, the opposite of this trend is happening in rural areas where the average length of stay has dropped by 5.6% year-over-year and January through April bookings show declines of 4-7%.
It could be that as more people return to ‘normal’ office working, they’re now less likely to take lengthy vacations in rural locations. Before, when working remotely, or when living a digital nomadic lifestyle, people had greater flexibility when it came to where and how long they could stay in rented accommodation. Since there’s little discrepancy in occupancy, it seems guests are simply choosing to stay for shorter periods of time, suggesting rural demand remains strong but that booking behaviors have shifted to adapt around changing lifestyles.
The increase in urban market length of stay could be a reflection of a number of factors including the rebound of business travel, people relocating to be closer to the workplace, and the fact that most cities are fully open to travelers again as restrictions lessen across the globe. It will be interesting to see how the year plays out now that we’re entering a new phase of travel— the ‘new normal’— and what that will mean for investors, property managers, and hosts of urban short term rentals.
What’s Happening With Short Term Rental ADRs?
The year got off to a slow start when it came to short term rental average daily rates (ADRs). Both rural and urban destinations show little increases in nightly prices for the first half of 2023 versus the same time last year, with some months even dropping slightly below 2022’s ADR. For bookings made before March 3rd, when we pulled this data, rural markets have gained a mere 2.7% annually, while urban areas show no change in rates. When factoring in the months of increased inflation the U.S. experienced in the latter half of 2022, these results actually indicate a drop in ADRs for both rural and urban destinations.
The second half of 2023 is looking stronger for both markets. ADRs are on the rise, especially in urban destinations. This trend could be suggesting that travelers have greater confidence when booking well in advance for higher-priced vacations, possibly because they have more time to save for their trip. But it may also indicate the gap between luxury and economy stays, as expensive vacations tend to be booked with longer notice. It’s also important to note that property managers may be keeping rates high with the hope that demand increases as we enter the peak season.
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Rural or City Breaks?
As it stands, the short term rental market data indicates there’s no clear ‘winner’ between rural and city breaks. While urban markets are showing signs of recovery after years of Covid disruption, with average length of stays rising, rural destinations continue to remain popular to the point where many property managers and hosts have even been able to raise ADRs. So, although booking behaviors may be shifting, we don’t foresee any drastic changes in the months ahead but rather a leveling out of the industry as people are now free to stay wherever they choose.
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