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The tide is shifting once again in the short term rental industry. After an unexpected 2020, the sector experienced two years of strong demand, leading to increased property supply across the board. Jump forward to 2023, and investors, property managers and hosts are facing an extremely competitive market with the added challenges of rising operational costs and tightening vacation rental regulations. Because of this, we’ll likely see a maturing of the short term rental sector in the year ahead.
The first quarter of the year has foreshadowed this change, recording lower occupancy and higher average daily rates (ADRs) that have driven a -5.6% drop in the average revenue per available rental ((RevPAR) for vacation rentals. Such fluctuations highlight how essential it is for those invested in the short term rental space to stay on top of industry trends to maximize business potential.
For some, expanding property inventory may be on the table for 2023. Despite the slowing of demand and a decline in RevPAR, there remain great opportunities. Investors can take advantage of falling property values (11% of the individual housing markets tracked by the National Association of Realtors witnessed a decline in home prices in Q4 of 2022) and by using reliable market data to support strategic decisions. So, which areas does our market data suggest could be the best places to buy a vacation rental property in 2023?
Top 10 Short Term Rental Destinations With The Largest Year-Over-Year Growth
Based on a number of key performance indicators (KPIs) including occupancy, ADR, active properties, and RevPAR for 2022 vs 2023 (as of March 8th each year), we’ve identified the top U.S. short term rental markets showing the largest year-over-year growth so far.
1. Midtown Manhattan, NY
Home to iconic tourist attractions, including Times Square, the Museum of Modern Art, Madison Square Garden and the Empire State Building, Midtown Manhattan has become a sought after hotspot for vacation rental guests. Year-over-year (YoY) occupancy rates have increased by 200%, demonstrating the sheer demand for alternative properties in the area.
Surprisingly though, available properties have dropped by 10% from 2,230 to 2,002, making the area a prime contender for investment. Supply is clearly not meeting demand, which may explain why the destination is currently reaping an average of $569 per night (with ADR up by 89% YoY). The drop in available properties and increase in ADR has driven RevPAR 466% higher than 2022 levels — if that doesn’t scream potential, we don’t know what does.
2. Ocracoke, NC
Based in North Carolina’s coastal Outer Banks region, Ocracoke Island village features historic landmarks, such as the 1823 lighthouse, and is home to Silver Lake. Like Midtown, NY, this destination’s supply of short term rental properties has fallen by 10% since the same time last year. However, occupancy levels are up by 170%, and RevPAR is 188% higher than in 2022.
3. Livermore, CA
The most populous city in the Tri-Valley area, Livermore, is located in Alameda County on the eastern edge of California’s San Francisco Bay. Short term rentals in this location are currently benefiting from ADRs that are 72% higher than in 2022. This has driven up supply, with a 46% increase in active properties recorded. However, demand remains higher, as occupancy has risen 51% above last year’s levels, suggesting there’s still untapped potential here for new short term rental properties.
4. Turtle Bay, NY
This New York City neighborhood is located on the east side of Midtown Manhattan and shares some of its vacation rental success over the last year. RevPAR sits 157% higher, likely due to a 66% rise in occupancy and 55% increase in ADR. Because of this, short term rental property managers and hosts of Turtle Bay properties can now charge an average of $372 per night. Since supply has only increased by 18% so far, there remains space for investors to bring new properties to this NY market.
5. Sunset Park West, NY
Offering Statue of Liberty views, artisanal restaurants, cafes and Chinatown, Sunset Park West is rising in popularity for short term rental guests. Market data has recorded a 72% rise in occupancy, alongside a 43% increase in ADR — with little movement in terms of available properties — marking out this destination as an ideal place to consider maximizing ROI.
6. Elizabeth, NJ
County seat of Union County, Elizabeth is located in New Jersey. Over the last twelve months, vacation rental demand at this destination has increased by over a third (+69% YoY occupancy rates), increasing RevPAR by 146%. Supply has attempted to keep pace with 61% more active properties available now than in 2022, but revenue is still up for grabs for those willing to invest in the area.
7. Upper West Side, NY
Home to the Lincoln Center and the American Museum of Natural History, the Upper West Side is another area of New York rising up in the ranks of in-demand short term rental hotspots. ADRs are 54% higher YoY, with property managers and hosts charging up to $299 per night. Occupancy is also 55% higher than in 2022, suggesting the location could be promising for those eyeing up new investments.
8. Clinton, NY
Yet another location in New York state, Clinton village has witnessed increased demand for short term rentals (+75% in occupancy YoY). Since March 2022, active vacation rentals in the area have dropped by 11%, likely causing the 35% rise in ADRs and +136% increase in RevPAR. Demand is on the upward trend though, making Clinton one to watch.
9. Dutch Hills, NY
This small mountain range in Central New York is located in the town of Frankfort. Over the past year, Dutch Hills has seen little change in active properties, yet short term rental occupancy has jumped 121%, increasing RevPAR by 135%. So, if you’re on the hunt for an area with minimal competition to set up new properties and expand your business, look no further.
10. Old Astoria, NY
This final New York destination boasts some of the state’s most beautiful antebellum and Victorian mansions. Supply in the area has risen (with active properties up by 26% YoY). However, this barely scratches the surface of the guest demand the destination is observing. Occupancy in Old Astoria is 85% above 2022 levels. What’s more, ADR has increased by almost a quarter (24%).
Vacation Rental Regulations
It’s pretty evident from this list that short term rentals in the state of New York are performing very well, with seven of the top ten hotspots being based within its borders. Most of these areas are crying out (at time of writing) for more supply to keep up with guest demand, likely due to the strict vacation rental regulations New York has implemented. Under New York State Multiple Dwelling Law, the state does not permit the renting of non-hotel/temporary residence buildings for less than 30 consecutive days. An exception to this law is that landlords are allowed to let rooms within multiple dwelling buildings for fewer than 30 days if they remain onsite, guests have access to every part of the rental, and there are no locks on internal doors. So, if you’re looking to invest in New York, it’s worth keeping these regulations in mind.
Want to look into other destinations? Or check out more in-depth KPIs for this top ten list? Sign up for a demo of our data dashboard, where you’ll be able to access market trends, real-time destination insights, and so much more.
