Airbnb and Vrbo hosts can expect more consistency in 2025, a new report from the industry analytics firm AirDNA said.
"There's going to be a bit more stability," Bram Gallagher, the director of economics and forecasting at AirDNA, told Business Insider. "The market is in a more mature phase compared to where it was five, even 10 years ago."
The short-term-rental market's roller coaster kicked off in 2020, when a surge in travel brought hosts record profits. An influx of new properties opened up, leading to a correction. Hosts have been adjusting their expectations ever since, sometimes lowering prices to remain competitive.
2024 has been an improvement for hosts in some ways. Demand for short-term rentals, as measured by the number of nights booked, grew 7% compared with 2023. Occupancy rates, the number of nights a month a rental is booked, declined from February 2022 to April 2024 but have been relatively constant since.
There are early signs that a stabler climate would translate to better returns for hosts in 2025. AirDNA measures a rental's expected revenue using a measure called RevPAR — or revenue per available rental, which combines a unit's average daily rate with its region's occupancy rate. For two years, the average RevPAR declined, meaning hosts could expect to bring in less revenue than the year prior. RevPAR forecasts for 2025 have turned positive.
"We're going to be seeing some gradual improvement from here on out," Gallagher said.
Here are three predictions AirDNA has for hosts in the new year:
1. Occupancy levels will stay about the same
Occupancy rates went through a historic whiplash over the past four years. First, a lower number of overall listings following COVID-19 lockdowns met a nationwide surge in stir-crazy travelers looking for more space, which produced some of the highest occupancy rates in industry history — hitting a peak of 61.9% in February 2022.
Then, a flood of new properties spurred by an investor boom intensified the competition for bookings, pushing occupancy rates down to 54% in April 2024.
Rates settled around the mid-50s this year, and AirDNA expects occupancy rates to stay around that mark in 2025.
"It's such a slight increase, but we're going to be holding on to the gains that we've got this year," Gallagher told Business Insider
2. The number of new Airbnbs and Vrbos has slowed, so there's less competition
The postpandemic explosion of new Airbnb and Vrbo listings is likely over.
"Supply is going to continue slowing, so you're going to have fewer new competitors next year to worry about," Gallagher said.
First, a tight housing market eroded investor appetite for new properties. Increasing regulations on Airbnbs and Vrbos in cities across the US and abroad over the past few years have also dampened new listings.
That's good news for hosts who already manage units.
"It's good for operators that are already in the market because they've got barriers to entry that are already in place for anyone who wants to compete with them," Gallagher said.
3. Large homes with relatively cheap nightly rates are likely to keep growing in popularity
One surprising trend from 2024 that Gallagher said was likely to continue into the new year is the exceptional performance of a certain segment of listings: multiple-bedroom homes that large groups can book cheaply.
AirDNA found that the largest growth in both demand and available listings this year was for listings with six or more bedrooms in the "budget" category, or the cheapest 20% of listings ranked by price per night.
Gallagher said the uptick in interest might be a response to the comparisons some travelers make between hotels and short-term rentals.
"People are looking at the value proposition of renting six rooms at a budget hotel, compared to getting a six-bedroom short-term rental," Gallagher said. "It's been a change to the composition of short-term-rental supply."
In recent years, some loyal Airbnb guests have said they're opting to stay in hotels more frequently over issues like fees and chores.
Airbnb has intensified its competition with hotels in recent months, with one executive teasing that the company would soon start offering "hotellike" amenities.
Read more at Business Insider
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