NASHVILLE, Tennessee — Demand recovery for both the hotel and short-term home rental sectors appears to be happening quickly, but there's clear differences between the two.
Speaking during a session at the Hotel Data Conference titled "Hotels, home rentals and how performance trends continue to evolve," AirDNA Director of Product Max Bernstein said as of June 2022, demand for short-term rentals is up 21% indexed to 2019, while hotel demand is down 3.4%.
The rental demand is largely coming from small city/rural markets, Bernstein said.
"The really interesting thing is seeing a persistent contraction in the amount of demand in urban markets," he added.
STR Vice President of Analytics Isaac Collazo said within the smaller markets, the greatest increase in rental demand share occurred in coastal and mountain/lake destinations, specifically. Additionally, rental demand increased the most in markets with under 5,000 hotel rooms.
STR is CoStar's hospitality analytics firm.
These core markets were always strong performers pre-COVID-19, Bernstein said, but the pandemic further reinforced it.
Collazo noted that while it's true that rental demand is growing, much of the growth "is in areas that hotels are not in."
"I think that's the first clue, when we were working with this data; there's under 5,000 rooms in this collection of markets but that's where the largest growth is [for rentals]," he said. "Essentially ... rentals are going to the market and capturing the demand."
In the top 25 markets, however, share fell for rentals, he said.
When plotting out the growth trajectory for the rental market, Bernstein said the demand share increase has not kept up.
"Things have kind of balanced out to where they were before," he said.
Collazo said that large gain for rentals at the onset of the pandemic made sense, as that was a period when groups and families wanted to travel in "social bubbles."
Hotel Demand Ratio
June 2022 year-to-date data indexed to 2019 shows for every one home rental sold across all location and market types in 2019, nine hotel rooms were sold, whereas in 2022 the ratio dropped to seven rooms, Collazo said.
Average Daily Rate Trends
Short-term rentals have reported huge ADR growth compared to 2019, up 32%, Bernstein said. Hotels are up 11%.
"When you look at the distribution difference between markets by their ADR change, you're seeing markets that are increasing by 20%, 30%, 40%, 50% year over year," he said.
Collazo said the key difference is that hotels experienced an ADR decline, but then it jumped back up. Short-term rentals have yet to experience an ADR decrease amid recovery.
In terms of location type and market size, the short-term rental market has been achieving higher ADRs than hotels, except for in the suburban market.
"That could be good news for [hotels] for competing purposes. [Short-term rentals] is growing faster [but] we have a good product as well on the hotel side, maybe we can raise rates — but that's not suggesting anything, I should say," Collazo said.
Among the top 10 demand change markets — Gatlinburg/Pigeon Forge, Tennessee; Texas East area; Panama City, Florida; Myrtle Beach, South Carolina; Ft. Lauderdale; Wisconsin area; Wilmington, North Carolina; Houston; Virginia area; and Phoenix/Scottsdale — both short-term rental and hotel ADRs were growing, except in one case. Hotel ADR declined in Panama City.
"But again, the numbers are very different. Pigeon Forge rentals were growing by 42% ADR, while hotels in that market grew by 19%," he added.