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- Short-term rental occupancy rates reached 60% in 2021, led by sites like Airbnb.
- Pandemic-fueled demand and limited supply created an anomaly for the industry, AirDNA said.
- Demand continues to grow in 2022, but the picture is more competitive.
Last year, a short-term rental boom devastated the country, driven by cumulative demand for travel and the expansion of distance work.
Rooms and homes were booked at such a rapid rate that the average annual profit of Airbnb hosts soared 85% in 2021 from the days leading up to the 2019 pandemic to an all-time high of nearly $ 14,000.
Meanwhile, employment rates rose to an industry record. They reached an annual average of more than 60%, up from 53% hovering during 2019 and 2020, according to holiday rental data company AirDNA.
But homeowners shouldn’t rely on this sauce train. Last year’s high employment rates were probably a historic mistake for the vacation rental industry, and are unlikely to be seen again, according to an AirDNA report in mid-year.
“It was a joke last year that you could put up a tent in the backyard and rent it out,” said Jamie Lane, AirDNA’s vice president of research. “It will be a little harder now to do that.”
Employment rates have already been affected as supply catches up with demand. They fell 9% in May and another 10% last month, compared to the same periods in 2021, according to AirDNA. These trend lines suggest that the high employment rates of 2021 “are unlikely to replicate,” the report’s authors said.
Not all is bad news for the hosts. Demand for short-term stays continues to grow, even compared to last year, but keeping the rooms full won’t be as easy as in the 2021 gold rush.
A perfect storm
When travelers went from Joshua Tree to the Great Smoky Mountains in 2021, they chose from a smaller group of lists than in times before the pandemic.
Available listings fell by about 20% in 2020, according to previous AirDNA reports, as short-term rental owners used the same spaces, found long-term tenants, or sold their properties.
This wave of demand in the early pandemic overwhelmed the market, resulting in record profits for those with open rooms.
Now the secret is out. New hosts have been added to take advantage of the return trip.
By the end of last year, the listings available for short-term rentals had returned to 2019 levels and continued to grow until 2022. In January, there was a record 1.5 million tokens, according to AirDNA.
“Really, in January and February of this year, it just started to take off,” Lane said of the number of listings.
Buyers began looking for properties before the high summer rental season and were taking advantage of low interest rates at the time, he said.
More options for travelers have contributed to the recent drop in bookings for hosts.
Demand still exists, but in a more competitive market
But demand persists.
The total number of booked ads was on average 27% higher during the first five months of 2022 compared to 2021, as more people chose short-term rentals instead of traditional options when traveling, according to the AirDNA report.
Other AirDNA data showed that last year approximately 40% of Airbnb rental reviews were from early users, 25% more than before the pandemic, suggesting that short-term rentals have expanded its scope.
But for hosts, capturing these new eyeballs will not be so easy in the coming months and years.
“There will be more competition to get that demand,” Lane said. “They will have to increase their game, be more professional and put a dynamic price on their units.”
For those who are yet to become hosts, Lane suggested carefully reviewing the properties and analyzing their performance before the pandemic, in 2018 and 2019, to understand what they could gain in more sustainable conditions.
“You’ll have an idea of, if we go back to more typical times, whether that investment will be profitable,” he told Insider.