National, short-term rentals are generating an average of +39% more income annually than they did during pre-pandemic times.
Surging Traveler Demand for More Private, Larger Units
The short-term rental market, and all those who are invested in this market sector, can tip their collective hats to the COVID pandemic. Pre-pandemic, travelers were content to stay in hotel rooms for short get-a-way trips. Not any more. Travelers now want larger, more private units even when getting away for only a night or two.
The short-term rental market had its best year ever in 2021. As a whole, short-term rentals generated approximately $113B in annual revenues.
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Challenges of Investing in Short-Term Rental Markets in 2022
Short-term rental investors will be challenged by two realities in 2022 regardless where they invest:
- Home prices nationwide increased +20% in 2021, according to Zilllow’s Home Value Index, and Zillow forecasts that home prices will increase another +16% in 2022.
- Housing inventory has hit a rock-bottom low. Finding an appropriate home for short-term rentals will be difficult in 2022 as all industry experts expect inventory levels to remain relatively flat this year.
Where to Invest in Short-Term Rental Market in 2022?
After analyzing 265 destination markets nationwide for short-term rental investment potential, AirDNA, a short-term rental analytics company, determined the top 25 markets for short-term rental potential.
AirDNA believes markets with the greatest potential for short-term rental investment will be concentrated in small and mid-sized cities. The AirDNA analysis stated, “…revenue potential of small city/rural areas in the US has risen +55% since the start of the pandemic, followed closely by mountain/lake destinations and mid-sized cities.
Snapshot of AirDNA’s Top Ten Markets for 2022 Short-Term Rental Investment
- Maui, Hawaii
– Investor score: 90.7
– Revenue potential of average full-time rental property – $101,590/year
– Annual occupancy rate – 72.8%
2. Kenai Peninsula, Alaska
– Investor score: 89.1
– Revenue potential – $44,124/year
– Annual occupancy rate — 67.3%
- Chattanooga TN
– Investor score: 87.9
– Revenue potential – $47,376/year
– Annual occupancy rate – 70.8%
- Gulfport/Biloxi, Mississippi
– Investor score: 87.9
– Revenue potential – $44,3022/year
– Annual occupancy rate – 63.9%
- Slidell Louisiana
– Investor score: 85.2
– Revenue potential – $68,690/year
– Annual occupancy rate – 61.6%
- Crystal River Florida
– Investor score: 83.4
– Revenue potential – $51,118/year
– Annual occupancy rate – 68.8%
- Joshua Tree California
Investor score: 81.5
– Revenue potential – $85,363/year
– Annual occupancy rate – 66.1%
- Charleston South Carolina
– Investor score: 81
– Revenue potential – $85,542/year
– Annual occupancy rate – 68%
- Galena Illinois
– Investor score: 79.7
– Revenue potential – $67.314/year
Annual occupancy rate – 60.6%
- Southwest Harbor Maine
– Investor score: 79.4
– Revenue potential – $72,772/year
– Annual occupancy rate – 76.1%
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Thanks to AirDNA and Inman.