Get ready for a dynamic year in the short-term vacation rental arena!
Having grown at a CAGR of 9.70% from 2019 to 2023, the short-term vacation rental market is expected to expand at a slightly higher CAGR of 10.80% from 2024 through 2034.
Country-wise, this accounts for CAGRs of 5.90% for the U.S., 9.20% for Germany and 9.70% for Australia.
Valued at $121 billion in 2023, the market is projected to grow from $135 billion in 2024 to $377 billion by 2034.
As the industry gears up for higher growth, new trends and challenges come to the forefront.
Online booking is set to dominate the market, grabbing a substantial 59.40% market share this year. The vacation rental boom will not be without its casualties as much as its opportunities.
Top 7 Short Term Rental Trends for 2024
“(AI) is going to become, effectively, a co-pilot to your business.”
Francois Gouelo, Co-Founder & CEO of Enso Connect
AI and machine learning have been part of the vacation rental industry for a while now, powering tools like dynamic pricing software. However, when ChatGPT entered the scene in late 2022, it created more than just a massive buzz across the world.
OTAs also joined the trend, introducing features such as Airbnb’s AI-powered Photo Tour in its Winter Release of 2023. With other large language models like Google’s Bard and Bing’s Prometheus also making waves, they are collectively reshaping how travelers research and plan their trips.
As traveler behavior undergoes a fundamental shift, smart property managers can benefit not only from using AI to streamline operations and scale faster at a lower cost in 2024, but also by directly addressing traveler searches to secure top positions in search queries.
Optimizing for the new era of AI-powered searches goes beyond OTA listing enhancements. It involves expanding content on direct booking websites to meet the evolving needs of travelers.
The most successful property managers will not only consolidate their data into a single platform, like Hostaway does, but also employ AI for analysis, forecasting and refining marketing strategies to attract more and higher paying guests.
“I think what we're going to see is a trend in the normalization of data between systems which will give more visibility to property managers,” says Enso Connect Co-Founder & CEO Francois Gouelo. “So we've talked a lot about fragmentation. I think AI is going to create bridges between these different technologies so that you can have more visibility on your day-to-day operations. It's going to become, effectively, a co-pilot to your business.”
As AI and machine learning bring us closer to that futuristic, concierge-level hyperpersonalization, OTAs are shifting focus. Instead of bombarding guests with endless search results, they want to match them with the perfect properties. Meanwhile, property managers are embracing AI tools to automate guest communication in particular. Amidst all this tech, travelers will come to value the human touch much more.
Property managers who attempt to realize the ideals of Unreasonable Hospitality, emphasizing high quality and value while tempering their automations with a human touch (at least until AI can perfectly mimic human conversation) will reap the benefits.
It doesn’t have to be flashy either. Even the smallest efforts, like stocking your property with your guests' favorite coffee or offering personalized recommendations, can make a huge impact.
The 2024 Booking.com Traveller Predictions paint a picture of travel evolving beyond a simple getaway — it's now about experiencing our best selves. Some adopt a whole new persona or avatar, while others savor the thrill of newfound anonymity.
Then there are those who indulge in luxuries, treating themselves to an experience or two that is usually beyond their reach. The spectrum spans from seeking sanctuary at health retreats to diving into psychedelic or sleep-focused getaways — travelers are on a quest for reset, connection and self-discovery.
In this transformed travel landscape of 2024, there are golden opportunities to boost revenue. It could involve adding an Airbnb Experience or a few, offering curated experiences in collaboration with tour operators or even upgrading your properties to include sought-after facilities.
“There’s going to be a flood of properties changing hands. Just make sure you are well-positioned for that and that more properties come to you than the ones you lose.”
Marcus Rader, Co-Founder & CEO of Hostaway
2023 saw both record demand - in July 2023 - and supply, with short term rental listings topping 1.6 million units by September 2023.
The combination of high supply and tight consumer budgets led to the first annual decline of RevPAR since 2014, slipping by 4.9% in the U.S. As competition heated up, many hosts and property managers struggled to keep occupancy steady, resorting to slashing rates.
Homeowners too started churning, looking for property managers who can earn them higher revenues and some, bowing out altogether.
While demand and supply are expected to harmonize towards the end of 2024, this will only be achieved with hosts – new and old – dropping out of the game altogether. Homeowners, facing lower payouts, will become pickier about the property managers they choose, demanding more transparency into the management of their homes.
Says Hostaway CEO Marcus Rader, “There’s going to be a flood of properties changing hands. Just make sure you are well-positioned for that and that more properties come to you than the ones you lose. You can do that by building a good community among your owners.”
Property managers who fail to professionalize, incorporating tech and top-notch service, are poised to get left behind. This shift will trigger consolidation in 2024, with larger property management companies acquiring smaller ones to expand their inventory.
AJL Atelier CEO Simon Lehmann concurs. “This is going to be a massive year for M&A. We are seeing a massive churn rate that we have never seen before… This is also a huge opportunity: ramp it up, buy some businesses.”
The growing competition and rising expectations from travelers for short-term rentals to offer a great place to sleep, work, relax, cook, play and more, in order to become the top choice over hotels, will favor vacation rental businesses with diverse inventories catering to short and long term stays.
“Unique distributed inventory is in,” says Wheelhouse CEO Andrew Kitchell, adding, “Whatever people are worried about, remember that in building a good business, you are sitting on what consumers want to buy, where investors want to come in … it’s really hard to be a good operator and there’s still a lot of room for well-managed supply.”
“We are seeing a massive churn rate that we have never seen before… This is also a huge opportunity: ramp it up, buy some businesses.”
AJL Atelier CEO Simon Lehmann
After spending what felt like ages locked up at home, dodging life's various curveballs, 2023 finally brought back the thrill of live events, giving both cities and rural towns a major boost.
Whether it was rocking out to Taylor Swift's Eras tour or Beyoncé’s Renaissance, people used concerts as an excuse to explore new destinations. Some even went all out, booking flights to venture into different countries. This trend wasn't limited to the big names — smaller artists like Siouxsie Sioux and Lana Del Rey hopped on the train, choosing offbeat places like Brandon, MI for their gigs.
Now, with the promise of Swift and Mrs. Knowles-Carter hitting the road again in 2024, along with a slew of other performers from singers and musicians to stand-up comics and magicians, events are set to give chosen destinations a massive revival in stays and ADRs, at least for a short stint. It's also a golden opportunity for part-time hosts to ride the wave and meet the high demand, especially during events like the Paris Olympics in July-August 2024.
Many workers may have returned to the office in some capacity but remote work is still holding its ground, especially with the rise of hybrid work setups. While not everyone can jet off to Barbados for an extended beachcation in the current economic climate, the itch for travel and new experiences hasn't faded. So, what's the workaround? Many white-collar workers are opting for staycations and workcations to scratch that travel itch.
Workcations are becoming the go-to for savvy business travelers. Picture this: extending a work trip by a few days and enjoying a mini-vacation. Even corporates are getting on board, weaving leisure activities into their business gatherings.
For hosts savvy enough to cater to the work-and-play balance these travelers crave — offering dedicated office spaces and high-speed Wi-Fi alongside ice baths for rejuvenation and a game room for family fun — there's a golden opportunity here. This trend seems like it's here to stay, so those who capitalize on it stand to benefit.
“Whatever people are worried about, remember that in building a good business, you are sitting on what consumers want to buy, where investors want to come in … it’s really hard to be a good operator and there’s still a lot of room for well-managed supply.”
Wheelhouse CEO Andrew Kitchell
In the era of climate change, 2023 showed us just how much havoc unpredictable weather events can wreak on the short term vacation rental industry. We're talking Maui’s wildfires, floods in the UK and hurricanes in Florida.
These unexpected and/or unpredictable weather phenomena not only hit pause on travel and wiped out chunks of occupancy but also left properties in ruins, pushing some homeowners and property managers out of business for a prolonged period or even for good.
Encouraging guests to snag travel insurance is becoming increasingly crucial. Without it, you're stuck with the tough choice of at least refunding them partially or risking them not booking with you again as they are left facing the double whammy of losing their vacation and holiday savings in one swoop.
As Hostaway CEO Marcus Rader cautions, “It’s a lot of different places. You may not think they will affect you but just make sure you are good friends with the property owners before something like this happens.”
On the flip side, scorching summers and drawn-out winters can extend the peak season vibes into shoulder seasons. This means hosts get to relish higher occupancy levels, scoring better rates and revenues.
In 2024, the short term vacation rental market is poised for a transformational leap. Fueled by AI and machine learning, travelers’ experiences and expectations will change, forcing property managers and hosts to adapt. Amidst these technological advancements, maintaining a human touch will be important.
The rise of personalized experiences, the resurgence of live events and the popularity of workcations are reshaping market dynamics. Together with challenges like increased competition and climate uncertainties, agility and strategic foresight are essential. As the industry adapts and evolves, it also offers property managers and property management companies of all sizes exciting opportunities to achieve success.