The past two consecutive years of COVID-19 pandemic led disruptions across the world left the global travel market choppy at best and shut down at worst. As the world re-emerges and the industry recovers, the short term rental market has shrunk, stretched, and shifted in different directions in its attempt to survive and then revive. Forecasting the trends for the new year of 2022 can thus be more challenging than usual. While some trends had begun to emerge in late 2021, others are only just emerging or are yet to do so.
8 Short Term Rental Market Trends of 2022
More and more travelers are choosing to pick rural locations and explore the outdoors across the US and the world. According to Airbnb, rural travel has more than doubled from less than 10 percent globally in 2015 to 43% in Canada, 45% in France, 48% in the UK, 42% in Australia, and 28% in the US, in 2021.
As people previously cooped up at home due to pandemic restrictions choose to escape their confines and experience open spaces, locations with access to state and national parks, in particular, are emerging as top destinations. For example, Whitefish Mountain, Montana (near Glacier National Park), Bancroft-Madawaska, Canada (near Algonquin Provincial Park), and Black Hills, South Dakota (near Black Hills National Forest). Other top locations include those with white sandy beaches (Florida Panhandle, South County, Hilton Head Island, etc) and near the Great Lakes (Michigan Upper Peninsula, Northern Wisconsin, etc). The shift is a worldwide phenomenon as top destinations shift to rural escapes such as Sardinia in Italy, Jeju in South Korea, Costa Blanca in Spain, and Cornwall in the UK.
Travelers are not shunning destinations that have historically reported higher COVID-19 caseloads either, as showcased by the enthusiasm for US southern coastal escapes like the Florida Panhandle, Miramar Beach, and Panama City Beach. They are also interested in sporty outdoor activities like hiking, biking, and kayaking.
More people than ever were able to work from anywhere during the pandemic. As the ability to travel opens up and employees continue to be able to work remotely at least part of the time, traveling for bleisure (business + leisure) will continue to rise.
In fact, according to a Leavetown survey, 81% of travelers stated they would continue to work remotely at least part of the time post-pandemic, while Goldman Sachs’ Alternative Accommodations Landscape report of October 2021 projects that COVID-19 will “permanently shift the way people live, work and travel” with “dramatic effects” on the travel lifestyle.
However, individuals and couples are not the only travelers embracing the digital nomad lifestyle. According to VRBO, 44% of families are more likely to work remotely from a place that is not their own home and are looking to travel even outside of school breaks and company holidays.
Between business travelers, digital nomads, and families, many travelers are choosing longer stays. The average number of nights per booking has increased to over 4 nights in 2021 on Airbnb and bookings 28 days or longer capturing overall market share. Meanwhile, on VRBO, stays between 21 and 30 days long have increased 68% with families, in particular, staying at vacation rentals longer. 59% state they are more likely to take a 2-week vacation while 30% are more likely to take a sabbatical.
Vacation rental hospitality company Evolve also noted older travelers (those above 40 years old) are driving longer stays, being nearly four times as likely to book trips longer than 1 week and over five times more interested in taking trips longer than 2 weeks, compared to younger travelers (below 40 years old). 2022 will see these traveler groups continue to prioritize vacations and bleisure trips and stay longer while doing so.
Cities have experienced steep declines in travelers booking stays since the beginning of the pandemic. According to AirDNA, urban areas experienced the largest decline in demand of 43% in 2020. The preference for rural destinations in 2021 further depressed recovery, with cities experiencing only an increase of 8.5% over 2020’s depressed levels. Across the world, travel shifted out of cities like New York, Boston, San Francisco, San Jose, Rome, Paris, Seoul, Barcelona, and London.
The slow recovery of business travel combined with the upswing in longer stays however will see travelers slowly return to cities in 2022. Business travelers are also more likely than ever to choose short term rentals over hotels, having experienced stays during COVID. Meanwhile, the top destinations for long term stays on Airbnb are all cities such as New York, Los Angeles and Seattle in the US as well as Montreal in Canada, Melbourne in Australia, Paris in France, Berlin in Germany, Rome in Italy, London in the UK, Barcelona in Spain, São Paulo in Brazil, and Seoul in South Korea. Highest growth in demand will be higher in large cities with full recovery expected only in 2023 at earliest.
The restrictions imposed by the pandemic accelerated the adoption of contactless check-in technology, particularly smart locks. Smart technology that allows guests to check in via tech over a human facilitated experience are now as firmly a part of guest expectations as wi-fi access. 2022 will not only see more hosts adopt keyless entry technology but also complementary technology including digital welcome books, guidebooks, and real time communications that allow guests to gain the benefits of in-person contact sans human interaction.
Hosts will also take advantage of protective technologies like NoiseAware, Minut, and Party Squasher that help property managers ensure short term rental regulations and house rules are met by guests.
Families are making holidays a bigger priority and shifting the demographics of travel. Families accounted for 33% of overall nights booked globally in summer 2021 on Airbnb, up from 27% in 2019. They’ve pushed the shift to rural over urban destinations and are picking longer stays. According to VRBO, families are more likely to let their kids choose where to vacation (50%), let them invite a friend (33%), and even let them skip school to holiday (43%). Families are also pushing for pet-friendly travel with 70% being pet owners and 68% of them having traveled or planning to travel along with their furry family members.
When online booking marketplaces like Airbnb and VRBO first took off, they left many cities and states scrambling to deal with the aftermath of higher property prices, too much stress on public infrastructure, and disruption of public peace. Over the years some states, counties, and cities have begun to impose regulations to govern short term rentals in their jurisdiction. 2021 however saw more local governments like Las Vegas and Lake Tahoe, take on the reins to impose or improve regulations. Expect more cities, in particular, to follow suit in 2022, as travelers flock to newer destinations and local governments have the advantage of looking at similar situational regulations for inspiration.
Spurred by the exposure received by short term rentals during the pandemics, institutional investors in search of new asset classes promising higher returns are set to make a clear and significant claim on the vacation rental market. Despite increasing regulations, investors are moving beyond seed funding property management companies to buy up homes all across the US. For example, Ohio based real estate investing firm ReAlpha has announced it would spend up to $1.5 billion, including debt, to acquire 5,000 short term rental homes while Blackrock has begun making forays into buying up entire blocks of single family homes and apartment buildings. According to Redfin, 18.4% of all homes purchased in the fourth quarter of 2021 were bought by institutional investors. As short term rental guru Richard Fertig has previously warned, there will soon come a time where the short term rental market will be crowded out by institutional players. 2022 will see institutional investors muscle their way in big time, crowding out small players with higher property prices, higher rents, and ability to scale.
As the short term rental market matures and speeds towards securitization, the low effort, high profitability of the early stages has been left behind. With institutional investors cutting out most private buyers, both property prices and rents are increasing fast, leaving individual investors looking to invest in the vacation rental market by buying property or rental arbitrage fighting harder than ever. Cities are wising up to the scale of vacation rentals in their jurisdictions and imposing regulations and taxes. Meanwhile, demographic shifts in travel choices are imposing new demands on hosts. From catering to digital nomads, families and other long term stay guests with spaces to work, amenities for everyday living and a more home-type ambience, as well as new demands for contactless service during stays, child- and pet-friendly options as well as outdoorsy and sports-type activities, hosts will have to adapt fast or lose out.