Short-Term Rental Market Analysis

STR revenue analysis borrows hospitality metrics. Average Daily Rate (ADR) is the average nightly price achieved across booked nights. Occupancy Rate is the percentage of available nights that are booked. Revenue Per Available Room-Night (RevPAR) combines both: ADR × Occupancy. A property with $200 ADR and 70% occupancy generates RevPAR of $140/night or $4,200/month—potentially competitive with a $2,500/month LTR when adjusted for higher operating costs. STR gross revenue must be reduced by platform fees (Airbnb charges 3% host fee; VRBO charges 5%), cleaning costs ($75-$200 per turnover), furnishing amortization ($10,000-$25,000 initial investment amortized over 3-5 years), higher utilities, supplies, and property management fees (typically 20-30% for STR vs. 8-10% for LTR). After these adjustments, the STR net income premium over LTR narrows significantly.

STR occupancy exhibits strong seasonality that varies by market type. Beach and mountain resort markets may see 90%+ occupancy in peak season and 30-40% in the off-season—annual occupancy of 55-65% is typical. Urban markets with year-round business and leisure travel show less seasonality—60-75% annual occupancy. Markets dependent on a single event (college football, festivals) may have extreme spikes surrounded by low baseline occupancy. Competitive dynamics intensify as more hosts enter a market: AirDNA data shows that the number of active Airbnb listings in the U.S. grew from 660,000 in 2019 to over 1.2 million in 2023, compressing ADRs and occupancy in many markets. Revenue per listing peaked in 2021-2022 and has declined in most markets as supply growth outpaced demand growth.

STR regulatory risk is the most significant threat to the business model. New York City effectively banned most non-owner-occupied STRs in 2023 via Local Law 18, requiring hosts to register, be present during stays, and host no more than 2 guests. Other cities impose licensing requirements, occupancy limits, annual night caps (e.g., 90 nights/year in London, 120 nights in Paris), or outright bans in certain zones. The STR vs. LTR decision should be based on a conservative analysis: model STR income using the 25th-percentile revenue for your market (not the median or 75th percentile), subtract all STR-specific costs, and compare to LTR net income. Only pursue STR if the net premium exceeds 30%—this margin accounts for regulatory risk, operational complexity, and revenue volatility. Always maintain the ability to convert to LTR as a fallback strategy if regulations change or STR revenue declines.