Jun 22, 2022
Since the emergence of the COVID-19 pandemic, the short-term rental (STR) market has undergone a significant transformation. As global travelers regain their confidence and adapt to the new realities of a post-pandemic world, the STR landscape continues to evolve, with some promising trends forecasted for 2023. This article delves into comprehensive data from leading STR market sources, AirDnA and VRMA, to illuminate the critical trends and predictions for 2023.
Even with a predicted decrease in occupancy rates to 56.4% in 2023, the demand for STRs remains strong as this rate surpasses pre-pandemic levels. Areas with high current occupancy rates, such as coastal and mountain resorts, are expected to see the most significant drop. In contrast, regions with limited supply due to short-term rental regulations, like Hawaii’s Maui and Oahu, and larger cities like New York and Boston, are experiencing increased occupancy, a trend likely to continue into 2023.
Pricing and Revenue Trends
Average Daily Rates (ADR) are projected to rise by 1.7% in 2023. However, this increase will not counterbalance the anticipated drop in occupancy, leading to a reduction in Revenue per Available Room (RevPAR). This trend will be felt most strongly in resort locations and smaller cities already experiencing declining occupancy rates. On the other hand, cities with a lagging recovery may see minor RevPAR gains.
Economic Outlook and STR Market Impact
Despite Oxford Economics predicting a mild recession and declining employment for 2023, the STR market appears to be resilient and is predicted to be among the least impacted industries, with positive growth projected throughout the year. The ongoing recovery in urban areas and changing travel preferences are likely to support the STR sector despite the economic headwinds.
Booking Lead Times
In 2023, expect to see longer booking lead times. As confidence in travel returns, travelers are starting to plan their trips further in advance. For STR owners, this necessitates close monitoring of their pricing in advance to prevent undercutting any part of the year.
Key Strategies for STR Success in 2023
Monitor Performance Closely: With an expected increase in booking volume, keeping a close eye on key performance metrics like optimal occupancy rates and ADRs is critical for competitive listing pricing.
Effective Pricing Strategy: Aim to meet or exceed the previous year’s average monthly ADRs and apply a premium for bookings made well in advance.
Adapt to Market Demand Shifts: The STR market is witnessing a significant shift towards areas underserved by traditional accommodations and less populated. Capitalize on this trend by adjusting offerings to cater to this growing demand.
The STR market’s landscape is rapidly changing, and understanding these changes is key to remaining competitive. Despite potential economic challenges, the STR market appears to be well-equipped to manage these issues and continue to grow. With careful planning and strategic pricing, 2023 could well be another year of growth for the STR industry. Keep a finger on the pulse of these trends, and look ahead to a promising future in short-term rentals.