Best Places to Invest in U.S. Vacation Rentals in 2023 | AirDNA

What to Expect from the Short-Term Rental Industry in 2023

2023 will mark a year of maturation and new normals for short-term rental (STR) investments. After shock in 2020, recovery in 2021, and expansion in 2022, 2023 is expected to be a year of moderation, according to AirDNA’s latest Outlook Report. The moderation will be met by a year-over-year decline in RevPAR (revenue per available rental) and, if true, will be a first since AirDNA started collecting data on STR performance in 2014.

Regulation has continued to present a threat to vacation rental investment, and 2023 will, without a doubt, bring new challenges. Throughout 2022, a wave of new and restrictive regulations emerged in cities like Oahu, Atlanta, New York, and Breckenridge, Colorado. Regulation will increasingly be a key concern when evaluating STR investment opportunities and should also be front of mind to existing owners and operators. For the first time, this report takes into account and highlights any restrictive regulation related to short-term rental use. All industry stakeholders should consider getting involved with their local STR advocacy organizations as well as national groups like Rent Responsibly and VRMA.

Falling home values may bring a welcomed opportunity for investors, as prices have risen substantially over the past few years. According to Zillow, home prices are just 8.4% higher than a year ago and down 0.7% from the peak in June 2022. A few themes will probably persist throughout 2023 and could make new investment tricky without an increase in available inventory, such as:

A lack of affordability, driven in part from rising home values but mostly from a more-than-doubling of the 30-year interest rate over the last 12 months, has weighed on home prices in the back half of 2022.

A growing spread between the prices sellers want for their homes and what buyers are willing to pay has led to a stalemate in the housing market. This has brought the flow of new listings down to a trickle and left many listings languishing for months without a satisfactory offer.


Oxford Economics’ latest forecast shows home values peaking in Q3 2022 and reaching their next low point in Q1 2024 before continuing to grow once again. Oxford anticipates a peak-to-trough fall in home values by roughly 5%, with the biggest declines in home values in California, Nevada, Arizona, and Florida: all markets with significant exposure to the STR sector. The cities with the biggest declines in forecasted home values are expected in San Francisco (-20%), Las Vegas (-16%), and Phoenix (-16%).

With home values falling throughout the U.S., this may present an opportunity for prospective buyers looking to buy during the down cycle. With this analysis, we provide a framework for finding profitable investment markets using the most up-to-date data through January 2023. However, just because a market is listed here doesn’t mean that all investments will be profitable. Likewise, excellent investments can be found in markets not listed here. AirDNA’s Rentalizer tool brings together the latest short-term rental and housing market data to analyze specific investment opportunities.

2023 Market Conditions for Vacation Rental Investments

While 2021 will serve as a high-water mark for occupancy, 2022 broke records for both nights booked and revenue, with U.S. short-term rental owners/investors/hosts generating over $62 billion throughout the year. 

After two consecutive years of small and mid-sized cities dominating our Best Places to Invest reports, it's no surprise that those locations led 2022 with the highest growth in listings throughout the year, with a 30% year-over-year increase in listings.

As we look at the list for 2023, it again included mostly small and mid-size cities, with a clear concentration on markets in the Midwest and Northeast. These markets tend to score high with our investability score, as home prices have failed to keep pace with rising short-term rental revenues, highlighting new investment opportunities.

Low investability scores reflect markets that have seen the largest increases in home values over the past few years. But as 2023 progresses, falling home values could expose opportunities in markets where revenues may continue to expand, primarily large urban cities. In these markets, supply has been slow to recover and occupancy is strong, but home values are currently elevated with the potential to fall, for example in, New York, Oakland, Seattle, San Francisco, and Washington, DC. These markets may also benefit from returning international travelers to the States.

Throughout 2022, average revenues per listing largely plateaued, with a slight pull back in Mountain/Lake markets as well as small city/rural areas, suggesting that performance may have peaked in those destinations. Growth has continued, albeit at a much slower pace than in 2021, in urban, suburban, and coastal locations. The result of this growth may bolster recovery trends as new supply favors those locations with outsized revenue potential today but eventually reduces available earnings for existing properties from increased competition (Economics 101).

Methodology for AirDNA's Best Places to Invest in 2023

Using AirDNA’s property-level performance data for Airbnb and Vrbo, we created an updated index of the best markets for investment in 2023. This methodology allows us to find high-performing, growing short-term rental markets that provide returns for investors.

The pillars of our Investor Score include:

Rental Demand: How often are rentals booked throughout the year? By using a combination of the trailing 12 months (TTM) occupancy and booked listing growth rates, this metric shows the relative strength of travel demand in each market.

Revenue Growth: Did properties earn more this year than they did last year? This is calculated by looking at the TTM year-over-year change in revenue per available rental (RevPAR) for properties that were booked over the past two years.

Investability: This metric compares the expected income of a property relative to the cost of buying it. This is calculated by using the average revenue potential of homes in the area, subtracting the average cost for operating the property, and then dividing that by the typical home value in the same area for similar-type homes. We weight home values by the number of short-term rentals in each zip code to make the home values more compatible with the relevant earnings in the same market.

Regulation: New for our 2023 analysis, we incorporated Revedy’s regulation score for each city. Revedy’s score ranges from a 1 (with no STR restrictions) to a 10 (which is prohibitive towards STRs) and considers both current regulatory risk for STR investors and the likelihood of increased regulation in the future. Regulations are approached from the view of real estate investors, so municipalities that limit STRs to hosted stays or primary residences are, therefore, deemed highly restrictive from this lens.

Together these data points combine to create our ultimate proprietary ranking metric, the AirDNA Investor Score.

Best Short-Term Rental Investment Markets in 2023

Known as the Land of the Midnight Sun, high investability and rental demand earn Fairbanks the top spot for Airbnb investments in 2023. Visitors come to experience the natural beauty of the area, including the northern lights, the midnight sun, and the nearby national parks. Filled with outdoor activities such as fishing, hiking, and hunting, Fairbanks caters to those seeking the true Alaskan experience. Additionally, Fairbanks is a popular stop for those visiting Alaska on a cruise or taking the Alaska Highway. The average full-time vacation rental property in Fairbanks earns $49K per year with an average daily rate (ADR) of $198. 

Evansville earns the second spot for Airbnb investment in 2023, with a high investability score of 93.1 and rental demand score of 80.4. Home values in Evansville are relatively low at $116K, and with an average daily rate of $129, full-time short-term rentals here can expect to earn an average $27K return on investment per year. Steeped in a rich history and culture, the city draws visitors from miles away with the Reitz Home Museum, the Angel Mounds State Historic Site, and the Evansville Museum of Arts, History and Science all located there.

Known as the Forest City, Rockford is a city of contrasts, with the Anderson Japanese Gardens, the Rockford Art Museum, and the Burpee Museum of Natural History all located here. The eclectic attractions allow the city to maintain an occupancy rate of 60.9%, an ADR of $175, and an average annual revenue of $39K. Rockford earned the second-highest revenue growth score (98.6) on this list. Coupled with a relatively low average home value of $117K, Rockford should provide a low-cost investment with plenty of cash flow. 

The capital of Illinois, Springfield is a great location for short-term rental investors looking to enter a market where initial investment costs are low. Homes go for $119K here on average. Despite having a relatively lower ADR ($133) than other locations on this list, an average occupancy rate of 61.5% allows full-time homes to generate an average revenue of $29K per year. Short-term rental owners here host guests from all over the country who come to visit timeless pieces of American history, such as the Abraham Lincoln Presidential Library and Museum, the Lincoln Home National Historic Site, and the Lincoln Tomb. An exceptional investability score (95.0) and rental demand score (92.2) earned Springfield the fourth spot on the 2023 best Airbnb investment list. 

Burdett, a small-town gem in upstate New York, secured the fifth spot on this year's list with an impressive investability score of 99.6. The town boasts an average annual revenue of $77K for full-time listings, with home values averaging at just $244K. Visitors are drawn to Burdett for its charming, small-town atmosphere and its proximity to popular destinations such as the Finger Lakes and Watkins Glen State Park. The Finger Lakes Trail, a 584-mile footpath that winds through the southern Finger Lakes region, also runs through the village center of Burdett. Furthermore, with an average daily rate of $345, guests are willing to pay premium prices to experience the beauty of this picturesque paradise.

Brimming with Southern hospitality, Williamstown is a small town in the heart of the Bluegrass State that boasts a high occupancy rate of 69.3%, an impressive rental demand score of 100, and relatively low home values at $179K, making it a budget-friendly option. Williamstown is a popular destination for tourists, thanks to its alluring downtown area, proximity to popular destinations like Lexington and Louisville, and rich history and culture. Visitors can take in the town's history at the Kentucky Gateway Museum Center, explore the well-preserved 19th-century buildings in the historic downtown area, and enjoy outdoor activities at the General Butler State Resort Park. The town's equestrian heritage can be experienced by visiting nearby horse farms, and it's also close to other popular tourist spots like the Ark Encounter and the Creation Museum.

Note*: All short-term rentals in Williamstown require a Conditional Use Permit. That permit application will go before a Board (that meets monthly) to decide whether or not it will be allowed. You also require a business license and a one-time short-term rental registration, which costs $200.

New Haven, Connecticut, is a prime destination for short-term rental investors, with a high rental demand of 91.5 and revenue growth of 88.7. Though home values are on the higher side relative to others on this list at $261K, full-time STRs here can earn $49K per year. The city's rich history, culture, and attractions, like Yale University and New Haven Green, along with delicious pizza, a diverse food scene, beautiful parks, museums, cultural institutions, and proximity to other popular tourist destinations make it a must-see for visitors. So, whether you're interested in history, food, culture, or nature, New Haven has something to offer all types of guests, making it a great investment opportunity for short-term rental investors.

Ellsworth is located just 15 miles from the entrance of Acadia National Park and serves as a popular location for guests looking to visit the park. Visitors to the national park often turn to Ellsworth for key vacation amenities like large grocery stores, restaurants, and even an L.L.Bean Outlet store. With the average home value in popular cities on nearby Mount Desert Island, where the park is located, reaching over $500K, Ellsworth’s relatively lower price point, around $267K, offers a smart opportunity for investors looking to buy properties while still appealing to travelers visiting the park. Ellsworth has benefited from expanded seasonality as the tourism season now extends from May through the end of October, putting occupancy at 72.8% over the past year and the average annual revenue at $67K, giving it a high AirDNA Investor Score of 84.7.

Set on the shores of Lake Huron, Cheboygan is the perfect spot for short-term rental investors looking to give guests the true Northern Michigan experience. An ADR of $304 allows full-time homes here to earn an average revenue of $69K per year. Not bad, with average home values at just $205K! Visitors come for the outdoor activities like boating and fishing on Lake Huron and nearby Straits State Park, as well as the town's inviting community and cultural attractions like the Cheboygan Opera House and Cheboygan County Historical Society. Winter sports enthusiasts will also love the nearby ski resorts and snowmobiling trails. Cheboygan is also well-connected to other Michigan tourist destinations, like Mackinac Island and Petoskey.

The village of North Woodstock earned itself the 10th spot on this year’s best Airbnb investment list by racking up an impressive investability score of 91.2. With an average home value of $285K, full-time listings here can expect to earn an average of $63K per year, with an average daily rate of $293. Visitors flock to North Woodstock for its natural beauty and outdoor activities such as hiking, skiing, biking, and fishing. The nearby White Mountains and Kancamagus Highway offer breathtaking views and are among some of the must-sees for visitors looking for small-town charm and a taste of New England culture.

Montgomery is a historic city located in the heart of Alabama, known for its vibrant cultural heritage, civil rights history, and Southern hospitality. The city found its way onto the top Airbnb investments in 2023 list by having an investability score of 95.2. With home values at a low $123K, it's a budget-friendly option that provides full-time vacation rentals with an average annual revenue of $30K per year. Guests can delve into the city's rich history and culture at places like the Rosa Parks Museum, Dexter Avenue King Memorial Baptist Church, Montgomery Museum of Fine Arts, and Alabama Shakespeare Festival. They can also explore historic sites, such as the Alabama State Capitol, and take in the city's downtown with its mix of historic and modern architecture. Plus, the Montgomery Zoo and Botanical Gardens are perfect for outdoor enthusiasts, and the city's proximity to popular tourist spots like Birmingham and Selma makes it a great road trip destination.

Located on the shores of Lake Superior, the picturesque city of Two Harbors has no shortage of demand from guests looking to experience the great northwoods of Minnesota. The city was able to garner a rental demand score of 92.9. What’s more, homes in Two Harbors go for an average of $245K, and full-time properties generate an average of $72K per year, allowing the city to earn an exceptional investability score of 98.9. Visitors are drawn to the natural beauty of the Lake Superior shoreline, Superior Hiking Trail, and nearby Superior National Forest and Gooseberry Falls State Park. Outdoor activities like fishing, boating, golfing, and rock climbing at Palisade Head and Shovel Point are also popular among visitors. The historic Two Harbors Lighthouse and local parks and golf course are also sure to please guests. Plus, easy access to other Minnesota tourist destinations like Duluth and Grand Marais makes this a great location for short-term rental investors.

Note*: The municipality has a cap on short-term rental permits and also limits new short-term rentals in two commercial zoning districts. 

Northern Florida’s Gainesville is said to be a place “where nature and culture meet.” Gainesville, one of the best places to buy vacation rental property in Florida, is home to the University of Florida, and the area boasts the cultural vitality of a college town with access to seven area Florida state parks. This is Gainesville’s second consecutive year on our Best Places to Invest list. The typical home value of $234K in Gainesville won’t set you back too much, and with an average revenue of $46K, the city earns an investability score of 77.8. Gainesville also scored 69.6 in revenue growth, along with a trailing 12 months occupancy of 56% and a $218 ADR. 

Located on Lake Huron just 20 minutes north of Cheboygan, Saint Ignace is a prime location for short-term rental investment in the Upper Peninsula. With an average home value of $166K and average revenue per year of $50K, Saint Ignace earned a remarkable investability score of 99.2. TTM occupancy levels were 62.1% on average, though there is a steady stream of visitors throughout the year, and the demand for rental properties in the area is high, earning Saint Ignace a respectable rental demand score of 83.7. The city offers a mix of natural beauty, history, and outdoor activities, such as the Mackinac Bridge, Fort de Buade Museum, beautiful beaches, water activities on Lake Huron, hiking and skiing in the nearby mountains, as well as dining and shopping options.

Note*: The total number of permits issued for short-term rentals in certain residential districts is limited to 50. Non-owner-occupied short-term rentals in residential zones must obtain a zoning variance from the Zoning Board of Appeals. An individual is limited to three short-term rental permits. 

Bardstown is a prime destination for short-term rental investors who are looking to host guests in an area with an eclectic blend of Kentucky history, culture, and nature. Visitors to the area love experiencing the city's bourbon heritage and distilleries on the Kentucky Bourbon Trail, exploring historical sites and landmarks, and enjoying outdoor activities in the beautiful countryside. Bardstown’s high investability score of 96.7 and revenue growth of 93.1 make it a great investment opportunity. Not to mention, the average home value of $182K is relatively low, making it a more affordable option. With an average daily rate of $206.05, investors can expect to earn an average revenue per year of $42,296 when listing full time.

Note*: STRs in agricultural and residential zoning districts require a Conditional Use Permit (CUP) from the appropriate Board of Adjustment (BOA). They also require a business license. Bardstown has a limitation on non-owner-occupied, non-residence short-term rentals. They are not allowed to be within 400 feet of each other.

Guests come to South Bend to visit cultural attractions such as the University of Notre Dame and the Studebaker National Museum. Visitors can also enjoy the city's outdoor recreational opportunities, such as the St. Joseph River. The city is home to a growing short-term rental market with a high revenue growth score of 91.8 and an average daily rate of $414.78. The average home value in South Bend is $235K, and properties here earn an average of $59K per year, which is why the city earned a high investability score of 95.3.

With a high rental demand score of 90.2 and investability score of 96.7, Kalamazoo is a prime spot in southern Michigan for short-term rental investors. Tourists are drawn to the city for its charming downtown area, diverse food and drink scene, and proximity to popular destinations like Lake Michigan. Visitors enjoy outdoor recreation at places like the Kalamazoo Nature Center, explore the arts and culture scene at the Kalamazoo Institute of Arts, and learn about the city's history and heritage. Foodies love the variety of restaurants and breweries, shoppers enjoy indulging in retail therapy, and events/festivals are held year-round. Homes here go for just $157K on average. With an ADR of $181, short-term rental hosts can earn an average revenue of $40K per year on a full-time property. 

Note*: The city's zoning ordinance does specify where short-term rentals are allowed to operate within the city. The city also has a rental registration program that ensures units meet health standards.

North Charleston is a city steeped in history, particularly its role in the Civil War and American Revolution. It is also home to the Charleston International Airport, making it a convenient location for travelers. With a high rental demand score of 93.2 paired with an ADR of $229, the average full-time property rakes in an average of $53K per year. What’s more, the city earned an investability score of 87.5 with an average home value of $252K. Guests have access to the city's many parks, outdoor recreational opportunities, such as the North Charleston Wannamaker County Park, and events and festivals, like the North Charleston Arts Festival and the Lowcountry Cajun Festival. Additionally, guests have the opportunity to visit several museums and historical sites, such as the North Charleston and American LaFrance Fire Museum and Educational Center.

Note*: The city has a straightforward short-term rental permit program with no zoning limitations or caps. However, the maximum number of people allowed in a single short-term rental is eight persons, including children. 

Logan is a city known for its outdoor recreation, with the Hocking Hills region being a main draw for visitors. The region offers a plethora of activities such as hiking, camping, fishing, and rock climbing, as well as state parks and natural preserves like Old Man's Cave, Ash Cave, and Rock House. The city also hosts annual events and festivals like the Hocking Hills Indian Festival and the Logan Washboard Arts & Music Festival. For short-term rental investors, Logan has a high investability score of 99.8, as home values are $208K on average and full-time properties earn $74K on average per year. With a 58.7% occupancy rate and an average daily rate of $322, short-term rentals in Logan offer a great bang-for-buck return.

Note*: Short-term rentals need to be in R-2 or R-2-B zoning districts, and you have to apply for a Conditional Use Permit. This process includes a public hearing in front of the Board of Appeal. If they approve the short-term rental use, you will receive a Zoning Permit and will be required to meet certain standards before receiving a City Zoning Occupancy Certificate to allow you to operate a short-term rental.

Drawing golf enthusiasts from around the world, Augusta is known for its annual Masters Golf Tournament held at the Augusta National Golf Club. But it's not just about golf, the city offers a load of experiences for visitors, such as historical sites and monuments like the Augusta Canal National Heritage Area, events and festivals like the Augusta Heritage Festival, scenic beauty and outdoor recreational opportunities like the Phinizy Swamp Nature Park, and Augusta University. As a short-term rental investor, the market in Augusta presents a high revenue growth score of 99.3 and an investability score of 86.7. Considering that home values here average $191K, hosts can earn $40K per year on average with a full-time property and an ADR of $313.

With a high revenue growth score of 88.5 and a relatively low average home value of $141K, Akron is an attractive investment market, as properties here can generate an average of $33K per year in revenue. Akron is a city that draws in visitors with its diverse attractions, such as the historic Stan Hywet Hall & Gardens, the contemporary Akron Art Museum, and the scenic Cuyahoga Valley National Park. The city also offers a wide range of activities, including hiking, biking, fishing, and golfing, as well as a variety of events and festivals throughout the year. Visitors can also enjoy the rich history of the Akron Rubber Bowl and the abundance of outdoor activities in the nearby Cuyahoga Valley National Park.

Note*: As of December 2022, the city was reviewing a draft short-term rental ordinance. This ordinance would require an annual registration with a fee of $250 and no talk about zoning limitations. 

Set on the Susquehanna River, Harrisburg, the state capital of Pennsylvania, offers a high rental demand score of 94.4 and a modest average home value of $187K. One of the main draws of Harrisburg is its historical landmarks, such as the State Capitol Building and the National Civil War Museum. These attractions provide guests with an educational experience of the city's history and architectural beauty. Additionally, the city's proximity to popular tourist destinations such as Hershey and Gettysburg makes it a convenient location for travelers to explore the area. Visitors can also enjoy outdoor activities such as hiking in Wildwood Park, catching a baseball game at FNB Field, or attending events such as the annual Kipona Festival or Harrisburg Symphony Orchestra. 

Note*: The city does not have a short-term rental ordinance, however, the planning department has argued that its zoning districts prohibit such a use. They are openly against "investment properties."

Cleveland is an attractive destination for short-term rental investors thanks to its world-renowned cultural institutions, such as the Rock and Roll Hall of Fame, Cleveland Museum of Art, and Cleveland Museum of Natural History. These, along with the Cleveland Orchestra, Cleveland Browns, and Cleveland Guardians (formerly known as the Cleveland Indians), draw many visitors to the city. Cleveland's bustling downtown area and lakefront, along with the nearby attractions such as Cleveland Metroparks Zoo, Cleveland Botanical Garden, Terminal Tower, and the Soldiers' and Sailors' Monument, provide experiences for all types of guests. Despite a low rental demand of 22.3, Cleveland offers a high investability score of 89.2 and a relatively low home value of $167K. Average full-time vacation rental properties here generate $35K per year with an ADR of $181, contributing to a strong revenue growth score of 79.7.

With average home values of just $190K, Waco found its way to the top Airbnb Investability list with an investability score of 97.7. Known as the heart of Texas, short-term rentals here can earn $52K per year on average when listing full time. Waco also has a solid occupancy rate of 58.1% and an ADR of $243. The main attraction that draws visitors to Waco is the Magnolia Market at the Silos, run by Chip and Joanna Gaines of HGTV's "Fixer Upper" fame. Visitors can also explore the Dr Pepper Museum, which was invented in Waco, and the Waco Suspension Bridge, a historic bridge offering views of the Brazos River. The Waco Mammoth National Monument and the Cameron Park Zoo are also popular attractions. Other attractions that draw visitors include the Texas Ranger Hall of Fame and Museum, the Mayborn Museum Complex, and the Waco Downtown Farmers Market. Baylor University is also located in Waco, making the city popular with collegiate football fans.

Note*: In certain residential zoning districts, non-hosted short-term rentals may not be located within 500 feet of another licensed Bed & Breakfast Homestay Establishment (BBHE) or another non-hosted short-term rental. Special Use Permits are also required. 

Indialantic, a small coastal town located in Florida with a unique name that is a portmanteau of Indian River Lagoon and the Atlantic Ocean, attracts visitors for its beautiful beaches, such as Indialantic Beach and Nance Park. A variety of water sports and activities like swimming, surfing, fishing, and boating keep visitors busy. Additionally, visitors can explore nearby Sebastian Inlet State Park for hiking and bird watching opportunities, attend events and festivals like the Indialantic Art & Seafood Festival, and visit nearby major attractions like Kennedy Space Center, Melbourne Beach, and the famous Cocoa Beach. Short-term rental investors can benefit from the high occupancy rate of 70.2%, high rental demand score of 87.6, and high revenue growth score of 93.8. Despite a relatively high home value in Indialantic, at $479K, full-time short-term rental properties here can generate a remarkable $84K on average per year.

Note*: Short-term rentals are only allowed in T-tourist zones. The city does not have a registration program or permit program. 

* Regulation scores and commentary provided by Revedy.

AirDNA’s vacation rental market data helps you uncover the best places to invest in a rental property in 2023. Discover the 25 best STR rental markets today.

Best Places to Invest in U.S. Vacation Rentals in 2023 | AirDNA

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