5 Reasons Why Short-Term Rentals Are Sound Long-Term Investments | AirDNA
Airbnb redefined the real estate asset class back in 2008. All these years later, skepticism lingers about whether vacation rentals have the potential to be sound long-term investments.
But the data shows that Airbnb investment isn’t as volatile as it seems—and that there are concrete ways investors can manage these assets to maximize the returns they’re already likely to get.
Here’s how:
1) Airbnb Investments Are More Profitable Than Long-Term Rentals
When Airbnbs first hit the market, many investors were understandably hesitant to take a chance on a fledgling asset. Fifteen years later, though, there is data aplenty—particularly about how Airbnb investment compares to traditional real estate.
STRs make 67% more than long-term rentals, proof that the vacation rental returns weren’t just a fluke. Their continued strong performance shows that vacation rentals can generate a high return on your investment, especially when they’re managed and marketed well.
This can make vacation rentals an invaluable asset for funds that don’t want to fully depart from the real estate category but do want to boost their profits beyond their traditional investments.
2) Vacation Rentals Have Proven Resilient in Turbulent Times
Resilient probably isn’t the first word that comes to mind when you think of short-term rentals as an asset. Our data shows it should be.
The COVID-19 pandemic is the best and most recent example we have of an unpredictable economic climate. During that time, Airbnb investments actually thrived compared to their more conventional counterparts.
The rental market surged to a record-high share of 17% as demand for hotels waned. This was especially true in tourist destinations; rentals were 17% more in demand than hotels in coastal areas and 10% more in demand in mountainous destinations.
Demand also only keeps going up. March 2023 marked the second month of increasing demand year over year (YOY) at 15.8%. It also saw 21.4 million nights booked, an all-time high for vacation rentals.
3) Airbnbs Diversify Your Revenue Streams
There is no silver bullet for asset allocation. Some investors say investing 5% to 10% of your portfolio in real estate is optimal, while others target as much as 26% of their portfolio.
But even if you land on the perfect percentage, market volatility and cyclical downturns happen. Airbnb properties are a great way to further diversify your real estate asset class. This reduces your reliance on any one business line or market segment—including traditional real estate.
And since Airbnbs have fared well through economic unrest, these investments aren’t just a safeguard but a value-add for shareholders who want a more dynamic portfolio.
4) Vacation Rental Investments Are Highly Flexible
A storage unit can only ever be a storage unit. But vacation rentals don’t have to stay vacation rentals.
Even if you invest in an Airbnb, the reality is that these units are meant to be lived in. If the STR market takes a hit, you can convert your vacation rental into a long-term rental. Many portfolio managers actually plan their investments with this in mind.
You already know what makes a good long-term rental investment. Hold out for properties that meet those criteria and have what it takes to capture Airbnb demand. That way, you’ll have revenue-driving options no matter how the market fluctuates.
5) You Can Actively Maximize Your Investments
The details matter for Airbnb investments. While that does put pressure on the investments you make, it also means you have options after you’ve made them.
Consider amenities, for example. In some markets, listings with pools or hot tubs earn 50% more revenue than listings without. But that doesn’t mean it’s either properties with pools or bust.
Vacation rental data gives you the opportunity to maximize your investments over time. Find the amenities that will make a difference and either invest in properties that have them or identify promising properties that you can upgrade to make even more money.
Remember: finding the right properties goes a long way but so does optimization. Using data properly will help you steer your STR assets to even greater returns.
Make Airbnb Investments With Confidence
You don’t fly blind with your traditional real estate investments. Why do the same with your vacation rentals?
Though you may not have a background in Airbnbs just yet, we at AirDNA do. Investors use our Property Performance Dashboard to back up their instincts or discover opportunities they didn’t expect—all based on data scraped daily from Airbnb and Vrbo.
Use Data to Diversify Your Real Estate Investments
When it comes to Airbnb investing, fortune does favor the brave. There may not be a need to shift your entire portfolio to Airbnb. But what if you invested even 10% of your fund in vacation rentals?
Greater returns, dynamic pricing, and unique markets are all on the table. What’s more, all the numbers we mentioned above are just averages. If you invest well, your fund could see even better performance than what we’ve listed above.
As you’re analyzing your vacation rental profitability, put the full power of AirDNA behind you. Our data intelligence gives you the confidence you need to get out of your investing comfort zone and into the valuable vacation rental market.