November Market Recap and 2025 Forecast
In this episode of STR Data Lab, Jamie Lane, Chief Economist at AirDNA, and Scott Sage, Vice President of Marketing and Customer Experience, take a deep dive into November’s short-term rental (STR) performance. They explore the current state of the market while sharing insights into rental market analysis, the importance of average daily rates (ADR) as a key metric, and the impact of inflation and interest rates on STR operators and investors.
Whether you're managing one property or an extensive portfolio, understanding these trends and data points is essential for navigating the complexities of today’s STR landscape.
Here’s What You Can Expect from This Episode
- Review of November’s STR metrics, including ADR, occupancy rates, and revenue per available rental (RevPAR)
- The impact of declining supply growth and steady demand on pricing power
- Projections for inflation, interest rates, and their influence on future STR investments
- What to expect in 2025, the “Year of Efficiency” for the STR industry
Episode Highlights
November STR Performance Recap
Scott and Jamie begin by reflecting on November’s market performance. For the first time in months, all five key metrics—demand growth, occupancy, RevPAR, ADR, and listings—exhibited positive year-over-year signals, indicating a steady recovery and newfound market stability.
One standout metric is the average daily rate, which showed a 7% year-over-year increase in November. While this is a strong result, Jamie points out that this growth was supported by easy comparisons to last year’s ADR decline of 3.9%. However, this trend signals that STR operators are beginning to regain pricing power.
Occupancy also rose by approximately 3%, reflecting both the strength in demand and a deceleration in supply growth, which has fallen from 15% in November 2022 to just 4% in 2023. With fewer new listings entering the market, existing operators are benefiting from improved booking activity and reduced competition.
Rental Market Analysis: The Role of Supply and Demand
Jamie emphasizes the importance of conducting thorough rental market analysis, as every region presents unique opportunities and challenges. Supply growth trends, for example, vary significantly by market type:
- Urban markets have seen minimal growth, hovering around 0-1%, largely due to stricter regulations.
- Suburban markets report moderate growth of 1-2%, supported by demand for family-friendly accommodations.
- Small city and rural markets continue to expand, with growth rates exceeding 11%, driven by traveler interest in unique and remote destinations.
- Traditional vacation markets, like coastal and mountain areas, show limited growth of 2-4%, reflecting high housing prices and saturated supply.
Jamie and Scott highlight how analyzing these trends can help operators and investors identify high-performing markets and adjust their strategies accordingly.
Strength in ADR: A Return to Pricing Power
The average daily rate (ADR) remains a critical indicator of market health. While ADR growth had stagnated earlier in the year, November marked a turning point. Jamie explains that ADR growth was largely supported by improved occupancy and reduced price competition. With demand rising at 5-6% annually and supply growth slowing, STR operators are regaining the ability to set rates more strategically.
Jamie advises hosts to use dynamic pricing tools to capitalize on seasonal and local demand fluctuations. For instance, winter travel to ski destinations often commands premium rates, making it essential for operators in mountain markets to adjust their pricing to reflect these trends.
Inflation and Interest Rates: Implications for STR Investments
Inflation and interest rates are key economic factors shaping the STR market. Scott and Jamie discuss how interest rates, which climbed sharply in 2023, remain elevated as 2025 approaches. With 30-year mortgage rates exceeding 7%, borrowing costs have made it more challenging for new investors to enter the market.
Inflation remains a concern, with projections for a slight uptick in 2025. Although current inflation levels are within manageable ranges, Scott notes that any unexpected acceleration could impact investment appetite and pricing strategies.
Jamie explains that high interest rates are creating barriers for new entrants, leading to slower supply growth. This trend benefits existing operators, as lower competition supports occupancy and ADR. However, for those looking to expand their portfolios, navigating these economic challenges will require careful planning and access to creative financing solutions.
Projections for 2025: The Year of Efficiency
Jamie and Scott dub 2025 the “Year of Efficiency” for the STR industry. With new investments slowing, operators must focus on maximizing the potential of their existing properties. Jamie outlines several strategies for achieving this:
- Optimize Operations: Streamline workflows through automation and better use of property management systems (PMS) like Uplisting.
- Leverage Data: Use insights from platforms like AirDNA to monitor market trends, identify growth opportunities, and refine pricing strategies.
- Improve Guest Experiences: Invest in property upgrades and personalized touches to boost reviews and drive repeat bookings.
Jamie emphasizes that the goal for 2025 isn’t just maintaining profitability but finding innovative ways to grow despite economic challenges. For operators, this might include expanding into underserved markets or diversifying property offerings to attract new traveler demographics.
Actionable Takeaways for STR Operators and Investors
Conduct regular rental market analysis
Use tools like AirDNA to track metrics such as ADR, occupancy, and RevPAR in your market. Tailor your strategies based on local supply and demand trends.
Focus on pricing power
With ADRs stabilizing, leverage dynamic pricing to optimize rates during high-demand periods and capture maximum revenue.
Prepare for inflation and interest rates
Account for higher borrowing costs in your financial planning. Consider alternative investment strategies, such as joint ventures or partnerships, to mitigate risks.
Embrace efficiency
Streamline your operations, improve guest satisfaction, and find ways to reduce overhead without sacrificing quality.
Explore high-growth Markets
Focus on regions with strong demand and manageable competition, such as small city or rural markets that offer unique travel experiences.
Looking Ahead
As the episode concludes, Scott and Jamie highlight upcoming reports and tools designed to support STR operators. In mid-January, AirDNA will release its highly anticipated “Best Places to Invest” report, offering valuable insights for those planning their next move.
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Connect with Jamie on LinkedIn and Twitter:
LinkedIn: https://www.linkedin.com/in/jamiehlane/
Twitter: https://twitter.com/Jamie_Lane
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Connect with Scott on LinkedIn:
LinkedIn: https://www.linkedin.com/in/sagescott
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Connect with AirDNA on LinkedIn, Twitter, TikTok, and Instagram:
LinkedIn: https://www.linkedin.com/company/airdna/
Twitter: https://twitter.com/airdna
TikTok: https://www.tiktok.com/@airdna.co
Instagram: https://instagram.com/airdna.co