The popularity of short-term rentals slid in 2023 as the world emerged from the COVID-19 pandemic, but demand is expected to pick up this year, according to STR analytics firm AirDNA’s 2024 outlook report. Still, some cities may offer better returns for Airbnb and VRBO hosts than others—and the top performers aren’t typical coastal vacation hot spots.
JW Surety Bonds, a national company, crunched data from AlltheRooms.com, an STR analytics site, and realtor.com® to evaluate the 100 largest U.S. cities on average net profits, mortgage payments and Airbnb and VRBO rental data. From there, AirDNA identified the markets with the most short-term rental returns on investment. Topping the list for 2024: Henderson, Nev., a town just outside of Las Vegas. Henderson had the highest estimated average yearly ROI per property, at $31,706, and ranked near the top for occupancy rates.
Meanwhile, for those looking to keep their properties fully booked, the markets with the highest VRBO and Airbnb occupancy rates were Jersey City, N.J., and Boston, at 69% each, the study notes. That indicates strong and consistent visitor interest in short-term rentals, researchers say. Real estate professionals can spur purchases of short-term rental properties by sharing common STR ownership myths.
Demand Rising in Small, Midsize Markets
Following blockbuster growth in 2021 and 2022, short-term rentals in 2023 had more of a “correction year,” the AirDNA report says. Many hosts saw revenues decline last year as inflation strained consumers’ budgets. Demand slowed most considerably in coastal and mountain locations, which may have been due partially to hurricanes and wildfires.
“Surprisingly, demand continues to be the strongest in small and midsize cities across the country,” the report notes, adding that such markets are expected to be the “resounding leaders in demand growth and will continue to increase their share of the U.S. short-term rental market.” For example, several Texas markets, like San Antonio and Austin, already are experiencing an uptick in demand for this year.
AirDNA researchers predict that overall demand for short-term rentals will pick up starting this spring. “Wages are now growing more quickly than inflation, and consumers can look forward to having higher purchasing power independent of their savings,” the report notes.
But urban locations are likely to continue to see slower growth. While urban cores had some of the quickest growth rates in 2022, they now face increased competition from hotels and a growing number of restrictive regulations that are stymieing demand, the report cautions.