Rising Demand for Short-Term Rentals Ahead of Labor Day Weekend
As Labor Day approaches, demand for short-term rentals in the United States is experiencing a notable surge. Recent data indicates that vacation rentals in coastal regions are witnessing increasing bookings, reflecting a strong desire among travelers for a final summer getaway. According to AirDNA, a firm specializing in vacation rental analytics, July saw record demand with 26.4 million nights booked, marking a 3.6% increase compared to the previous year.
Despite ongoing economic challenges, including rising prices and weak employment figures, Americans appear undeterred in their travel plans. The average daily rate for short-term rentals climbed nearly 6.9% year-on-year, reaching just over $351. Jamie Lane, Chief Economist at AirDNA, emphasized that summer vacations are often prioritized, stating, “Summer vacation is usually like the last thing someone’s willing to give up.”
Travelers are gravitating towards larger and pricier rental properties. Demand for rentals with six or more bedrooms has increased more than 13 times faster than for single-bedroom listings since February. Despite this increase in demand, average occupancy rates fell to 67.4%, a modest decline of 1.1% from the previous year, largely due to a rise in available listings. Nevertheless, the total number of nights booked has increased by 0.7% year-on-year.
International travel trends have shifted as well, with a significant drop in demand from foreign tourists. The number of short-term rental bookings from Canadian travelers fell by more than 48% compared to 2024, attributed to the ongoing repercussions of Donald Trump’s trade policies. This decline has been somewhat offset by increased domestic bookings, as American travelers filled the gap.
Joel Berner, a senior economist at Realtor.com, noted the resilience of the short-term rental market, stating, “Generally, when the economy is tight, travel is one of the first industries to take a hit. STRs do not seem to be feeling this pinch this summer.” Revenue per available rental (RevPAR)—a key metric for rental performance—rose by 5.7% annually, reaching $237, driven by higher rental rates.
Top Coastal Markets for Short-Term Rentals
Coastal areas have shown remarkable revenue growth for short-term rentals. Notably, Maui, Hawaii, reported a 17.3% increase in RevPAR, even as it continues to recover from the devastating wildfires of 2023. Lane highlighted that the limited growth in available rentals has led to increased occupancy, allowing hosts to charge higher rates. “Last year, people were avoiding Maui,” he explained, noting that demand has rebounded as tourists feel more welcome.
Maui’s rental market faces uncertainty as local authorities consider Bill 9, a proposal aimed at banning short-term rentals in areas with multifamily housing. This legislation could significantly impact property owners in condominiums, prompting some to contemplate legal action to safeguard their investments.
In the contiguous United States, South Carolina’s coastal towns are also witnessing impressive growth in the short-term rental sector. Hilton Head Island, which attracts over 2.5 million visitors annually, is a prime example. The island’s blend of scenic trails and outdoor activities continues to draw tourists. Similarly, Charleston experienced a 14.5% increase in RevPAR, largely due to heightened rental rates. This charming city, famous for its rich history and culinary scene, welcomed approximately 8 million visitors in 2024, generating an economic impact of $14 billion.
Future Outlook for Short-Term Rental Investors
The current trends in short-term rentals indicate a potential upswing for investors looking to enter the market. After a challenging period marked by oversupply and fluctuating demand, the summer data suggests that rentals remain a viable investment. The supply of short-term rentals contracted in July, with listings increasing by only 4.6%, a decrease from 5.7% in June.
Should the Federal Reserve proceed with anticipated interest rate cuts in September, more individuals may consider purchasing investment properties for short-term rentals. Berner highlighted the appeal of domestic vacations this summer, particularly as the U.S. dollar weakens against other currencies, encouraging families to opt for high-end rental properties domestically.
Overall, the short-term rental market’s resilience amidst economic uncertainty suggests that it may continue to thrive, offering opportunities for both travelers and investors in the months ahead.
