Recent research conducted by CBRE Short-Term Rentals: A Maturing U.S. Market and Its Impact on Traditional Hotels highlights a consistent rise in short-term rental (STRs) stocks in previous years –but is this growth about to end?
The report, published this year, predicts that 100,000 net new STRs will penetrate the U.S. hotel market in 2020, accounting for 12.2 per cent of the overall accommodation supply –a rise of 1.8 per cent from 2019.
What are short-term rentals?
It is a highly diverse category of accommodation and includes houses, apartments, condos and lofts, as well as ‘unique units’ like lighthouses, boats and treehouses. STRs have become a popular alternative to traditional hotel accommodation which is prone to full occupancy at peak times. But location, cost and experience are also key drivers for uptake.
Three markets (Los Angeles, New York and Orlando) account for 12 per cent of the total STR supply in the U.S. –Los Angeles being the largest. Elsewhere, Atlanta was recorded as the fastest-growing market, in part due to the Super Bowl.
None too surprisingly, the largest distribution platforms for this type of rental are websites such as Airbnb, Booking.com and HomeAway. It is, therefore, not uncommon for stock numbers to fluctuate as casual landlords capitalise on holiday seasons and popular events to make extra income from travellers outside the corporate market.
The decline in market growth
However, “the days of STR units doubling every year are long gone” the report cautions. In 2019 the number of short-term rentals in the U.S. grew by only 26 per cent, a significant decrease on the 39 per cent recorded in the previous year. The slump is attributed to various factors from market saturation –especially in rural and suburban areas – to tightening regulations.
Irrespective of the downturn, the findings indicate that STRs do impact hoteliers. The availability of more cost-effective options has reduced their ability to hike rates during peak periods, slowing RevPAR growth –something ASAP comments was at its lowest in 2019 than in “any year since the recession.” In addition, declining ADR levels may restrict new hotel construction.
Despite this, not everyone believes that STRs are a problem for the hotel industry. A recent article by Skift quotes Gary Steffen, Hilton’s global head of Canopy, at the American Lodging Investment Summit: “We believe this is a different kind of customer looking for a different kind of stay…we don’t think it’s bad for the industry. It’s bringing in people who want to travel.”