How Did the STR Industry Perform in 2023?
A Short-Term Rental Market Overview for 2023
The short-term rental industry is one that is dominated by highs and lows, and 2023 was no exception. With lower occupancy and RevPAR than has been seen since 2019, owners may be worried about the future of the vacation rental market.
In general, the short term rental industry in 2023 continued to see a significant rise in supply (available listings) which outpaced the continued increase in demand (nights booked). This led to a drop in RevPAR and occupancy, while ADR saw increases. To better predict how 2024 will play out for the short-term rental industry, let’s dive into how the market performed in all four quarters of 2023.
Keep in mind that the data we’ll go over in this blog is national. Although national trends tend to correlate with local markets, local markets can act differently due to differences in seasonality or local events. In general, most markets follow along with the data shown in this AirDNA’s reports.
Q1: Rising Demand Contends with Lower Occupancy and RevPAR
The first few months typically set the tone for the rest of the year, and the first quarter of 2023 continued a pattern seen at the end of 2022–with supply at the highest it’s ever been, occupancy and RevPAR both fell into a downward trend while demand continued to rise.
In January 2023, RevPAR fell by 0.5% year-over-year according to AirDNA’s report, while occupancy dipped 4.2%. However, demand began to rise during the beginning of the year, with a 12.4% increase year-over-year. Average daily rates also rose during this period, up 3.8% over 2022, while nights booked increased by 15%.
In February 2023, the market saw a staggering decrease of 8.7% in occupancy rates from 2022 with a 5.8% decrease in RevPAR as well. It wasn’t all bad news for February, as average daily rates still rose during this period, swelling 3.1% year-over-year. March slowed the declines in occupancy a bit, falling only 4.1% year-over-year, but average daily rates fell by 0.1% in March as well. Demand also continued to rise in both February and March, increasing by 8.1% and 9.5% respectively.
Q2: Dips in Occupancy and RevPAR Continued While Demand and Booking Growth Increased
April began to show some promise for the short-term rental industry, with AirDNA reporting that booking growth surged to 7.5% in April, up more than double its number from March. Demand also rose by 5.2% in April as well. However, declines in RevPAR and occupancy continued as both fell by 9.6% and 8% respectively. Average daily rates also fell during this period by 1.8% year-over-year.
In May 2023, the same patterns continued from the beginning of the year, with demand rising 5.3% year-over-year while occupancy fell by 5.7% and RevPAR decreased by 6.4% year-over-year. Average daily rates continued to fall, though not at the rate seen in April, with a 0.7% decrease year-over-year.
By June 2023, the slide in occupancy slowed a bit to -1.8%, signaling that the overabundance in supply had finally begun to rebalance in the market. RevPAR also slowed its decline as well, falling by only 2.8% year-over-year in June compared to its 6.4% decrease the previous month. Demand continued to skyrocket, rising 9.7% year-over-year, signaling that the market is in a healthy place despite some setbacks in RevPAR and occupancy rates.
Q3: Summer Supply Leads to Falling Occupancy
July of 2023 was a big month in many ways, but not in the least due to AirDNA reporting the highest amount of short-term rental stays in one month. At the same time, demand increased by 6.5% year-over-year. But although there were positives to the market in July, the trends seen in the rest of the year persisted, with RevPAR falling by 6% year-over-year and occupancy dipping 4.1% year-over-year. Average daily rates also continued to fall, declining 2.0% year-over-year.
As the summer continued and sweltering temperatures dominated much of the US, occupancy rates only fell further, and by August of 2023, occupancy rates were 7% below where they’d been in 2022 and 5.2% lower than in 2019. RevPAR also continued its downward trend, falling by 8.4%, and average daily rates also dipped by 1.5%, slowing from the previous month.
September showed a bit more promise as the heat wave slackened off and demand picked up by 4.1%. The beginning of the shoulder season also offered a more moderate occupancy rate decline of 0.8% over 2019 and 5.5% behind 2022’s occupancy rate for September. RevPAR fell yet again, though a little less than August at an 8.1% loss, while average daily rates fell by 2.7% year-over-year.
Q4: Trends Continue Throughout the End of the Year
October played into the same pattern as the previous months, with demand rising 6.4% year-over-year and available listings jumping by 17% year-over-year, according to AirDNA’s report. RevPAR and occupancy both continued their decline, falling by 8.1% and 5.3%, respectively. Occupancy in particular was also lower than seen in 2019 by 1.9%, signaling a return to closer to 2019’s occupancy levels.
In November, things began to look up a bit. RevPAR nearly halved its decline over the previous month, falling only 4.3% year-over-year, while occupancy dipped by 5.9% year-over-year but grew by 0.6% in comparison to 2019. Average daily rates also increased during this period by 1.7%, while demand reached a staggering 8.0% growth year-over-year.
In December, much of the same trend reared its ugly head again, and RevPAR began to fall back into its average data points for much of the year, falling yet again by 8.1% year-over-year according to AirDNA. Occupancy is now firmly back to its 2019 levels, decreasing by 5.8% year-over-year but only by 0.6% over December 2019.
Withstand Any Market Conditions with LocalVR
2023 was by no means the best year to be a vacation rental owner. With the boom of the post-pandemic period now just a memory and an overabundance of supply from 2022 finally rebalancing the market, we are seeing closer to 2019’s performance in the short-term rental market.
Diving deep into data can be a tedious task, but thankfully, the experts at LocalVR make it a cinch. If you’re a short-term rental owner looking for a property management company with the expertise to withstand any market, contact LocalVR today.