U.S. overtakes Europe for largest share of rental bookings

Driven primarily by beach and mountain markets, the United States experienced the biggest gain in share of gross bookings of short-term rentals during the COVID-19 pandemic, and has overtaken Europe in 2022 for the largest regional share.

Europe’s loss in share will be exacerbated by economic and war concerns, as well as increased regulatory restrictions in important markets.

One example is Paris, where in early 2021 both France’s and Europe’s highest courts ruled in favor of regulations intended to hinder the negative impact of STRs on the housing market. The decisions made tax registration obligatory and restricted the renting of primary residences to a maximum of 120 days per year.

Asia-Pacific experienced a sharper decline in share of STR bookings in 2021 due to strict pandemic lockdown policies. The region is projected to bounce back, however, and surpass 2019’s share level by 2026 as the rental markets rebound and mature. Rest-of-world will lose share as all major markets are predicted to strengthen.

As demand exploded from mid-2020 through mid-2022, the biggest challenge facing many STR markets was a lack of supply.

This environment drove up average daily rates to new heights and pushed the industry to add new inventory as fast as possible. Now, with a recession manifesting, uncertainty also returns. And as in the last recession, people are turning to STRs as an additional income source, further adding to supply.

If demand drops off abruptly, the market could be left with a glut of supply and plummeting ADRs. Conversely, should demand remain strong, sustained high ADRs may price many travelers out of the market - especially as elevated STR fees push total cost of stay even higher.

This possibility is even more relevant as hotels are making a robust comeback, with many touting their more consistent quality and amenities. Some news outlets are reporting that this dynamic is already pushing would-be renters back to hotels.

Despite the challenges, the STR market is expected to sustain post-pandemic momentum in the coming years. Its trajectory solidifies the segment as one of travel’s hottest areas as it matures into a core product in the traveler’s arsenal, competing ever more directly with hotels for attention.

Many of these themes as well as the ongoing professionalization of STRs and the potential impact of a recession on the sector were also discussed during the Executive Panel: Growing Pains - the Maturing of Rentals session at The Phocuswright Conference in November.

See below for the full session with Jamie Cohen, CFO at Vacasa; Brian Egan, co-founder and CEO of Evolve; and Margot Schmorak, CEO and co-founder of Hostfully. The panel discussion was moderated by Phocuswright’s senior research analyst Madeline List.