How the Hotel vs. Airbnb Battle Completely Flipped

Dave:
Hey, everyone. Welcome to On The Market. This is Dave Meyer, your host, joined by Henry Washington. Henry, you really went out of your way for this one to go all the way to Maui and post up in a short-term rental just to set the mood for the show about short-term rentals. It’s very nice of you.

Henry:
Look, that’s the extra mile that I’m willing to go for you, Dave. I am willing to get on a plane and fly to Hawaii just so that we can do a show on short… I did this just for you, Dave.

Dave:
That is the Henry Washington experience, everyone. What a standup gentleman.

Henry:
I will go to a tropical destination just so that you can get the inside information at that tropical destination.

Dave:
Well, for you, we’re going to do one of these shows once a month so you can start traveling around and go to a short-term rental. Well, we do have a great show for you all today. Honestly, I feel like it’s been way too long. We’ve been doing On The Market for what, 140 episodes?

Henry:
Yeah.

Dave:
We finally have a real bonafide expert on short-term rental data. We’ve had some fantastic operators on the show already, but we have Jamie Lane joining us today who runs the Research Department. He’s the Vice President of Research for AirDNA which, if you don’t know them, is one of the biggest short-term rental companies out there. I’m super excited to talk to Jamie about all the headlines out there about whether short-term rentals are declining or what’s really going on in the industry, and Jamie is definitely the person to tell us what’s truly going on.

Henry:
Yeah. The internet says the sky is falling out of the short-term rental market, and headlines are sometimes just headlines, and sometimes there’s some truth behind it, and I think what a great way to… Actually, let’s find out what the actual data says so that people can make informed decisions about growing or scaling a short-term rental business.

Dave:
All right. Well, with that said, let’s bring on Jamie Lane, the Vice President of Research for AirDNA.
Jamie Lane, welcome to On The Market. Thanks so much for being here.

Jamie:
Yeah. Thanks, Dave and Henry, for having me.

Dave:
Jamie, let’s just start by having you introduce yourself. Can you tell our audience what you do for AirDNA?

Jamie:
So I am the Chief Economist at AirDNA and SVP of Analytics. I’ve been with AirDNA now for three years.

Henry:
So for our audience who maybe hasn’t heard about AirDNA, tell us a little bit about what kind of data AirDNA helps with and what you guys track.

Jamie:
Yeah. So we are a short-term rental data and analytics company. We track the global performance of short-term rentals. So every listing that’s online and available for rent across Airbnb, Vrbo, Booking.com. We track the performance of that listing and then provide that data back to our customers. So, for investors, they can understand what the earning potential is of new investments, what markets and sub-markets make the most sense to invest in today, and what the future earning potential of those investments might be.

Dave:
Henry and I have a long list of questions that everyone else probably cares about, but I have to ask questions selfishly. How do you track all of that data? I’m just very curious how you get it because it seems like a very unique dataset.

Jamie:
It is a very unique dataset. So we actually started tracking it back in 2014, and we do it by collecting it from the OTA. So, Airbnb and Vrbo. We are looking at the calendars of every single listing every single day, and then tracking the movements in those calendars. So is a night available? When does it go unavailable? We then have a proprietary machine learning algorithm that can tell whether that’s a booked or a blocked night. We then take the last variable rate for that unit for that night as the revenue for that booking, and then we do that every single day across 10 million listings around the world, so it’s a massive data undertaking. We’ve got teams of engineers that manage the pipelines. We have to check the accuracy. There’s changes happening across the OTAs every day that we have to keep up with that makes it a… It’s makes it a serious endeavor.

Henry:
So what you’re saying is it’s no big deal, it’s just a couple of inputs, and you just throw it all together? Easy-peasy?

Jamie:
Yeah.

Henry:
I am also a data nerd. I did data analytics for my career before I went into the real estate business. So thanks, Dave, for asking that question because that’s… I always have an appreciation to hear about how this stuff is put together because it’s crazy difficult, and then I’m cool that you guys get to do it now, and I just get to sit back and be a person that looks at the aggregate.

Jamie:
Yeah. I spent 10 years as an economist covering the hotel industry before joining AirDNA, so that was… Actually, I was one of the, if not the first, customer of AirDNA getting the short-term rental performance data and actually incorporating it into our analysis of the hotel industry and trying to predict its future performance because obviously, the short-term rental industry and its massive growth that we’ve seen has impacted how hotels are able to perform and the rates they’re able to charge.

Henry:
So let’s talk about what everybody else is thinking about when they hear short-term rental or AirDNA because there’s been all kinds of crazy, scary, the world is falling apart, doomsday headlines about the short-term rental space. Every time you turn on your phone, you’re hearing somebody say, “Airbnb is dead,” or, “Short-term rentals are dead.” So going into the fall, what do you see demand looking like for short-term rentals in this current market?

Jamie:
You’re not talking about Twitter X and the doomsday scenarios that we’ve been seeing on that. I don’t know what you’re talking about. Yeah. There’s been a narrative out there around the collapse of the short-term rental industry. That is not what we’re seeing really at all. We’re seeing a normalization of performance. So back in 2018, 2019, short-term rentals averaged about 55% in terms of overall occupancy. Now, that accelerated massively in 2021. So for a full year, it averaged about 63%, so 800 basis points higher for occupancy. While it might not seem big, that’s a big change for an industry that was typically running in 55% year after year after year. Though 2018, 2019 was the historical peak. That was one of the best years ever for travel, for short-term rental performance. That was a really good year.
If you think about how we got to that 63% occupancy in 2021, it wasn’t because we saw a massive increase in demand for short-term rentals. So the narrative that everyone started traveling and staying in short-term rentals in 2021, demand was essentially flat compared to 2019 when it had been historically growing 10%, 15% per year. What happened was we saw a massive decrease in supply. So supply dropped 25% roughly in 2020, and it took a long time to crawl back. So, in 2021, demand started coming back, supply wasn’t there, and that pushed occupancies to those record levels. So, now, we’ve started to see a normalization coming back down. We only expect 2023 to end up at 58% occupancy. So, yes, down from the 63%, but not nearly what we were at pre-pandemic. So it’s, in our opinion, a very healthy market.

Dave:
Where does supply sit now, Jamie? You said that it took a little while to recover. In 2023, how does it compare to pre-pandemic levels?

Jamie:
Yeah. We’re sitting about 25% higher today than we were at in 2019, but as I said, the trajectory of what we are growing at pre-pandemic was growing 10%, 15% per year. So we’re now what? Four years past the onset of COVID and have only grown 25% over that past year. So we’re well below the trajectory that we are on. We’re getting back to it. Last year was a good year for growth. Supply was up about 20%, but now where it slowed in 2023, we’re running about 12%, 13% growth this year.

Henry:
So tell us a little bit about where you are seeing… Go both ways. So where are you seeing dips in occupancy, and then what parts of the country are you seeing STRs are really rocking it right now?

Jamie:
Yeah. Where we’re seeing the dips is more areas that we’re seeing the most normalization. So there’s markets like Joshua Tree or Phoenix, Coachella Valley that did really well in 2021 into 2022, and both on the demand side. So we had, in a lot of these markets, abnormal seasonality patterns like people traveling to Phoenix and Joshua Tree during the summer. I don’t know if you’ve been to Phoenix or Joshua Tree during the summer.

Henry:
Why?

Jamie:
They’re not markets that you typically want to travel to. When you look at the occupancies that those markets were generating pre-pandemic, those were the slow seasons. So now we’re getting back to normal, typical seasonality patterns in this market, which is causing it to look like occupancy is declining all the while, and it is declining, but it’s still a very healthy normal market. Then, there’s other areas like a market like Miami that has seen significant supply growth and is actually seeing overall weakness in demand, and that’s a market that’s interesting because of the impact of domestic and international travel. So that was a really popular market for people that wanted to travel to maybe an exotic city, but wanted to stay in the US, wanted to be able to go to the beach.
Now, we’re seeing a lot of people start to travel overseas again, and Miami is a market that has historically been really dependent on international travelers coming into it as tourists, and we’re not yet seeing the recovery of international travel to the US. So that’s a market where we’re seeing some overall occupancy weakness, but it really is a different story for each city on why we’re seeing the declines. Just about every market is seeing declines in occupancy in 2023, but still just about every market is above 2019 levels of occupancy.

Dave:
Jamie, what if you cut and look at the data a little bit differently rather than trying to segment by geography? Do you have any insights into other characteristics of the rentals that are seeing more occupancy or declines in revenue? I’m just thinking, is there anything about tenure of the operator or scale? Is it upscale, midscale, something like that?

Jamie:
So we do actually segment all properties into different price tiers, and this is one of the changes we’ve had since in the past couple of years that you can go on and see the performance of luxury properties, or budget properties, or mid-scale properties. Throughout history and even today, luxury properties typically generate the lowest overall occupancy, and it’s much higher ADR. A lot of homeowners have a much higher ADR threshold for which they’d be willing to rent out their home and wanting to control the type of renters that are coming in, making sure their property is not getting trashed on a party or something like that.
So 2019 luxury properties are generating less than 50% occupancy. They saw the biggest increase over the past four years. So they’re generating well over 50%, almost 60% occupancy in 2021 now running about 56%. So they saw the biggest overall increase, and a lot of that was the higher-end traveler that’s staying domestic that would’ve traveled overseas without the pandemic. That’s especially true in coastal and mountain markets, and that plays into maybe the narrative in an area like Destin or Panama City that did really well, especially at the higher end because someone like from Atlanta that’s going to do a drive-to-beach vacation, drive down there instead of traveling maybe to Nice, or Cahan, or somewhere in Europe.
Those locations now are seeing the biggest overall decline at the luxury side because of the changing travel patterns for those consumers. So that’s an area we’re seeing overall weakness. Where we’re actually seeing the best performance is in that mid-tier. So reasonably priced properties are still relatively competitive to hotels and a really good product. So has key amenities, well-located, on the beach. These are the type of things you’d actually want to rent, and they’re doing really well today. So going after that core travel segment that uses short-term rentals on their vacations.

Henry:
Well, I love hearing that because I have mid-tier short-term rentals, and they have been doing fairly well consistently, and so hearing that makes me happy. Real quick, define ADR for the people who don’t know what that is, and then I have another question for you.

Jamie:
Yeah. So maybe I’ll go through the three main metrics. So occupancy and how many nights are you selling out of every night that you make your unit available. ADR is the average daily rate. So what is the rate that you’re actually selling that night for? Then, RevPAR. That’s one of the best ones. That combines occupancy and ADR. So what is the average revenue that you get for every night that you make available? Essentially, you just multiply your ADR times occupancy because you can manipulate your occupancy by either increasing or decreasing your rates. So if you want to drive up occupancy, you can lower your rates, fill your unit every night of the year. So RevPAR is that great mix. So you can really get to the overall health of how your units and how the industry is performing.

Henry:
Wonderful, and my next question, I’m asking for a friend. You said those mid-tier short-term rentals tend to do the best, especially if they have the right amenities with those mid-tiers. So what are you seeing? What are the right amenities or the best amenities for those mid-tier type properties? Again, this is for a friend. I’m just going to relay this information. No big deal.

Dave:
Such a nice guy.

Jamie:
It really depends on the market, and that’s where… In certain markets now, there are certain amenities where they’re considered table stakes. If you don’t have those amenities, then you just can’t compete for guests. If you’re investing in Gatlinburg right now, and you do not have a hot tub, you’re a budget property. You’re a property that’s going to… and 80% of properties, entire home properties in Gatlinburg have a hot tub. So it really depends on the market properties. Like in Joshua Tree, if you don’t have a pool in Joshua Tree, you’re seeing double the overall decrease in occupancy from the market average. So there are certain things like during the pandemic, maybe you would’ve got booked in Joshua Tree if you didn’t have a pool, but now you’re having to really compete to find guests if you don’t have those basic amenities.
There are amenities that can take you over and above like having game rooms, having pickleball courts, having just unique things that really make your property stand out, and those unique things are what’s driving outsized performance in those markets, and those are constantly evolving as like in 2018 in Gatlinburg, if you had a hot tub, you’re like, “Oh, yeah. I’ve got the new hot amenity,” and then everyone copies you. So you constantly have to be seeing what those top-performing properties are doing to make sure you’re staying competitive.

Henry:
So what you’re saying is that your answer is saying people should look at the data from the data company.

Jamie:
You caught me. Yeah.

Dave:
Well, I think the best business in all of real estate is being a hot tub repair company in a short-term rental market because the amount of money I pay the service company for a hot tub because you have to have it like you just said, Jamie, is ridiculous. In these small towns, there’s two of them, and they definitely collude on prices, and good for them they’re making a killing. Anyway, I digress. So we’ve talked a little bit about supply, demand, and occupancy. I’m just curious a little bit about average daily rate and how that compares not just to the short-term rental industry, but how it also compares to the hotel industry because I think… We talk about this a lot on the show, Jamie, is that short-term rentals, they’re, of course, real estate investments, but your competition is as a hotel, not a rental property or not a flip. So I’m just curious how that all stacks up in today’s climate.

Jamie:
Yeah. So one of the things that have made short-term rentals such an attractive investment over the past couple of years is the massive increase in ADRs that we’ve seen. So ADRs today are 40% higher than they were in 2019 overall for the short-term rental industry. That makes the returns on investment that much more attractive because it’s not like you’re having to turn over more units, pay more for cleaning, all those things. This is just the exact same home that you’re now being able to rent out for 20%, 30%, 40% more, and that comes essentially right down to the bottom line in terms of your profitability of operating these investments. What we are seeing though is the rate of increase is slowing substantially and even declining in a lot of markets around the country, and it plays into the overall inflation picture that we actually see in the economy.
So, last year, last summer, inflation was what? 9%. That was what caused the Fed’s reaction to start raising interest rates. Short-term rental ADRs were growing up 11%, so we were outpacing the rate of inflation. That was great for short-term rentals, not great for the Fed’s reaction to all the rising prices that we’re seeing across the overall economy. Now, we’re actually seeing ADRs decline slightly. So, last month, we saw about a 1% decline in overall ADRs for short-term rentals. We’ve seen a few months now of consistent year-over-year declines which means… and overall, you’re not getting as much. A lot of what’s playing into that is the declining occupancies.
So if you’re seeing your unit not being rented as much, you want to maintain the occupancy that you’re getting. You’re cutting your rate to stay competitive. Bring guests into your properties. That’s happening across the country. Not necessarily great for our industry, but great for the price pressures that are going to overall impact the real estate industry long-term of the Fed feeling comfortable that prices aren’t going to overall spiral. Then, how that competes with hotels is hotels had seen overall weaker performance coming out of the pandemic. So people were much more likely to stay in a short-term rental relative to a hotel.
Now, that’s largely flipping. Hotels have seen really strong performance in the past couple of years. A big part of that is the return of business travel or return of conferences, people going to these big events, and hotels now have significant pricing power. So they were growing rates 5%, 6% this summer which actually means hotels are starting to look a bit more attractive. Overall, hotels are still more expensive, comparable units in major cities. Short-term rentals is more expensive in coastal destination markets, and it’s not necessarily a fair comparison given that you get a kitchen, more amenities, and short-term rentals relative to hotels.

Henry:
Yeah. I mean, you do get more amenities, it seems like, in an Airbnb. I think what makes it attractive for myself in particular is when I travel… and I like to bring everybody. For example, I’m sitting in a short-term rental right now, and we chose short-term rental over a hotel because I can get multiple bedrooms because I brought my kids, I brought my two kids, and then we brought a nanny with us so that my wife and I can actually get some quality time in this vacation destination. So when you’re going to be stacking multiple rooms in a nicer luxury hotel, it gets super pricey compared to a short-term rental. But in that same vein, are there certain clients that you see that are more attracted to hotels or more attracted to Airbnbs? What’s that client base look like?

Jamie:
Yeah. So, overall, and this narrative that’s really held over the entire four years since the onset of COVID has been the larger the property, the better your performance. So people that are traveling with groups, traveling with families maybe started staying in short-term rentals for the first time and are continuing to choose short-term rentals for that type of travel. If you look at the hotel industry’s response, it’s been like Hilton saying, “We’re going to now let you confirm adjoining rooms, and that’s our response to all the demand for short-term rentals.” Over half the pipeline for new hotel investment is extended stay properties, so properties with kitchens, properties with additional bedrooms, suite-style hotels.
So they’re seeing what’s happening in terms of the popularity of the short-term rental product and trying to adapt to it. I think they’re going to have a hard time overall really competing, and we’ve actually done a lot of studies in terms of what’s happening in terms of short-term rental share of overall paid accommodation. So the total number of rooms being sold across hotels and short-term rentals. The short-term rental industry had been growing their share of overall travelers and pretty significantly. That obviously increased in 2020, came back down in 2021, and now we’re slowly pulling back share again from hotels. Still, 85% of overall travel is happening in a hotel room, so there’s still a much bigger slice of the overall pie of travel, but short-term rentals were 8% of overall demand in 2018, and now we’re up to almost 15%. So this industry is growing more and more. People are trying it for the first time, and seeing that for certain types of travel, it is a much better fit for how you want to interact and have accommodation when you go on vacation.

Henry:
Yeah. If hotels figure out how to compete with this multiple-room, large-family scenario, but in a hotel environment, I will be a sucker for it because I love a good hotel bar and delicious restaurant access by just walking downstairs. So I’m their huckleberry if they figure that out. That’s for sure. One more thing I wanted to ask about hotels and Airbnbs. So are you seeing certain markets where hotels are beating out Airbnbs particularly?

Jamie:
Absolutely, and it’s interesting the types of markets that are really beating out hotels. It’s not because of anything the short-term rental industry is doing. It’s what’s happening in terms of regulation. So we just saw new laws going to effect in New York which dropped the short-term rental supply by almost 80% overnight. We had regulation go into effect in Los Angeles, and Chicago, and Boston, and Dallas. So there is an impact there in terms of the short-term rental industry able to and just provide the accommodation that people want in the types of units that they’ve showed historically that they want to be able to stay in because of new laws and regulation going into these markets.
So if you look at the overall share of demand staying in short-term rentals in urban areas, we’re now essentially at 2018 levels of share. So all the growth that we’d seen in 2018, 2019, 2020, 2021 has essentially disappeared because of lack of supply in those markets to accommodate guests in the areas where short-term rental supply has been growing the most, so beach and mountain markets, small and mid-size cities. Short-term rental share in those areas is just going gangbusters and continues to grow at a great rate.

Dave:
What about international markets, Jamie? I’ve read a lot about US travelers going internationally a lot particularly this year. Are you seeing a lot of growth there?

Jamie:
Yeah. So I talked a little bit about areas that we’re seeing weakness in the US because of Americans now traveling overseas. That has been a real bright spot for the global short-term rental industry of Americans really coming back at an amazing rate of traveling overseas again. So we track the overall share of international travelers in these destinations. It’s now at record highs. There’s markets like Ireland, Switzerland, Italy, Portugal, and over 15% of the demand for short-term rentals in those markets is coming just from Americans over the past year.

Dave:
Wow.

Jamie:
So a massive increase in demand there. There’s events really coming back now, so we are tracking… I had the team just look into what was going on in October Fest, and we’re seeing demand up 30% this year for stays in short-term rentals compared to last year. So, now, fully recovered back to pre-pandemic highs and seeing strong growth. So people traveling for these fun events in Europe, again, going back to the beach, going back to Greece, going back to south of France, and it’s really a healthy market where Europe… If you looked at the data in 2021 and 2022, it was really struggling. So lockdowns were much more stringent there. People were really reluctant to get on a plane for 10 hours. Now, that really shifted, and people are getting back to traveling, and it’s… The Americans are back.

Dave:
Yeah, man. Tell me about it. All my good deals on Airbnbs in Europe have evaporated over the last two years. Everyone stay away.

Jamie:
So a data point there for you, Dave, you laugh, but I had mentioned how ADRs were down in the US. ADRs this summer were up 15% in Europe year over year.

Dave:
Wow, wow.

Jamie:
Yeah.

Dave:
Yeah. I mean, you see it firsthand. Everywhere is just bustling right now.

Jamie:
Yeah.

Henry:
Okay. So, obviously, you have access to all this amazing data, and I’d imagine most people listening to this show are either current short-term rental operators who are wondering should they be growing and expanding their portfolio, or they’re aspiring short-term rental operators, and they want to get into this space. So what advice would you give to those people who are looking to either grow or get started in this space? What should they be looking for, not looking for, adding, or avoiding?

Jamie:
So this may sound self-serving, but you got to be looking at the data.

Dave:
You’re a good company here, Jamie. Our audience will be receptive to this idea.

Jamie:
Your audience is going to know that affordability of housing is at all time lows, and you’ve got interest rates over 77%. We’ve got housing values still at all time highs. So we had seen a little bit of dip. That’s now come back and reaching all time highs again in terms of housing values. Short-term rentals revenue peaked early last year. We’re not seeing an overall decline, but it’s essentially plateauing at the peak, which makes it where you’ve got to be really careful and really, I would say, intentional in where you’re going to make an investment today where if you were looking in maybe 2020 and 2021, you could throw a dart on a board, hit a market, and probably have found a great investment. That is much harder now. We’re seeing way more activity in small and mid-size markets today.
Essentially, the best investments for short-term rentals in a lot of ways the areas that haven’t seen significant upticks in housing values over the past three or four years. Those markets are becoming harder and harder to find, and you’ve got to find ones that still have the drivers of short-term rental demand. So maybe a state or national park nearby, maybe a hospital or a university that’s driving a demand to that destination, but there’s still great markets out there, and we’re trying to build new and innovative tools to help people find those diamonds in the rough. Not only the best markets to invest in, but I would say just about every market has got a sub-market that is investible today. It just might not have been the same market or sub-market that you would’ve invested in even just last year.

Henry:
Your advice does sound a little self-serving, but I appreciate it because we’ve been saying this, really, about all aspects of real estate investing when we talk about it on this show, right? This market is forcing people to be more fundamentally sound investors because it’s a much more unforgiving market. So education in any real estate investment industry is so much more important right now because you can’t make the mistakes you could make two or three years ago. Two or three years ago, you make a mistake, your value was going to go through the roof, and you’d be fine. Right? Two or three years ago, you make a mistake with a short-term rental, and you were still getting booked up. It didn’t matter. The market is just not allowing for that now, but it doesn’t mean that it’s falling apart. Right? You have to ignore the headlines, and dig into the data, and do the research. There are always opportunities in every market, and essentially, what you’re saying is you’ve got to do the research. Find the areas where there’s opportunity, and then capitalize on that opportunity. That’s investing fundamentals, so I really do appreciate that answer.

Jamie:
Yeah. When you’re looking at the data, and just to give a tangible example, if you’re looking at the current occupancy that your market is running, go back and look at what it was running in 2018 and 2019. If it’s still magnitude is higher, you’ve got to expect it to normalize back to those levels, and you can’t expect the highs that we’ve been running to continue. That’s, I think, unsafe, maybe conservative underwriting, but I think prudent in the type of environment we’re at.

Dave:
Well said. Well, Jamie, thank you so much for joining us. You don’t know this yet, but you will be appearing on this show again. Well, if you’ll have us, but we would love to have you back. This was super helpful. If people want to follow you and AirDNA, where should they learn more?

Jamie:
Yeah. So, AirDNA. Our website is airdna.co. Me? I’m active on Twitter, @jamie_lane, or on LinkedIn. Please follow me. I talk about short-term rental data all the time, and we also, if you like the podcast format, have a data podcast on short-term rentals called the STR Data Lab, and you can hear me every week talking about this sort of stuff.

Dave:
Awesome. Great. Thanks again, Jamie.

Jamie:
Thank you.

Dave:
So it sounds like even though we are both short-term rental investors, we both prefer hotels. Is that why?

Henry:
It’s 100% accurate. If I have a choice, price excluded, I’m going to stay at a hotel 10 out of 10 times.

Dave:
Dude, I’m exactly the same way. I find going to cool hotels to be one of the most fun things to do about traveling. I love checking out new hotels.

Henry:
For me, too. It’s nostalgic for me. My parents used to take us on all these trips. They didn’t believe in taking vacations without the kids, and this was back when you could just let kids wander. So we’d check into a hotel, and then the only rule we had was we couldn’t leave the hotel grounds. We would just wander around exploring the hotels, and I still have that sense. So when I walk into a new hotel, I feel childlike. I don’t get that same feeling with an Airbnb.

Dave:
Totally. I’m with you. You mentioned the bar and restaurant, which I love. It’s like a fun place to socialize, but I mean, a hotel breakfast… I walk into a hotel, and I’m like, “I am going to make sure this hotel loses money on me based on how much I’m going to consume at the hotel buffet. I will get them,” and I make it my mission.

Henry:
I think that’s a fair mission in life.

Dave:
But there is something true about the group travel. When I go on a ski trip with friends or for example, we’re planning a family reunion for next summer, I think Airbnbs are great for that, having nieces, and nephews, and cousins running around, that kind of stuff. It’s really fun for group travel, but if it’s just me and Jane alone, it’s definitely going to be a hotel.

Henry:
Agreed. 100%. I’m with you, bud.

Dave:
But that’s it. I learned a lot. I did not realize that demand continues to just grow. You see these headlines that occupancy is down, and it is a normalization, but what he said was that supply was up 25%, but occupancy is still up relative to 2019 over the same time period. So, clearly, there’s still plenty of demand, and he also told us that hotels still make up 85%. So it’s not like Airbnb at this moment in the summer is capturing some huge portion of market share. It’s still just a fraction. So it doesn’t feel to me anymore like there’s some risk that all of a sudden, demand might evaporate.

Henry:
I mean, what I heard was that there is still plenty of opportunity all across the country to be a successful short-term rental operator, and I think what I hope people are seeing and hearing from shows like this is that you just have to learn how to find the opportunity. You have to learn how to research the markets, and then interpret that data, and yeah, you’re going to take some risk, but you’ve got tons of data at your fingertips. Think about investors who were doing vacation rentals before. They didn’t have this level of data to use to make their decisions, and so you really have a superpower with access to this information. If you spend a decent amount of time researching your market, and then understanding what you need to provide to that market and where you need to provide it, I think you can be successful. It’s just not like it was two years ago when you could throw anything out there, and you’re going to get a booking. I mean, you’re operating a business, which means you have to figure out a way to set yourself apart, and then solve a problem.

Dave:
Totally. I’ve been saying this for a while, and I think it’s still true is that in a lot of new industries or new asset classes, when it first comes on, there are these pioneers, and there’s a gold rush. I think that happened in short-term rentals, and it’s before the market becomes efficient. It’s relatively easy to make money. There’s not great systems. You just get in there and figure it out. Over time, if it proves to be a profitable asset, you can sure as hell bet that sophisticated investors are going to start moving into the space, software companies… It’s going to become an efficient market just like the stock market is efficient, just like the rental and the multifamily market is efficient. That doesn’t mean they are bad investments. They’re still investments. It just means that they are more driven by the same fundamentals and need for good operations and good decision-making as every other asset class.

Henry:
100%.

Dave:
All right, man. Well, enjoy your short-term rental. We were just talking about hotels. Go sneak into a hotel breakfast and find yourself a buffet.

Henry:
If you think I already haven’t gone next door to the Four Seasons and acted like I was staying there, you, sir, are mistaken.

Dave:
You get the best of both worlds.

Henry:
Absolutely, absolutely.

Dave:
You got your whole family in one spot. You got all the amenities at the Four Seasons.

Henry:
100%.

Dave:
You’re living the dream, right? All right, man. Well, thank you for joining us from your vacation, and thank you all for listening. If you appreciate this episode, make sure to leave us a review on Spotify or Apple. We’ll see you next time for On The Market.
On The Market is created by me, Dave Meyer, and Caitlin Bennett, produced by Caitlin Bennett, editing by Joel Esparza and Onyx Media, research by Pooja Jindal, copywriting by Nate Weintraub, and a very special thanks to the entire BiggerPockets team. The content on the show, On The Market, are opinions only. All listeners should independently verify data points, opinions, and investment strategies.