The beginning of a new year is the perfect time to take stock and reflect on how the short term rental market has performed. It’s also a great opportunity to predict future travel trends for the year ahead. The most reliable way to do this is by analyzing market data pulled directly from property managers and scraped from leading online booking marketplaces, such as Airbnb, Vrbo, and Booking.com.
With this in mind, what can January 2023 market data tell us about the current state of the short term rental industry? How are guests choosing to travel? Have travel trends shifted? And how does it fair in comparison to the same period last year?
Reservations and Length of Stay
According to analysis of Vrbo and Airbnb data, the U.S. observed a strong 27% increase year over year in short term rental reservations made in the first three weeks of January for 2023 (that’s more than 900,000 extra bookings than 2022). The U.K. also recorded an increase in bookings, securing an extra 19% (160,000+ property) reservations.
However, the data also shows a slight decline in the number of nights booked. In the U.S., a 4% decrease in nights booked and a 25% decline in stay length was seen. Meanwhile, the U.K. saw a significant 11% drop in nights booked and a 6% decline in stay length.
What do these data trends tell us about traveler habits? Increased average daily rates (ADR) caused by inflation (the value of U.S. reservations increased sharply by 43% year over year) and the pressure of higher living costs may be tightening travel budgets. Because of this, guests are cutting trips short according to their affordability. The good news is that the rising frequency of reservations shows people are still traveling despite these challenges.
Other factors possibly contributing to the decline in the number of nights booked include the return of business travel and a decrease in remote job listings. According to the Global Business Travel Association (GBTA), 77% of travel managers expect company business trips to increase in 2023, with the average length of stay for business trips in the U.S. being three days. This increase in short business trips could be shrinking the average number of nights booked. Meanwhile, remote job listings are declining (down to 14% as of September), likely reducing the number of people living a digital nomad lifestyle.
Guest Booking Confidence: Is Travel Finally Normalizing?
The increase in bookings may suggest traveler confidence is returning to ‘normal’ after three long years of uncertainty. Short term rental hosts and property managers across the U.S. and U.K. generated nearly $7 billion (£5.6 billion) in revenue in the first three weeks of January alone. So, it’s clear that, despite rising costs, people continue to prioritize travel and guest demand for vacation rentals remains strong. According to the U.S. Travel Foundation, there will even be an increase in travel spending in 2023.
Travel may, however, be different to what we knew before. We may witness changes in the length of short term rental bookings as well as a shift in where guests choose to stay. Domestic destinations will likely be more favorable as travelers attempt to minimize costs. Hostfully’s CEO, Margot Schmorak, told Phocuswire that because of inflation, “more frequent domestic travel will be a lasting shift in traveler behavior.” She also believes that this year will bring a sharp increase in train travel as ticket prices have yet to rise since 2019, offering travelers a more affordable form of transport.
What does this mean for travel trends going forward? While booking confidence may be returning, it seems that ‘normal travel’ remains a distant memory.
Shifts in Travel Trends
- Why people are traveling: According to an Expedia, Hotels.com, and Vrbo study, 2023 is the year of “no-normal travel” as people choose to take a more free approach to travel. It’s believed that the coming months will make way for trips that include an array of travel agendas, such as exploring wellness activities, becoming a digital nomad, or taking a once-in-a-life-time, bucket list trip.
- When people are traveling: Seasons are beginning to normalize in some areas. However, rising travel costs could continue to encourage off-season bookings. This shift provides a great opportunity for short term rental property managers and hosts to increase revenue during quieter periods. Those looking to maximize profit during high demand nights may turn to tech solutions, such as dynamic pricing tools, to optimize ADR.
It’s important to note that while, previously, January data has been a key indicator for the performance of the rest of the year, recent circumstances, including the pandemic and inflation, have made these measures less reliable. This is why it’s crucial for property managers and hosts to have access to accurate industry data throughout the year so they can make well-informed decisions.
January short term rental market data shows promising signs of traveler booking confidence returning, as reservations are on an upward trend. But, what’s even more promising is that demand for travel remains strong despite rising travel costs. The impact of inflation won’t go unnoticed by the industry, however, as we’ll likely see a shift in trends including the length of trips, travel agendas, destinations, and seasonality. But, overall, it’s safe to say that the industry is continuing its post-pandemic rebound.
Want to dive deeper into the trends shown by recent short term rental market data and keep on top of shifting traveler habits? Book a demo with us today for an overview of how our platform can help you elevate your business.