Airbnb Investment Tips - How to Succeed in 2023

March 6, 2023
2 minute read

Airbnb has led the way during the past decade’s short term rental boom, raising the profile of what has become the fastest-growing accommodation sector. 

The rising popularity of the platform’s unique and alternative accommodation options, which offer greater flexibility to guests than traditional hospitality stays, has influenced real estate investors, enterprise property managers, and small-scale hosts alike to invest in this lucrative lettings market. 

In the U.S. alone, short term rental accommodation supply sharply increased by 29% between the beginning of 2021 and the third quarter of 2022, showing how the market responded to rising demand. 

So, whether you’re looking to scale your property management business this year or get your foot in the door of the short term rental scene, here are our top tips for Airbnb investing. 

Choose Destinations Wisely  

Where you choose to invest can mean the difference between positive ROI and a loss. Luckily, vacation rental performance data can help you identify areas with the best potential based on a number of metrics such as supply and demand, average daily rates (ADR), occupancy, and active properties. These tools highlight hot spots and up-and-coming destinations, allowing you to make a well-informed decision on whether an investment is worthwhile. 

how to choose an airbnb location for profit

Now could be the perfect time for real estate investors and property managers to make high-return investments, due to falling property prices and distressed sales (currently being witnessed in many countries around the globe, including the U.S., New Zealand, Hong Kong, China, and more). In the U.K., house prices have fallen for five consecutive months. You could make the most of this fantastic opportunity by investing in ‘hidden gem’ locations where ADR remains high despite falling costs. 

As an example, here are the destinations that witnessed the biggest declines in house prices across U.S. metropolitan areas between June and September 2022.

  • San Francisco
  • Seattle 
  • San Diego 
  • Los Angeles
  • Denver 

When choosing a location, don’t forget to consider its seasonality. While most markets experience high and low periods, destination markets (ski, lakeside, or beach towns, for example) have distinct peak and off-peak seasons, which means demand can vary dramatically. In this scenario, it’s even more important to analyze historical data trends in order to predict revenue. 

Another important thing to note is that short term rental regulations can vary between destinations, so be sure to look at these when doing your research. 

Estimate Potential Earnings

The main question you likely have is whether short term rentals are a good investment. While we can’t give you a straight yes or no answer, short term rentals can be lucrative and rewarding — when done right. It’s vital to spend time completing thorough research to determine your potential earnings, especially given the added challenges of increasing mortgage and interest rates. This information will give you a clear idea of whether your revenue goals are achievable, plus these estimates are invaluable when pitching to investors and homeowners.  

Rental projection tools that are backed by real market data can streamline the entire competitive analysis process. With accurate and reliable real-time rental values for your new business, you’ll be able to present a professional, branded rental projection to impress investors and improve closing rates. 

Identify Your Property Type

Certain locations and property types, such as city-center apartments or mountain cabins, will vary in demand based on your guests' reason for traveling. While you shouldn’t limit yourself to one sole market, it’s important to determine the type of guests you want to attract when deciding what kind of property to invest in. Examples of short term rental consumer markets include business travelers, digital nomads, and families.

In order to maximize ROI, you’ll need to choose the right property type based on your destination and target market. Apartments are a great choice for urban short term rentals targeting business travelers, whereas larger spaces in rural areas may be more popular with digital nomads or families. Start by looking at which property types are in demand in your chosen area, compare this with supply data, and you’ll be able to determine whether there’s a gap in the market ready for you to fill. 

Analyze Market Data 

It’s vital to know the state of the industry before taking the leap and making an investment. This is especially crucial in the current economic landscape; inflation is fluctuating, and travel has yet to fully rebound post-pandemic. Use reliable short term rental data to analyze the market so you can see the revenue potential of multiple destinations. 

Once you’ve set up your short term rental, customized ‘comp sets’ allow you to monitor daily Airbnb pricing and availability on your properties as well as competitors’, for a comprehensive analysis of how your business is performing against others in the area. Keeping on top of data trends is the best strategy for short term rental success. 

airbnb data tracker

Set Your Prices Strategically 

The profitability of your short term rental largely depends on getting your pricing right. What may be a suitable rate for one property will be completely wrong for another. You must carefully consider ADR based on the day of the week, the season, and ever-changing guest demand, while also walking the fine line between maximizing revenue and remaining competitive

Mastering a short term rental pricing strategy is an art. But with the help of reliable data from nearby Airbnb properties, property managers and investors can benchmark their rates against current lodging market pricing. Some key performance indicators (KPIs) to look out for include ADR, revenue per available room (RevPar), occupancy, and guest nights (paid bookings). 

Our ProData tools enable property managers to monitor their top KPIs in real-time with pacing charts, examine future performance vs historical data, benchmark against competitors, determine where guests are coming from and which markets are growing the fastest using geo targeted mapping, capture forward-looking traveler search demand with DemandIQ, look into the organizations financial health down to property level, and so much more. 

Dynamic pricing tools are designed to support STR property managers in choosing the right ADR for their property based on real-time demand. These tech solutions, such as PriceLabs, can help you strike the perfect balance between earning top profit and being the most appealing accommodation option in your local area. 

Set Yourself Up for Airbnb Success

Without the right tools, it can be challenging to align all the moving elements involved in creating a profitable Airbnb business. But with real-time and historical short term rental market data for destination analysis, revenue projections, and demand insights — finding the right investment is made easy. 

Schedule a call with one of our team members today to see for yourself how our platform can simplify your investment strategy and get you well on your way to scaling your business. 

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