What does the first quarter of 2023 suggest about international travel market performance for the rest of the year? So far, we’ve witnessed demand growth in the U.S. over the Spring Break period, with nights sold 8% higher year-over-year. However, in general, the country’s occupancy rates dipped below 2022 and 2021 levels in January and February. But, what’s causing this, and does global data match these trends?
We uncover what’s really happening on the travel scene in the U.S. and beyond — answering some of the most pressing questions property managers, hosts, and real estate investors have right now, including — is international tourism rebounding? Is traveler confidence back? And, what destinations are up and coming?
The Health of the Global Travel Scene
In order to assess the current international travel landscape, it’s important to look at key performance indicators (KPIs) in global short term rental market data. We pulled data for trips that took place during the first quarter of the year, as of March 29, to find out how this year performed in comparison to previous years.
Average Daily Rates (ADR)
Despite growing 15% between 2021 and 2022, this year’s U.S. Q1 ADRs have shown no change year-over-year. Considering the country closed 2022 with a 6.5% inflation rate, this result is rather surprising. Could it be that property managers and hosts are keeping rates low to attract those traveling on a tighter budget? And, is this tactic working in their favor? Maybe so, since the country gained a 3% year-over-year increase in occupancy while Europe and the Middle East saw declines.
Both of these continents, along with Asia, raised their average nightly rates in Q1. Europe increased ADRs by 5% year-over-year, the Middle East’s rates were up by 1%, and Asia’s prices jumped 12%. These increases have driven up the global average to 6% higher than the same period in 2022.
It’s important to note that, despite the U.S.’s ADRs remaining the same year-over-year for 2022 and 2023, the average rental price per night is much higher than anywhere else in the world, at $264 — which is over $100 more than the global average.
Occupancy and Revenue Per Available Rental (RevPAR)
Europe’s occupancy declined in Q1 by 11%. It’s possible this decrease is simply a reflection of the industry leveling out after the ‘short term rental boom’, which led the continent to surpass pre-pandemic levels of demand in 2022. The U.K., however, is beginning to show signs of positive growth, with the recent Easter break recording higher year-over-year demand, hinting at a possible upward trend for the rest of 2023.
The Middle East witnessed a small 1% decline in occupancy year-over-year for the first three months of 2023, whereas the U.S. scored 3% higher than last year. Despite these fluctuations being minor, for the U.S., this result actually shows the significant slowing of growth for short term rental demand in the country, since last year’s occupancy was 24% higher than 2021.
The real star of the show in terms of short term rental occupancy in Q1 was Asia. Although its nightly rates have risen, the continent received 44% more guest demand in 2023 versus 2022. Asia has been the slowest continent to reopen its borders post-pandemic, with some countries only beginning to welcome visitors this year. This may explain the sudden boom in short term rental activity. If this is the case, it’s likely that demand will remain high throughout 2023 as travelers make up for years of being unable to enter its much-loved destinations.
Thanks to rising ADRs and higher occupancy, Asia’s RevPAR so far this year comes in 62% higher than 2022. This is quite a feat considering the global average only grew by 3%. But it’s worth noting that Asia’s RevPAR still remains significantly lower than other areas of the world, especially the U.S., with rates being $28 and $86 respectively. This difference could be attributed to the country only being at the beginning of it’s recovery journey.
Average Length of Stay (ALOS)
The good news for property managers and hosts is that the ALOS has seen little movement across the board, with only slight declines of up to 0.5 days, and the international average only dipping by 0.2 days to 4.2 days.
Asia’s ALOS is significantly lower than its counterparts at 2.8 days, suggesting travelers are favoring shorter trips at this destination. Maybe this is a result of travelers hopping between short term rentals to explore more of the continent, which is a major characteristic of travel across this part of the world.
What Are Travelers Looking for in 2023?
Based on scraped international short term rental data as of April 3, this is what we know about what kinds of properties guests were favoring in Q1 2023…
The U.S. saw minimal differences in property size demand for Q1 in comparison to previous years. In line with occupancy declines, bookings for all property sizes in Europe dipped slightly during the first three months of the year. The Middle East saw a small amount of growth, with the most notable rises in 0-1 bedroom and 4+ bedroom properties by up to 3%.
As expected, all property sizes in Asia have witnessed year-over-year growth, with 0-1 bedroom properties receiving 6% higher occupancy this year, and 2, 3, and 4+ bedroom rentals gaining 4-5% more occupancy.
Short term rental lets within hotels are gaining traction, with occupancy increases in the U.S. (+6%), Europe (+11%), and Asia (+8%), bringing the global demand up by almost 10% year-over-year for Q1. This trend is likely attributed to the hotel sector installing amenities to appeal to the short term rental guest and make the most of guest demand.
The Middle East has witnessed increased demand for houses (+3%), private rooms (+5%), and townhomes (+9%). And, as occupancy rises in Asia, all property types at the destination are seeing greater year-over-year demand but, most notably, travelers are choosing apartments (+9%), condos (+8%), houses (+7%), and townhomes (+6%).
- Asia is an up-and-coming destination, seeing significant growth in occupancy, RevPAR, and ADR. This trend is likely to continue throughout 2023.
- Europe’s short term rental landscape is starting to slow following the 2022 ‘boom’.
- Hotels are on the rise in most areas, and may be a sector for property managers, hosts, and investors to keep an eye on for investment.
International travel is on its way to recovery — but each destination is going at its own speed. Europe and Asia are currently on opposite ends of a rebound trajectory, with Europe nearing the end, as declines suggest the stabilization of the sector after a huge boom post-pandemic, and Asia just beginning its return with massive growth.
Minimal shifts in the average length of stay, occupancy, RevPAR, and ADR may also indicate the stabilization of the short term rental sector on a global scale.
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