Geographically ‘blessed’ Tennessee broke national tourism records in 2021, generating over $24 billion in travel spending from both domestic and international travelers. According to the U.S. Travel Association and Tourism Economics, this also marked the largest visitor spending in history for the state ($66 million per day).
It’s no wonder travelers have flocked to the destination when it’s easily accessible — merely a day’s drive for three-quarters of the U.S. population — and boasts fantastic landscapes, including the Great Smoky Mountains, and a long-adored music scene. But how is the state performing today? Is Tennessee on track to break more tourism records in 2023, or is it witnessing a comedown after the post-pandemic boom?
Hometown to country music, the capital city of Tennessee, Nashville, broke its own tourism records in 2022, receiving a whopping 14.4 million visitors. Travelers, drawn in by the city’s southern hospitality, cultural landmarks — including the Bicentennial Capitol Mall State Park and the Frist Art Museum — and live music, spent $9 billion last year alone. NCVC forecasts that this growth will continue into 2023 and hopes for a 5% increase in spending from over 15 million visitors.
Market data, so far (as of March 28), suggests that these forecasts could be correct. Year-over-year analysis of the destination shows occupancy rates have increased 15% over 2022 levels (which were already 38% higher than 2021 rates). Could this be the beginning of another positive year for the city?
Interestingly, after rising 43% to an average daily rate (ADR) of $352 in 2022, nightly prices have seen little movement so far this year. This could be a reflection of property managers and hosts trying to appeal to travelers who are now on tighter budgets thanks to inflation. Or maybe managers are keeping rates low to remain competitive in the face of increasing numbers of short term rental properties — which have grown 8% to 10,504 properties, after a 24% gain last year.
The good news for property managers, hosts, or those looking to invest in the area is that, despite ADRs remaining the same, occupancy increases have pushed up revenue per available room (RevPAR) by 15% to an average of $73. And the even better news is that all property sizes are performing well, with nights sold rising by 22-29% across the board for 1, 2, 3, and 4+ bedroom rentals. It would almost be a shame for property managers and investors to not take advantage of Nashville’s unlimited short term rental law in the months ahead.
Chattanooga, with its thriving tech business ecosystem and breathtaking views, was named by the New York Times as one of the ‘top 45 places’ to visit in the world, and receives around 3 million visitors each year (80% of whom come from less than three hours away). The city’s tourism landscape showed recovery and growth in 2022, with short term rentals leading the way in increasing lodging demand.
Like its big brother city, Nashville, Chattanooga has witnessed great occupancy growth (+14%) already this year (based on year-over-year data as of March 28), which is great news considering most U.S. regions suffered from occupancy declines in February. This growth has led to a 19% increase in RevPAR, raising the average to $31.
But, unlike its counterpart, Chattanooga has seen a slight rise in average daily rates — from $164 to $171 — and has had barely any movement when it comes to short term rental supply. Available properties in the area have only increased by 2% year-over-year, after rising 31% in 2022. This slowdown in the supply chain is likely due to the city’s new short term rental regulation that was supposed to come into effect in December last year. Chattanooga will no longer accept new non-owner occupied short term rental applications. However, this law seems to have been put on hold until July 2023 — creating the perfect opportunity for investors to make the most of a low-supply but high-demand destination, where rates will likely only rise further once regulations are in place.
Performing particularly well are 3 and 4+ bedroom properties, increasing by 26% and 22% respectively in terms of nights sold so far this year. Could these trends support the theory that Chattanooga ‘converts’ visitors into residents, as large property bookings may be reflecting the increasing number of families traveling to the city? Whether it does or doesn’t, the reality is that Chattanooga presents a limited-time opportunity for promising Airbnb investment, especially when it comes to larger properties.
- Property managers, hosts, and investors should keep Tennessee on their radar, as the state’s capital city, Nashville, and Chattanooga are already recording occupancy growth in 2023.
- Thanks to this demand, RevPAR is on an upward trend for both Tennessee destinations.
- Low supply levels in Chattanooga make the destination an appealing opportunity for investment, but it’s worth noting that strict regulations will come into effect later this year.
Market data suggests a positive outcome in both Tennessee destinations is possible over the remainder of the year as, despite hitting record levels in 2021 and 2022, Nashville’s and Chattanooga’s travel recovery trajectories continue to be on an upward trend.
Want to look into these destinations further to build an investment strategy? Or, maybe you have another city in mind but are unsure of its current vacation rental performance. Check out our data dashboard, which supplies property managers, hosts, and investors with all the data you need to make strong business decisions.