Revenue Drop Reveals Cracks in Short-Term-Rental Foundation

When it comes to the real estate and property management market, everything eventually tracks back to supply and demand. And now the short-term rental market is starting to see the reverberations of a dramatic increase on the supply side.

According to an article in DSNews (“Airbnb Rental Revenues Plummet, Listings Outpace Homes for Sale”), the number of homes available in several major STR markets far outpaced the number of booked rentals. And analytics firm AllTheRooms, which tracks statistics for STR markets across the country, reported revenue drops per property nearing 50 percent.

Nick Geril, CEO of Reventure Consulting, recently tweeted a chart detailing the 15 markets with the biggest decreases in STR market revenues, according to AllTheRooms. The drops are significant.

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The numbers show that in May of this year, Sevierville, Tenn., saw the biggest decrease in revenue per door at 47.6 percent, compared with a year ago. Rounding out the top 5 were Phoenix (-47.2 percent), Austin, Texas (-46.1 percent), Myrtle Beach, S.C. (-45.1 percent), and San Antonio (-43.8 percent).

What does this mean for single-family-home rental investors? It could signal an influx in homes listed for sale, which would be a welcome development for frustrated home buyers. That could also put downward pressure on home values and sale prices. More likely, some STR owners will transition their properties to the long-term-rental market, which also lacks inventory.

And those property owners will need the services of proven companies such as Dream Big Property Management to oversee their homes and return them to profitability. (See our comprehensive list of services here.)

Airbnb, an online marketplace that connects properties with occupants, told DSNews that their numbers dispute AllTheRooms’ data.

“The data is not consistent with our own data,” an Airbnb company spokesman said in an email. “As we said during our Q1 earnings, more guests are traveling on Airbnb than ever before, with Nights and Experiences Booked growing 19% in Q1 2023 compared to a year ago.”

To back that up, millions of people are traveling this Fourth of July weekend, and planes are fuller than ever since the COVID shutdowns.

But with the recent increase in the number of STR homes, many cities are restricting or outright banning short-term rental homes. Many are adding additional fees, taxes and licensing requirements, further eating into the profit margins for STR owners.

Smart rental home investors have already begun reaching out to local property management companies like Dream Big Property Management in Riverside, Calif., for information on the long-term rental market. Dream Big Property Management is a full-service property management company serving the Inland Empire of Southern California. It focuses on helping owners turn their rental homes into life-changing wealth machines. For an analysis of your rental home, contact Dream Big Property Management at 951-778-9700.