The vacation rental market is poised for strong growth in 2024 as travel demand remains robust post-pandemic. While new supply will also enter the market, occupancy rates are expected to rise given heightened interest in alternative accommodations versus traditional hotels. Established platforms will invest heavily to upgrade the user experience on both sides. At the same time, newer entrants will bring innovative models and acquisition opportunities. The market will continue shifting towards professional operators with higher quality listings and service levels.
The vacation rental market has exploded in popularity over the last decade. Fueled by platforms like Airbnb and VRBO, short-term rentals are now a viable option for all types of travelers. In 2024, this market is forecasted to build on the rebound seen after COVID-related restrictions eased in 2021-2022. With many positive macro trends converging, vacation rentals should continue taking share in the broader lodging industry.
Key Market Trends and Forecasts
Continued Strong Travel Demand
Travel demand is expected to remain highly robust in 2024 and beyond. After declining sharply in 2020, travel bounced back swiftly as COVID restrictions lifted. Consumers are demonstrating a strong pent-up appetite for experiences and getting away following prolonged lockdowns. Remote work flexibility has also enabled people to take more frequent but shorter trips. McKinsey estimates that personal travel will reach 90% of 2019 levels by early 2024. Much of this demand will flow into alternative accommodations. According to AirDNA data, occupancy rates at vacation rentals averaged 58% in 2022, up from 44% in 2019.
Surge of New Supply
A significant influx of new supply will hit the vacation rental market in 2024. The allure of strong guest demand and lucrative hosting income is attracting more individual homeowners to list their properties. Overall supply grew by over 25% in 2022 alone according to AirDNA. Airbnb aims to have 20 million total listings by 2024, up from under 7 million in 2019. While concentrated in destinations seeing the greatest travel demand, new supply will expand choices across the board.
Accelerating Shift to Professional Operators
Within this supply growth, the share of listings managed by professional hosts is rising quickly. Individual amateur hosts were previously the norm, but professional hosts and management companies now account for over 40% of properties on Airbnb. These operators manage multiple units at scale and treat hosting as a true business. They offer advantages like consistent quality, better support infrastructure and specialized expertise. An Airbnb survey found that professionally managed listings averaged 4.7 stars versus 4.5 stars for non-professional listings. As the market matures, major platforms will prioritize partnerships with professional hosts to elevate quality.
Improved User Experiences
Travelers today have high expectations for seamless, quality experiences. Platforms like Airbnb, Expedia and VRBO are therefore investing heavily in features and policies aimed at improving satisfaction for both guests and hosts. For guests, this means updated mobile apps, transparent listings with lots of photos/amenities info, and enhanced customer service. Hosts are benefitting from streamlined tools to manage listings, pricing optimization recommendations, and expanded protections. These improvements will smooth frictions in the user experience, leading to higher repeat usage.
Higher Occupancy Rates
As supply growth stabilizes and consumer demand remains elevated, industry occupancy rates are forecasted to reach new highs in 2024. According to AirDNA, the median Airbnb occupancy rate was 55% as of July 2022 on a trailing 12-month basis. With hosts better leveraging dynamic pricing tools, occupancy could top 60% in 2024 – still leaving ample availability. Higher occupancy will allow hosts to implement moderate rate increases to maximize income during the most in-demand periods.
New Segment Opportunities
Certain segments within vacation rentals are poised for especially strong growth into 2024:
- Luxury: High-end properties are surging in popularity among affluent travelers. Luxury short-term rentals can offer advantages versus 5-star hotels, like more space and privacy.
- Long-term stays: Stays of 1 month or longer saw the biggest bump in 2022, as remote workers leverage flexibility to travel while working remotely. Listings catering specifically to digital nomads are carving out a niche.
- Off-the-beaten-path destinations: Travel to popular destinations has recovered swiftly, but more remote and rural spots are now seeing demand bounce back as travel normalizes further. These regions represent a growth opportunity.
Competitive Landscape
While Airbnb and VRBO pioneered the vacation rental space, new entrants have arrived with innovative models around experience, supply acquisition, and targeted customer segments.
Airbnb: The clear market leader, Airbnb offers unmatched global supply and brand recognition. Investments in trust, safety, and trip support are addressing previous brand reputation issues. Still, lower-cost alternatives are proliferating.
VRBO: A cornerstone brand for family and group travel, VRBO retains loyalists. However, mimicking Airbnb’s model has diluted VRBO’s differentiated positioning. Integration with Expedia’s broader platform provides an edge.
Karta: Originally an online vacation rentals company, Karta is expanding into a consumer-facing booking platform – leveraging its professionally managed portfolio to compete directly with Airbnb. The unified management/booking model provides homeowner yield maximization.
Vacasa: This venture-backed startup offers serviced apartments managed under one brand. Properties are designed specifically for short-term stays, with features like keyless entry. Vacas appeals to the modern business traveler.
TurnKey: With over 5,000 listings across 64 markets, TurnKey targets the high-end with luxury condos and homes. Guests benefit from 5-star hotel-style amenities and dedicated Trip Support Specialists. TurnKey’s homes averaged 95% occupancy in 2022.
Industry Consolidation
Maturing sectors tend to experience consolidation, a trend already underway in vacation rentals via mergers, acquisitions, and rollup plays. Major platforms are acquiring providers across the ecosystem to own more of the value chain. Smaller niche players will get absorbed as competition intensifies from end-to-end platforms. This consolidation will provide more seamless experiences but potentially less diversity.
Outlook for 2024
In summary, 2024 is shaping up to be a year of robust growth and evolution for vacation rentals. As consumer appetite for unique lodging remains strong in a post-pandemic travel boom, alternative accommodations should continue gaining share. New supply growth will be offset by surging demand, driving higher occupancy rates. While major players like Airbnb and VRBO dominate, innovative new entrants keep emerging as well. Across the board, the user experience for both hosts and guests is getting an overhaul through tech enhancements, upgraded service levels, and streamlined end-to-end platforms. For travelers seeking memorable trips in 2024, vacation rentals represent an increasingly appealing lodging option.
