Short-Term Rental Demand Returns, Why Are Hosts Making Less

Kathy:
By now, we all know that the Airbnb bust headline never really materialized, but the short-term rental market has shifted a bit as travel season heats up, is it recovering the way experts predicted it to? And with so many markets saturated with short-term rentals today, is there even an opportunity in this space? I am Kathy Fettke and welcome to On the Market. I’m here with the one and only James Dainard on his yacht. Hello James.

James:
Hey Kathy. I’m leaving you though me and you aren’t going to be in the same state anymore. I’m leaving the yacht. I

Kathy:
Know.

James:
I feel like we should be having a yacht party instead of a last podcast.

Kathy:
We really should, and I’m ready when you are.

James:
I’ll be coming back,

Kathy:
But don’t worry listeners, James isn’t leaving on the market podcast. I was worried there for a minute. He’s a busy guy for sure, but he’s just moving from California to a much better tax state. Yes,

James:
I like to keep myself busy. I’m definitely not leaving the On the Market podcast. We have amazing guests that come on and today we’re talking with Jamie Lane, the SVP of Analytics and the chief economist at Air, DNA, Jamie’s team at Air DNA does a ton of data analysis on short-term rental market across the US regionally and internationally, and their company provides the information you need to underwrite your deal.

Kathy:
Yeah, I love this company too. I was hoping we’d get a discount on Air DNA for having Jamie here, but Jamie’s here today to tell us what this year’s data so far tells us about this short-term rental market, how the short-term rental market fits into the broader economic trends we’re tracking and what we might expect to see play out over the rest of 2024. So let’s dig into the data. Jamie, welcome to On the Market podcast. Let’s just start by explaining what air DNA is and how you track the data.

Jamie:
Yeah, so we are a global short-term rental data analytics company. So we track every single listing around the world on Airbnb, vrbo, booking direct bookings, like on what they’re earning on any given day, how many listings are out there, so that global supply of short-term rentals down to a neighborhood and what every property around the world is earning. And we provide that data in a way that helps investors, operators, hosts, both buy and manage their short-term rentals.

Kathy:
So then you would be the guy to tell us how things are going out there. Is the news legit? Are things really slowing down? What is this travel season like this year?

Jamie:
Yeah, so it is my job to have a pulse on what’s happening in the short-term rental sector. I can tell you I’ve been at ODNA now for four years. Prior to that I was tracking the hotel industry for 10 years and these past four years in short term rentals have been a wild ride

Kathy:
Just like everything else has been

Jamie:
Just like everything else. But our theme at the beginning of the year was equilibrium so that these sort of discontinuities that we had been seeing of supply decreasing during the pandemic demand decreasing, then everything coming back super strong during the pandemic of everyone traveling and staying in short-term rentals, then everyone investing in short-term rentals. And now 2024 was supposed to be the year that things sort of evened out, that supply and demand got somewhat imbalanced and that’s actually what we’ve been seeing. So we’ve seen occupancy levels relatively flat. We’ve actually seen demand growing at a relatively stable rate. We’ve seen 80 R essentially flat. So essentially for most hosts what they were earning in 2023 is pretty close to what they’re earning right now in 2024, which in monitoring this sector, maybe some stability and predictability and what’s going to be happening is maybe a sigh of relief for many people, even if it’s down a bit from where it was in the highs of 2021 and 2022.

James:
Hey Jamie, for our listeners who don’t know what a DR is, can you explain what that is?

Jamie:
Yeah, so a DR stands for average daily rates. So that’s essentially the average rate that a guest is paying to stay in a short-term rental unit. And what you’re charging the other terms I talk about a lot occupancy. So that’s essentially of all the nights that you make available, what percent of those nights are being stayed in. And then the other is RevPAR revenue per available rental. So of all the nights that you make available, what is the average revenue per night that you’re earning? Or the other way to calculate it is occupancy times a DR.

James:
So the important metrics for when you’re looking at your short-term rental, you got to know how much money’s coming in.

Jamie:
Yeah, what percent of the nights are you getting booked, what rate are you getting booked at, and then you multiply to those together and that’s essentially what you’re taking into the bank. So

Kathy:
If things are normalizing, at least post pandemic, what other economic factors should we be aware of now and in the future?

Jamie:
So on one hand supply, so what’s going on with interest rates? What is the sort of standard investment environment? We still have a relatively high interest rate environment maybe down a bit from where we were at earlier in the year. We still have very high home values relative to pre pandemic, relative to last year. They’re still growing and combine that with lower revenues on a per night basis, it’s not as good of an investment environment as it was. And since we’ve seen lower supply growth in recent years on the demand side, and this is where it’s kind of different from the rest of real estate, that you really have to stay on top of what’s going on with consumer trends, how many people are employed, how much they’re earning, and how much they’re overall spending on travel. And there we’ve definitely seen weakness on both the short-term rental side and on the hotel side for lower income travelers. And that’s showing up in demand for lower tier type properties. Those properties that are pricing themselves lower on average than the typical property, those type properties that are very attractive to lower income type individuals. And that’s where we’re seeing most of the weakness today.

Kathy:
You mean weakness in terms of there’s not enough demand

Jamie:
That we actually see demand declining for those lower a DR properties and

Kathy:
What price point are we talking?

Jamie:
So for a one bedroom home, something that’s being priced under $125 a night, so I would be considering a lower tier and then on the higher tier it would be more than $250 a night for one bedroom property. And in the leisure type markets, so mountain coastal destinations for short-term rentals, we actually see demand the number of nights being booked down on a year over year basis. And it’s not often in a high growth sector like short-term rentals that we actually see demand declining in other aspects of the sector. So the higher end type properties. And in urban markets we’re seeing demand grow, but this is something to watch and sort of the first and cracks in the system that we are seeing some weakness there.

James:
And Jamie, when you’re talking about that, do you think that’s more the markets that are like the sub-markets? Right. When we were seeing this short-term rental explosion of purchasing, part of that was cheap financing, low down payments because of how people could structure their deals. And it was allowing people to become an investor with low money down because the numbers would work and you would see these investors kind of buying all sorts of different types of submarkets where I’m like, well, you’re getting a short-term rental in Wichita, Kansas, nothing think is Wichita, Kansas saw on the top of my head. And traditionally back when I remember I did my first short-term rental in 2009 or 10, I did it because I actually wanted a vacation there and as a vacation destination. So are you just seeing the more vacation destination markets growing or still having high demand and the ones that are kind of more on the fringe, those are the ones that are slowing down?

Jamie:
No, it is actually the opposite. It’s those fringe and not calling Wichita Fringe market. But those markets like Wichita, like Dothan, Alabama, like Chattanooga or Birmingham, and these smaller to midsize cities are still the ones that are seeing the most new investment coming in and the most demand growth. And I kind of think of it in a way. One, we don’t have new hotel supply coming into these type markets. So on the demand side, any new travelers looking to come, they essentially have to stay in short-term rentals, not other options. And then on the supply side, a lot of these markets like Wichita in Birmingham didn’t see the same runup in home values that a lot of the coastal mountain and large cities saw as people were sort of moving to these markets. So they’re still actually attractive on the investment side, which means people are still adding supply, creating new short-term rental investments in those type of markets.

Kathy:
These aren’t really fringe markets, but they’re also not vacation destinations per se. So I don’t know if you have the data on this, but is it people coming to work or visit family or Yeah,

Jamie:
It really runs the gamut. So you’ve got people looking to work, construction workers, nurses, doctors, people doing residency. You’ve got displaced residents, maybe their home’s going through a renovation, maybe they’ve got family coming in for an extended period of time, medical demand either on the guest or the workers of those hospitals. So let’s say you’re going to do a surgery, you’re going through cancer treatment, you don’t want to be staying in the hospital. It’d be great to stay in a short-term rental nearby and stay safer, be more comfortable, or maybe you’re moving to this market and you want to try out different submarkets within that market where you can stay a week in this neighborhood, a week in that neighborhood. So all these types of demand that and maybe existed pre pandemic, but so many people tried short-term rentals for the first time during the pandemic that now when they go to the city they have these different use cases, they’re going to use short-term rentals for these type of stays. And we just see so much new demand being created. It’s still unbelievable how much growth we’re seeing for that type of travel.

Kathy:
We do have to take a quick break, but stick with us. There’s more from Jamie Lane from Air DNA when we are back.
Welcome back to On the Market podcast. We are here with Jamie Lane discussing the short-term rental markets that are seeing the most growth in 2024. Let’s jump back in. So what we were seeing, I think it was just last year, there were reports that individual Airbnb owners were seeing not as much money coming in, they weren’t renting as many nights, but overall there were more rentals, so more rentals on the market, more people renting, but the individual owner wasn’t experiencing it, there was so much supply. Is that still the case? Is there still more supply growing like you said, and the individual owner is getting less of that piece of the pie.

Jamie:
And when we look at last year, 2023, we saw overall supply increase by like 8%, 8%, that’s a lot. And we saw overall demand increase, total number of nights stayed increased 2%. So demand was growing, but with supply growing faster demand, that means that occupancy was decreasing. And how I think about occupancy is how many nights on average that my unit’s being booked. So yeah, there’s more units being booked overall, but my property individually, I’m seeing overall fewer bookings. And so overall on average was about 55% occupancy for the overall us and that compares to about 56% pre pandemic. And that had gotten us high as 62, 60 3% in 2021. So we raised occupancies a whole lot during the pandemic and that was sort of the boom times. Everyone was like, ah, I can rent out a tent in my backyard and make money like this is amazing. I definitely saw a normalization happen in 2023 that reduced average earnings per host, average unit earnings per listing and now that sort of normalization has happened. We’re definitely in more of that equilibrium period now where we’ve seen occupancies essentially flat in the first half of the year on a year over year basis and we expect that to continue out in the future. We’re very much an equilibrium with supply and demand both growing at about 6% this year.

Kathy:
So what does that mean to the person trying to get into the market now? Does it make sense? And if so, where we know there’s not one housing market, there’s not one Airbnb market, where are the areas that maybe are more oversupplied than others and areas that are maybe undersupplied? So

Jamie:
Overall, I don’t sort of subscribe to the notion of markets being saturated, especially in a high growth market like short-term rentals. I know there’s 1.7 million active listings out there and most markets and traditional vacation rental markets are pretty mature in those type of markets. New can beat old any day of the week. So if you come in with a great new investment where you’re picking the right property that’s going to be attractive to the type of guests that come into that, you add the amenities that guests are looking for, it could really depend on the price point that you’re having to pay for it, but you’re going to be able to come in and operate and generate above market average. In terms of revenues, markets that I would be cautious around right now though, are those that are seeing overall demand going down, I there’s fewer people staying those markets this year than in years past.
There are quite a few coastal and mountain destinations where that’s happening. And a big piece of that was areas that Americans were traveling to sort of in droves when we weren’t traveling overseas. And now that we’ve sort of picked back up in terms of overseas travel, those are ones that are seeing declines in overall occupancy overall demand. My favorite example for that is Panama City Beach. I’m in Atlanta, we were all driving down there during the pandemic and now all of my friends I’m seeing, they’re actually going to nice southern France, the Riviera, Greece, they’re going to European beaches and there’s been that trade off that has definitely been impactful to some of these drive to beach markets really around the country.

James:
And I think part of that trend is that when you look at international travel now, it actually is a lot cheaper than traveling in the US sometimes and I think that’s why people are looking elsewhere. I remember my buddy, he went skiing in south of France. I’m like, oh, look at you, you’re fancy. You went skiing in south of France. He’s like, I looked all around and it was cheaper for me to fly to France, go skiing there and come back than it was to book an Airbnb or a hotel and ski. And so there’s definitely been a little bit of a transition just because for some reason international travel has gone down, especially if you get thrifty on finding your flights. But we’ve seen some sort of demand come down, but also demand’s also gone up. You guys recently had a report that the demand went up June year over year. What do you think is driving that demand for people? I mean, I definitely know when I go to airports, the airports are busy people, they don’t care what the cost of credit cards are and what the interest rates are. It seems like people are still traveling the busiest I’ve ever seen the airports. What do you think is going on with the year over year growth right there in June?

Jamie:
Yeah, so two big factors I’ll call out. One is TSA still publishes their numbers. We are seeing record air travel this year in the us it’s up 6% from last year and last year was a record. The days of the week that are seeing the most growth are midweek Tuesday, Wednesday, which to me points to a strong growth in business travel. And you look at the hotel data, it’s like the markets that are doing the best, the segments are doing the best are downtown core convention, hotels, big conferences are back, people are traveling for work. That’s clearly the trend that’s happening right now. The other factor you have is we’re finally getting international guests coming back to the US and this is the first summer since the start of pandemic that we actually saw just as much travel spending from international travelers to the US as pre pandemic.
And we’ve been through so many years of just like where are the international travelers? Americans are traveling overseas, but we weren’t seeing it reciprocal of international travelers coming back to the us. An interesting trend is that when international travelers come to the us, they’re not going to the same markets that domestic travelers you and I travel to when we’re in the us, we go to the beach, we go to the mountains, but international travelers come to New York, Chicago, Boston, Miami, la, San Francisco. So those are the type markets that we’re seeing now, greater demand growth, but it’s different than pre pandemic. We’re not seeing the return of Asian travelers. So when you look at country of origin like China, Japan, South Korea, travelers from those countries, it’s still way down and we’re not seeing much recovery. So that’s causing weakness on the west coast and then travel from Europe, Latin America is actually up and that really benefits markets on the east coast. So we’re seeing sort of a bifurcation in terms of the return of international travelers that are definitely biasing growth to in Midwest, southeast east coast type markets.

James:
So what do you think it is causing the Asian markets to not travel as much right now? Because usually a huge push, which is also kind of as an investor, you’re going, okay, well when this turns on, the demand could go up even more, right? It’s what we’re always trying to do, forecast the growth, whether it’s short-term rentals, Kathy loves the migration, where are the people coming? What do they think is preventing that and do they anticipate that that’s going to turn back on at some point? I mean, that’s always been a huge traveler’s market. I mean for all countries, right? Like Australia, the us, that’s a huge part of our travel business. Do you think that’s going to be turning on anytime soon?

Jamie:
Yeah, there’s a couple factors. One is Asia was really the last markets to reopen from the pandemic. So it was just like a year and a half ago that there were still major travel restrictions in Japan of where people could go and come back from. We’re still just as a country, haven’t fully opened back up the ability for Chinese travelers to get visas to come to the us it can be multi months. They have to wait just to get permission to travel to the us. So there’s still a lot of work our government needs to do to essentially tell travelers that we’re open and willing to host them again in Air DNA we’ve been working with providing data to us travel so that they can really understand what the lack of openness for travelers means to operators, hotels, and short to rentals of being able to operate profitably. Again, what

Kathy:
Are the international travelers looking for? Is it different than what the domestic travelers want?

Jamie:
One, they’re going to different markets and so they’re going to cities, they’re going to maybe national parks. They’re also staying longer, usually traveling with groups and staying in larger properties. So it can be a different type of property that is attractive to international guests. A lot of hosts and their ability to speak multiple languages can be attractive and certain amenities. We host a lot of international guests and just like having a hot water kettle for European guests that want to make tea, they want their tea. And it’s not something that I’m doing on a regular basis, but it’s something that the guests sort of expects you to have. For Asian travelers, it can be having a rice cooker that is just like a staple in their own homes that a lot of short-term rental properties just don’t have. And having that amenity can be attractive to those type of guests booking your property.

Kathy:
I mean, I’ve seen people just trick out their properties and spend a ton of money, which I just often wonder if there’s the ROI on that putting in pools and putting in volleyball and all sorts of things. Does that make a difference? Do you have to spend that much money

Jamie:
Now more than ever? Yes.

Kathy:
Oh,

Jamie:
Was that baseline 5, 6, 7 years ago? No, but in this more competitive environment where I was talking about if you come in into a new market, like new beats hold, you take a market like Joshua Tree pre pandemic, only like 20% of properties had pools. Now like 40, 45% of properties have pools. It’s almost becoming like you have to have a pool to be competitive in that type of market. Each market has their own sort of an amenities that people expect, but that’s something that you really got to pay attention to when you’re coming in and investing in a market is what are those amenities that are like table stakes now you got to make sure you have,

Kathy:
Yeah, I didn’t feel like investing in a hot tub in Utah near a ski place. That’s probably a bad idea. But we do allow pets, and I think that’s why our places stay really booked. I don’t know what the percentages of short-term rentals that allow pets, but people love to travel with their animals. They’re part of the family. Do you see a lot of that or not enough?

Jamie:
Yeah, making your property pet friendly can be one of those triggers that can really unlock occupancy for you. So if we have hosts trying to understand why their property is not getting booked, going in and benchmarking your amenities of what are those things that I could turn on that could unlock bookings? A few examples. One is pet friendly, the other is your cancellation policy if you’re strict. And a lot of the other competitors are flexible, people just want more flexibility today when they’re booking travel. The other is instabook. I just don’t want to have to wait around for a host to accept my booking. I want to know when I make that decision that I’m going to get the property that I want. So there’s certain things like that that can be unlocked to more bookings.

Kathy:
We do have to take one more quick break, but more from on the market when we return. Welcome back to our show. Before we jump back in, we to let you know about the short-term rental furnishing list. It’s a ready-made checklist with product links even, and it has everything you need to prepare your property for your next guest. If you’re getting a short-term rental up and running, go to biggerpockets.com/resources and grab it now. That is so helpful to know what you need to buy in advance before people complain. Alright, now back to the show.

James:
So with people booking more right now, demand was up in June and we have international travelers starting to turn on, maybe we get the other markets turn on. I mean, what are you guys seeing for the rest of the year as far as anticipated forecast? Do you see the demand continue to increase or do you think this is more seasonal? I mean, what are you guys forecasting for the rest of 2024?

Jamie:
Fortunately for the back half of the year, we have pretty good visibility because of how we collect our data. It’s what we call on the books so we can see what’s booked out into the future and we can compare that to what was booked out in the future as the same time last year. So we can see in the fall into the winter, that demands up anywhere from five to 10%. That combined with we see supply growth growing and anywhere from five to 6% gives us a decent confidence that we’re going to see flat to increasing occupancies in the back half of the year. Where we have seen some weakness in recent months is on rates and on pricing. In June, we saw overall rates decrease by about a percent, and that’s one way that you can unlock bookings as your property is once you start getting into peak season, which we’re in now, if you don’t have the bookings that you want that you might start discounting to make sure your property gets booked. And with shorter lead times, I guess waiting longer to book for peak season travel, we’re seeing more and more hosts sort of start to panic and start discounting their properties so that they make sure that they get booked. So broadly, we’ve been seeing the demand come in just coming in closer to the date of this day and people discounting to make sure their property get booked.

Kathy:
Well, now that I know what a DR means average daily rate, how do you know how to set your rate? Obviously if you’re not getting any bookings, you’re not pricing it, and I know that’s one of the things you offer. So how does that work? How do you get the price right?

Jamie:
Yeah, so at RDNA, we do provide pricing tools for hosts so you can make sure that you’re setting your rate at the right rate to get booked. That’s sort of the biggest factor of whether you’re going to get booked or not, is how competitively you’re priced. So when a guest is going and looking at all the properties on Airbnb and seeing the amenities you have, where you’re located, and then the relative value that they’re going to get to it, you got to make sure you’re priced competitively. So one way that we do it is we have tools where you can see how your competitors are pricing, you can monitor that and then sort of compare how you’re getting booked, how your comp set’s getting booked, and then making sure that you’re adjusting your rates so that you can get booked as well. So that’s something that as a host, I’m monitoring on a weekly basis.
So what is my forward bookings? How are my competitors getting booked? And then if I see myself, I’m not getting booked, I should that I can adjust rate. Maybe there’s a high demand night coming up that everyone else is booked and I’m still available and I know that there’s going to be more bookings coming in. Maybe I’m really going to push my rate higher to make sure that I maximize my revenue. So that’s one of those big unlocks for hosts that can really increase your revenue is making sure you’re priced. And it’s not always that you’re increasing rates. A lot of times it’s decreasing rates during low demand periods to make sure if anyone’s getting booked that it’s your property.

Kathy:
And Airbnb has a tool for that, right? They’ll set what they think is the right rate, but a lot of people think it’s not the right rate, so how do you automate it? That’s a lot of work to constantly be checking.

Jamie:
Yeah, I would not suggest using Airbnb’s pricing tool. They do have an automated tool. Typically they undercharge guests. They’re very much trying to promote more bookings to their platform, not necessarily making sure that it gets booked at the highest rate. So Air DNA has a pricing tool and there’s other great ones in the market price labs beyond Wheelhouse that are great options as well and can make sure that you’re maximizing the revenue of your property.

Kathy:
So the average daily rate, the A DR went down this year, you mentioned that. Why, and what do we need to know about that? Do you think it’s going to reverse?

Jamie:
Yeah, so the big factor on pricing is what are occupancy levels at? Because if occupancy levels are really high, there’s a lot of scarcity out there. For properties, like during the pandemic in the height of 2021, everyone was booking short-term rentals. It was impossible to find availability, and it really gave hosts the pricing power to start increasing their rates, charge whatever they could. Now we’re seeing almost the exact opposite of that, of we’ve seen so much new supply come in, we’ve seen occupancy levels now decrease to a level that they’re now below what they were in 20 18, 20 19, where there’s not a lot of scarcity. There’s a lot of options for guests. So we see more and more people discounting to make sure that their unit’s getting booked, and that means average rates are down. We saw that last year and we’re seeing that again this year. It’s expected rates got really high average rate increased today relative to pre pandemic or 30% higher. So for someone with a fixed rate mortgage on a house that they bought in 2019, you’re earning 30% more on average on any given night. That’s great. But on average now we’re seeing a decrease by about 1%. So I wouldn’t say it’s terrible, but we’re just not seeing the pricing power that we had in years past

James:
The past, I would say 24, 36 months. We’ve seen so many people moving around. The migration patterns have switched so much throughout where people want to live, how they travel, all these things. Covid really changed people’s mindset. What are you guys seeing and how does these migration patterns affect short-term rentals? How they’re being absorbed, the demand? I mean, what is the impact with people moving around?

Jamie:
Yeah, we actually just released this big report actually digging into that topic. The research showed that the biggest determination of where you travel to is where you live. Let’s say if you live in Houston and we contract this, the destinations that you vacation to, it’s Galveston, it’s Corpus Christi, it’s Fredericksburg, it’s Broken Bow, it’s hot Springs, Arkansas. So if we see a massive increase in migration to Houston, what destinations are going to benefit from that? It’s Galveston, it’s Corpus Christi, it’s Fredericksburg, it’s those sort of feeder destinations. So we did a big analysis of all the migration trends that have happened over the past four years, which metro areas have seen the largest increases in population, and what destinations will benefit from those migration trends. And so based on migration trends that have already happened, one the Texas markets, as you guys know, I’ve seen so much in migration.
So four out of the top five destinations that are going to benefit from the migration are actually in Texas, really. So it’s Corpus Christi, it’s Fredericksburg, it’s South Padre Island, Galveston and Broken Bow. Then we get into markets like Pinetop, Lakeside, Arizona, sort of benefiting from the increase in migration to Phoenix. We’ve got Boone, North Carolina and the broader North Carolina mountains area. You’ve got Lake Hartwell in South Carolina and then Heart Springs, Arkansas. So really a wide variety of markets across sort of the Sunbelt that have benefited from the growth in populations in those major markets in the Southeast.

Kathy:
I was just told that Fredericksburg is a great place to visit. Now I’ve heard it twice. That means I have to go, and then we got to go visit Henry, of course, in Arkansas. Yep. All right, put that on the calendar concerts. What is it with young people that have so much money that they can just fly to Europe and go to a concert? That was not the case when I was young, but what’s going on with concerts and Airbnbs?

Jamie:
Yeah, Europe really took it on the nose during the pandemic, and there were such tight regulations. Now we’ve seen Europe being really some of the highest growth out there. And this summer is the summer of Taylor Swift. It’s the summer of Adele guilty. It’s the summer of Coldplay, it’s the summer of the Olympics, it’s the summer of the Euro Cup. There is so many events happening in Europe this summer that is driving demand trends. It’s amazing to see. And I’ve got friends that traveled out to Europe to see Taylor Swift. It was actually cheaper in a lot of ways to fly to Amsterdam, get a ticket there than it was to see it five miles away from us in Atlanta. So in similar ways, James, that you were talking about, that we see so many people traveling to Europe because of the deals that you can get and many of these destinations, it’s the same thing with these concerts, and it’s really been a major demand driver this summer.

James:
Yeah, because it’s a better deal. I mean, when you go out, I remember we stayed recently at an Airbnb in London, and we were in one of the nicest areas. We were Mayflower. We were in this huge two or three bedroom, three baths suite with views and everything, and it was like 400 bucks a night for what you were getting. I was like, I’m like, I’ll go to Europe all day long. It justifies the expense of the airfare. And I think that’s also, people just want to get out. They were Roman in the us, they saw enough of it. Now they want to go overseas. It’s a little bit more affordable in a lot of spots. And then who doesn’t want to hang out in Europe? What do you see going on? Because Europe is also making some changes on the regulation out there too. Because I know for me, if I’m going to Europe, I would much rather stay in an Airbnb. The hotels are a little bit older. They’re very small. It’s hard to do that with kids. With all this demand now shooting to Europe, do you think that’s what’s also causing the regulation to start to be really looked at? I know Spain’s really starting to crack down. Other countries are, is this what’s causing that?

Jamie:
Yeah, we’re definitely seeing some backlash in terms of the amount of tourism coming into Europe. And we have to remember that these cities, people live there and European capitals, major European countries like France, Spain, Italy, tourism drives their economy, but also they see tens of millions of visitors all compacted into three months during the summer. That can really impact the sort of quality of life for residents. That was an issue pre pandemic, and maybe people got a glimpse of what their city could be like without tourists in 2020, 2021, and now they’re seeing a comeback. And I do think there’s a ripe balance of tourism in a lot of these cities. Some cities have maybe swung too far like Barcelona, like Amsterdam, and essentially proposing or implementing complete bans on short-term rentals. And then I think other cities, like we’ve seen Paris in the Olympics of where they have a limitation of the number of nights that you can rent out.
So we don’t see a whole lot of units actually being converted to full-time, short-term rentals because a limit on the Total Knights. But you do see people that say, you know what? I don’t like being in Paris during the summer as a resident. I’m going to go to the south of France. I’m going to rent up my unit while I’m gone. So it doesn’t take a unit out of the long-term housing stock, but still allows tourists to come and stay in those units during peak season and promote more economic activity, economic spending in these cities. So I think there’s going to be some pain while cities figure out what that right balance is. But I think long-term, we’re going to find it and that short-term rentals are going to be an option again in these cities.

Kathy:
Oh man, you’re not kidding. They totally leave Paris. I was an exchange student in Paris colleges. They are out of town and they’re by the beach most of summer. So yeah, good opportunity to rent at that time.

James:
Alright, so Jamie, we’ve talked about demands going up, migration patterns, traveling US travelers starting to go to Europe. Europe’s coming back here. I think for all of our listeners, they’re all trying to figure out how to keep growing where the best markets are. Where do you think the most strategic opportunities, if you’re a new investor or even the short term investors that want to keep going? I mean, where do you see the most strategic opportunities for people buying these types of investments going forward?

Jamie:
My suggestion is, think about it in the same way that you would long-term rentals. What are the major trends that are driving population movements? What are going to be the beneficiaries of that? What are the long-term trends in terms of where short-term rentals are really attractive and where short-term rentals are going to beat hotels going forward? Because it’s going to get way more competitive. Hotels are not going to bow out of this fight. So when I put my investment hat on, I’m looking at destinations in the southeast West, maybe even down in Florida. I’m looking at larger type homes that are going to be attractive to larger groups to families. I’m looking for properties that can be amenitized if you need to amenitize them to stay competitive in that market and be smart about how you’re going to continue to be attractive to guests and that you’re in markets that are going to long-term be in demand. And that’s how I’m advising investors today and how I’m sort of shaping my own investments.

Kathy:
So you got to work at it now a little bit harder than maybe you used to have to. Yep. Alright. Well, Jamie, thank you so much for joining us here on the market. It’s really a pleasure to have you here.

Jamie:
No, this has been great. Thank you guys so much.

James:
Thanks, Jamie.

Kathy:
If you want to connect with Jamie, you’ll find that information in the show notes. We’ll see you next time on the Market.

Dave:
On The Market was created by me, Dave Meyer and Kaylin Bennett. The show is produced by Kaylin Bennett, with editing by Exodus Media. Copywriting is by Calico content, and we want to extend a big thank you to everyone at BiggerPockets for making this show possible.