Short-Term Rental Market Trends

Growth Drivers

• Profitable effect of remote work culture: The emergence of remote work culture is driving high demand for rental properties in various locations, fuelling the use of online booking platforms. Remote jobs benefit employees to work from anywhere, as a result, they are no longer tied to cities and can choose their residence locations based on personal preferences such as climate and affordability. This shift in work culture is benefitting all customers, property owners, and short-term rental platform providers. Globally, the percentage of remote employees has increased dramatically in recent years, from 20% in 2020 to 28% by 2023.
• Effective role of artificial intelligence (AI) and machine learning (ML) in short-term rental platforms: AI and ML are core branches of computer science, and their integration in short-term rental platforms is set to offer a more customized and flexible advantage to both hosts and customers. The AI and ML algorithms analyze market trends, local events, seasonal demand, and historical booking to optimize pricing. This aids hosts in adjusting their rates in real-time and maximizing revenue while remaining competitive. For instance, a Berlin-based deep learning company AristanderAI uses AI and ML algorithms to aid short-term rental businesses in making effective pricing decisions.

Challenges

• Rising competitiveness: The proliferation of short-term rental platforms and the increasing number of service providers are making the market highly competitive. This saturation is expected to drive down the rental process and make it more difficult for new entrants to succeed. Also, several cities have strict regulations on short-term rentals such as zoning restrictions and registration requirements, which may hamper the short-term rental market growth to some extent.
• Economic uncertainty: Economic downturns such as inflation and unemployment have high impacts on travel budgets and discretionary spending of individuals, which can limit the demand for short-term rentals.