Revenue generated from the short-term rental industry may have hit a saturation point, according to Scott Shatford, the founder and CEO of AirDNA, a short-term rental analytics firm.

Revenue generated from the short-term rental industry may have hit a saturation point, according to Scott Shatford, the founder and CEO of AirDNA, a short-term rental analytics firm.

Shatford said he and his team began to study short-term rental data to develop an index on revenue, because there’s a shortage of information on the health of the market.

“Nobody really knows exactly the general health of the short term rental market,” Shatford told Inman. “What we’ve seen, over the last five years, is that supply of short term rentals has exploded.”

“But really, nobody knows generally in the U.S. – is it oversupplied?” Shatford added. “Is it oversaturated? Can it be super cyclical like the hotel industry, which is the most cyclical industry there is?”

Shatford said his team was also curious how the softening of the market will impact vacation rentals. There are two schools of thought. Many people think that short-term rentals will thrive because they’re more cost-effective than hotels, and people are going to be thinking about different ways to make money. The other side is that people won’t be able to afford to travel, so managing a full-time vacation rental won’t make sense.

AirDNA developed an index to measure the revenue generated in each market. To arrive at the number, 90 percent of the data is scraped from every listing on Airbnb and Vrbo and the company supplements that with data sanctioned from roughly 20,000 individuals that signed up to give data. The company also created a seasonal coefficient to eliminate the seasonality of certain markets.

Shatford said, from the data, they were able to see a few specific insights, the first of which is that the market may have reached a saturation point this summer.

This summer for the first time we sort of saw a bit of a flatlining in what the average properties are earning,” Shatford said. “The general thought is that now we’ve hit the saturation point in the market.”

Over the last three years, revenue is up roughly 50 percent in general, but this summer it hit a stalemate, Shatford added.

The other insight is that metro markets used to have all the revenue growth, but that’s shifted to more destination markets in the last few years. AirDNA’s index breaks down the data from top metro markets as well as more traditional vacation markets.

“Maybe cities had their heyday a while ago while hotels were undersupplied,” Shatford said. “It’s shifted over to be more investment and profit is being made in the destinations over the past couple of years.”

The rest of the insights were market-dependent, according to Shatford. Accompanying the data plot of the general revenue index were insights into the top 26 markets in both metro areas and popular vacation destinations.

San Diego, California, is the top “big city,” metro area, where the average short-term rental pulled in $6,909 in revenue in July. The metro area with the most rentals is New York City, with 36,097 short-term rentals in July. The area where revenue has grown the most year-over-year is Indianapolis, which saw average revenue grow 17.4 percent year-over-year, while Fort Worth, Texas saw the most significant decline at 18.00 percent year-over-year, in July.

Santa Rosa Beach, Florida, is the top vacation destination, revenue-wise, where the average short-term rental pulled in $10,580 in revenue, in July. In fact, the top 10 vacation destinations all pull in more revenue than San Diego does, as a designated “big city.”

The destination with the most rentals is Kissimmee, Florida – home to DisneyWorld – which had 45,454 short-term rentals, in July, more than even New York City. The area where revenue has grown the most year-over-year is Breckenridge, Colorado, which saw average revenue rise 36.2 percent year-over-year, while Fort Lauderdale, Florida, saw the biggest decline at 11.6 percent year-over-year.

Email Patrick Kearns

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