Trendwatcher: Shifts in Short-term Rental Supply and Demand and How to Solve it With AI

Vacation rental manager STR supply and demand

In the last five years, we have seen drastic shifts in work and travel patterns, new traveler personas, and increased regulatory constraints. The industry adapted, and one discernible result was the increased popularity of short-term rentals. 

Cue 2024. The world has reverted to pre-pandemic routines. Once held debates on the best sourdough recipe have shifted to the most effective ChatGPT prompts. AI is being adopted across industries, including hospitality. 

However, how does this impact travel, and what booking trends should a vacation rental manager expect? Let’s dive into some of the numbers.

Travel Trends

Business travel is making a strong comeback, with Delta’s Q4 earnings highlighting a double-digit growth rate, bringing it to 90% of its pre-pandemic volume. This resurgence is fueling a renewed interest in hotel accommodations, traditionally favored by business travelers. Yet, an interesting twist in the travel narrative is the rise of ‘bleisure’ travelers – those blending business with leisure – who are increasingly seeking out short-term rental properties for their stays.

Another intriguing development is that transatlantic travel is eclipsing domestic journeys, presenting both challenges and opportunities for domestic vacation rental managers (VRMs). This shift offers VRMs a unique chance to capture the attention of European travelers looking for short-term rental options in the U.S.

The landscape for short-term rentals (STRs) is also experiencing significant changes. As of September 2023, the U.S. saw a record high of 1.65 million STR listings, marking an increase of over 80% within just two years. Despite this burgeoning supply, demand hasn’t kept pace. According to AirDNA, U.S. occupancy rates dipped to 47.7% in November 2023, reflecting a 6% decrease from the previous year. This scenario of growing supply but dwindling demand presents a complex challenge for VRMs navigating the evolving travel market.

Putting it all together

Today’s travel landscape presents a complex challenge for Vacation Rental Managers (VRMs), marked by intense competition. Here’s a snapshot of the current scenario:

  • The demand for short-term rentals has reverted to what we saw in 2019, yet the market is now flooded with the supply levels anticipated for 2024.
  • There’s a noticeable dip in domestic travel, while interest in hotel accommodations is on the rise.
  • Online Travel Agencies (OTAs) are upping their fees and tightening their operational guidelines.

This situation might seem daunting at first glance. However, there’s a silver lining that’s empowering VRMs of all sizes to stay in the game and even boost their revenues: the strategic adoption of artificial intelligence (AI). AI is revolutionizing the way marketing teams understand and engage with guest preferences, offering a pathway to targeted and effective marketing strategies.

Predictive Hospitality: AI-matchmaking

Predictive Hospitality platforms empower Vacation Rental Managers (VRMs) to harness the power of AI throughout their direct booking processes, streamlining operations, boosting property visibility, customizing guest booking paths, and enhancing direct reservations. These advanced systems continuously evolve by gathering and analyzing data on guests’ property preferences, spending patterns, and online activities, offering unparalleled insights for VRMs.

For marketing teams, these platforms are game-changers. They sift through vast amounts of historical data on properties, guests, and online interactions to build predictive audience segments automatically for targeted marketing efforts. This approach eliminates the need for repetitive guesswork and extensive A/B testing, providing marketers with the tools to create highly effective audience lists tailored to specific characteristics that only predictive hospitality technology can uncover.

Consider a scenario where a property is underperforming in terms of occupancy. Through predictive audience capabilities, marketers can identify and directly target potential customers most likely to book that property, enhancing marketing efficiency and fostering guest loyalty by delivering content that truly resonates. This targeted approach not only delights guests but also pleases property owners as their properties gain traction and achieve higher booking rates.

Beyond targeting, AI-powered predictive audiences revolutionize email marketing by enabling seamless integration with email platforms, ensuring that each recipient receives content and property suggestions tailored to their unique preferences. This personalization boosts the relevance and impact of each communication, driving engagement and direct bookings.

In today’s competitive short-term rental market, where an increased number of listings vie for guests’ attention, the solution isn’t just to reduce prices. AI empowers marketers to connect with guests who value what a specific property offers, fostering loyalty and smoothing the booking process by presenting properties that align with guests’ preferences right in their inboxes. This strategic approach leverages AI not just to compete but to stand out by understanding and catering to the nuanced needs of the modern traveler.

What’s Next? ChatGPT might not know.

Over the past five years, the travel sector has ridden a rollercoaster of challenges and opportunities. As the landscape has evolved, so have the behaviors and expectations of travelers.

In response, Artificial Intelligence (AI) is now a cornerstone in the business strategies of all sectors, including travel. Leading the charge, large Online Travel Agencies (OTAs) have widely integrated AI into their operations, especially within their booking processes. This shift presents a golden opportunity for Vacation Rental Managers (VRMs) to leverage AI and unlock the full potential of their data.

To stay ahead in this rapidly changing environment and boost profitability, VRMs are encouraged to embrace the technological innovations that are reshaping the travel industry.

Interested in seeing what AI can do for your business? Explore the capabilities of Aidaptive’s Predictive Hospitality platform or delve into our Predictive Audiences by requesting a demo [here].

And if you’re keen on keeping up with the latest advancements in AI and technology within the hospitality sector, we invite you to subscribe to our newsletter [here]. Stay informed and stay ahead with the latest insights and trends delivered straight to your inbox.

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Katie Keyser
Katie is part of the marketing team at Aidaptive. She's a key strategic resource for the go-to-market execution.

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