Sat: We Should Almost Honor Them

To Err is Human, but It Takes Private Equity to REALLY Screw Things Up.

Brian Chesky famously founded Airbnb in 2007 after he and his friends rented out a mattress in their San Francisco loft "to make a few bucks." It was during a popular conference that had left all the hotels jam-packed.

In the 16 years since, individuals have gone from putting travelers in spartan guest rooms to purchasing whole, lavishly decorated homes for the sole purpose of renting them out on Airbnb. Then came professional hosts — or megahosts — who own or manage hundreds of listings.

When it comes to finding the strongest locations for Airbnb and Vrbo hosts right now, some might look for sky-high revenues or destinations with the most room for income growth. But it's a cruel summer for short-term rental hosts, as many vacationers are seeking out lower nightly rates and last-minute bookings, putting pressure on hosts in busier markets.

But there are still small cities and regional watering holes across the country that are wise investments for hosts looking to get their foot in the door, according to a new report from short-term rental analytics site AirDNA.

These spots might not always grab headlines, but the report notes their rising demand from short-term renters, their flourishing host communities, and their accessible real-estate price points make them attractive locations to operate long-term as a host.

To compile the report, AirDNA looked only at locations with between 100 and 500 whole-home listings with between one and five bedrooms. These spots proved a "happy middle ground" of established destinations that are not yet "name-brand" vacation spots, AirDNA Director of Enterprise Marketing Dillon DuBois told Insider.

Each destination had at least 85% of all listings from last year still available — any larger exodus might indicate unhappy hosts. All locations that made the cut also experienced positive growth in bookings from 2022, bucking the trend of some nationwide hotspots struggling.

Locations were knocked out of the ranking if professional hosts, or those with more than 21 rentals, operated a majority of the area listings. AirDNA focused on spots that weren't dominated by "well-oiled machines,"DuBois said. It also excluded markets with strict regulations.

Then, a "bang for your buck" metric was applied: the yield. It's the annual revenue an average host stands to make, based on the area's booking numbers and daily rates, divided by the average home price. The higher a location's yield, the higher it ranked. AirDNA supplied all figures except for average home prices, which are from Zillow and used by AirDNA in its ranking.

In the end, the list highlights stable, overlooked spots in states including Wisconsin, Mississippi, Ohio, and beyond.

Now, Wall Street wants in on the action.

Private-equity firm TPG recently decided to try its hand at the short-term rental market.

It started buying up houses in Florida, and renting them out on Airbnb for hundreds of dollars a night, the Wall Street Journal recently reported.

TPG, which has roughly $136 billion in assets under management as of Sept. 30, joins other big names hoping to cash in on travelers' affinity for accommodations that are more spacious and more private than a hotel. Take New York-based investment firm Saluda Grade, which planned to buy $500 million in American homes to rent out to vacationers and business travelers in 2022, and Chile's WEG Capital, which bought up $80 million in US properties that year, too, the Journal previously reported.

It makes sense: Short-term rentals can be more lucrative than annual leases because you can more easily adjust prices to reflect seasonal demand or counter inflation.
Not least, the demand from travelers is still there. This past July broke the record for the most short-term-rental stays in one month, with 35.4 million nights stayed, beating the previous high recorded in July 2022 by 9.4%, according to AirDNA, which tracks properties listed on the vacation-rental sites Airbnb and Vrbo.