The journey into real estate began in the late 90s, with a foray into Airbnb properties starting in 2014. Over the years, much has been learned as an investor, yet the market constantly evolves, and so must the strategies. Reflecting on the trajectory of the short-term rental (STR) market, especially within the U.S., it’s clear that while success has been notable, significant changes have been made since the 2022 peak.
By 2022, a portfolio of 16 STR doors—including new builds, planned build-to-rent Airbnbs, condos, and rehabs—had been established. Maintaining Superhost status every quarter and hosting thousands of guests, the portfolio doubled or even tripled in equity. That year, a 97% occupancy rate was achieved, setting a new annual revenue record.
After two years of rapid, Fed-fueled post-COVID appreciation—growth that typically takes a decade—it became apparent that the time had come to consider selling to harvest the artificially created equity. With prices soaring, the decision was made not to chase the market but to step back from buying.
Two paths presented themselves: sell high or reinvest heavily in properties that had been well-used over the years. The choice was to start selling turnkey STRs, retaining only the best and parting with the rest. This decision proved wise, as properties were sold at peak revenue, securing top market prices.
For those properties still held, the landscape has shifted. Margins have compressed, expenses are rising faster than usual, and revenue, ADR, and occupancy are all slipping. The current market demands twice the effort for the same—or even less—return. Despite these challenges, there’s gratitude for having made investments at the right time and for the right price, allowing resilience in the face of current conditions.
The decision to sell in 2022 went against the tide, as many were diving headfirst into the STR market. It was a tough call, but it’s always been about careful evaluation and making the best decision based on current realities. When the market grew greedy, a more cautious approach was adopted.
Today, the focus shifts to embarking on a new STR investment journey, becoming buyers once again, but only for the right deal. The mission now is to travel and explore premier global destinations where investing in STRs allows for living better at a lower cost.
Key trends are being closely monitored—trends that could impact STR property values, cash flow, and equity growth potential.
Key Trends to Watch:
American Consumer Discretionary Income
The STR business relies heavily on American consumer discretionary income, which is currently under significant pressure. Household debt has ballooned to over $18 trillion, and credit card balances have reached an all-time high. Alarmingly, over one in ten credit card holders are three months behind on payments.
Inflation is eroding purchasing power, and rising taxes and insurance are squeezing budgets. The decline in savings, coupled with rising costs, means fewer people have a financial cushion, making them more likely to cut back on discretionary spending, such as travel.
For STR investors, this signals that bookings and revenue will likely face challenges. There’s a high probability that more consumers will begin cutting back on non-essential spending like vacations, leading to fewer bookings and even lower rates. Consumer spending is softening, with cracks beginning to show in hotel and travel sectors.
Housing Values & Rising Inventory
Housing values present another concern. The assumption that prices will continue to rise is risky, even if interest rates drop. Real wage growth isn’t keeping pace with home prices, which dampens the potential for continued appreciation growth.
For home values to rise, mortgage rates would need to return to the lows that fueled the recent surge in home appreciation, or real wage growth must catch up—with inflation under control. Neither scenario seems likely in the near term, leading to the belief that there’s a higher probability of falling home values in many markets.
Yet, within this concern lies an opportunity. A significant correction in housing prices could present a buying opportunity that, in some markets, could rival the post-2008 financial crisis period. For those who exercise patience, this could be the moment to acquire properties at substantial discounts, setting the stage for future gains.
Consumers Running Out of Money
Consumer confidence and spending habits are under close scrutiny, with earnings reports indicating that consumers are feeling the strain. As belts tighten, STR bookings are likely to remain under pressure.
In response, many operators have turned their properties into themed experiences to attract guests, investing heavily in over-the-top amenities or over-improving assets to sustain revenue. While this strategy works for some in the short term, it carries risks if the market shifts. The focus here remains on smart, cost-effective enhancements that optimize both the guest experience and returns.
Deteriorating Credit, Tightening Credit, & Rising Unemployment
Warning signs are emerging in the credit markets, with rising credit card delinquency rates, tightening global liquidity, stricter bank lending standards, increasing unemployment, and a rise in bankruptcies and mortgage delinquencies.
These indicators signal broader economic challenges that could impact real estate investing, particularly in the STR sector. Further deterioration in credit and delinquencies could reduce the pool of qualified buyers, lead to rising inventory, and make it more challenging to secure financing. This scenario could depress property values and extend holding periods for sellers.
A growing number of consumers can no longer afford discretionary travel, which could lead to reduced occupancy rates and downward pressure on rental rates and revenue. While informed decisions are being made, the future remains uncertain, and caution is the guiding principle in determining what to buy and where to buy.
Inflation vs. Income
The relationship between inflation and wage growth is being closely watched. If inflation outpaces incomes, people will have less money to spend on travel. Although disinflation has begun, it only means prices remain high without further inflation. What’s needed is a deflationary reset.
Marketing strategies are being adjusted to appeal to an older, more affluent demographic of mid-term monthly travelers who possess discretionary income. This segment offers a stable income stream that can help weather economic uncertainties.
Global STR Diversification
Scouting for the best international STR destinations is underway, seeking locations where it’s possible to live and invest better for less.
International markets often present opportunities where the dollar stretches further. Expense ratios are significantly lower compared to the U.S., the cost of living is more affordable, and demand for STRs remains high, leading to more favorable opportunities.
Particular interest lies in regions where currency advantages can be leveraged and growing tourist markets can be tapped. This is just one possible strategy among many.
Final Thoughts
New STR investment opportunities are always on the horizon, regardless of market conditions. Success will favor those who are prepared. A network of local insider scouts is being built to bring the best opportunities—both in the U.S. and globally.
As economic challenges emerge, so do unique opportunities for those who are patient and methodical in their approach. By carefully analyzing trends, adjusting strategies, and scouting new opportunities domestically and internationally, the goal is to navigate this volatile market and emerge ahead.
The prize for those seeking STR real estate for cash flow and lifestyle enhancement will go to those who are patient, methodical, and make wise purchases in the right place at the right time.
About STR Scout
STR Scout is a newsletter crafted to help you enrich your life and grow your wealth globally through strategic investments in Airbnb properties and short-term rentals. We provide tools, resources, and insights tailored for real estate investors, guiding you to make informed decisions. The twice-weekly newsletter delivers property scouting reports, market trends, STR classifieds, and investment news, helping you discover the best opportunities in the global short-term rental market. Join
About STR Homes for Sale
STR Homes for Sale is the top Facebook marketplace for buying and selling Airbnb properties and short-term rentals, boasting 98,700 members. Since 2017, it has connected real estate investors with sellers, offering a free platform to showcase both on and off-market STR properties. With hundreds of thousands of monthly views, this community is a vital resource for those looking to maximize exposure and secure the best deals in the short-term rental market. Join