High demand for short-term rentals offers big return

With Labor Day just around the corner, many sunseekers are likely to be racing to book short-term rentals.

That’s because, judging by a recent spike in demand for vacation rentals in coastal areas of the U.S., anticipation is high that travelers will be seeking one last summer getaway.

July demand for short-term rentals climbed to a record 26.4 million nights, up 3.6% compared with a year ago, according to the latest available figures from AirDNA, a firm that compiles and analyzes Vrbo and Airbnb data.

Even economic uncertainty, weak employment numbers, and persistent affordability challenges could not stop Americans from indulging in travel in July—that despite the average daily rate climbing nearly 6.9% year over year, to just over $351. 

“Summer vacation is usually like the last thing someone’s willing to give up,” AirDNA Chief Economist Jamie Lane tells Realtor.com®. “It’s going to take a lot to cause people to pull back on those type of vacations.”

And Americans not only traveled but also chose larger, more expensive rental properties.

“Since February, demand for six-plus bedroom properties has grown more than 13 times faster than for single-bedroom listings, and about four times faster than for two-bedroom homes,” says Bram Gallagher, AirDNA’s director of economics and forecasting.

However, occupancy averaged 67.4%, down 1.1% from a year ago, mostly because of an uptick in listings. But total nights booked rose 0.7% year over year.  

Year-to-date occupancy remains ahead of 2024 levels, and the latest pacing data points to a potentially stronger fourth quarter.

Foreign tourists turn their backs on U.S.

Perhaps unsurprisingly, given the heightened geopolitical tensions fueled by President Donald Trump’s trade war with partner nations, international demand for short-term rentals plunged 16% from a year ago, led by a sharp decline in Canadian stays.

According to AirDNA data, demand for short-term rentals in the U.S. among Canadian travelers dropped more that 48% from the same period in 2024.

This is consistent with a trend of Canadian second-home buyers increasingly retreating from U.S. markets in response to Trump’s tariff policies.

Fortunately for AirBnB and Vrbo hosts, Americans filled the gap, driving the majority of summer bookings.

Coastal revenue powerhouses revealed

Realtor.com senior economist Joel Berner says the historic surge in short-term rental (STR) demand is noteworthy because, generally, when the economy is tight, travel is one of the first industries to take a hit, because it heavily relies on discretionary spending.

“STRs do not seem to be feeling this pinch this summer, with the number of nights stayed exceeding last year,” Berner notes.

What’s more, revenue per available rental (RevPAR)—a measure of how well a property generates revenue for each night of booking—edged up 5.7% annually to $237, driven by steeper rates.

Here are the areas where short-term rental revenue growth has been the strongest:

Maui, HI

Coastal areas stood out for registering the highest RevPAR growth in July, led by Maui, HI, which saw a 17.3% year-over-year surge, even as it continued to recover from the deadly 2023 wildfires that ravaged the town of Lahaina on the island’s northwest coast.

“There’s not been much, or any, supply growth in Maui; there’s actually been slight supply decline,” says Lane. “So if the same or more people are coming to the area and there’s fewer listings available, that increases occupancy, and then allows those hosts to charge higher rates as well.”

According to Lane, Maui’s tourism turned a corner this year following the disruption caused by the fires.

“Last year, people were avoiding Maui,” says the economist. “There was still a lot of, I would say, misunderstanding of whether people were allowed to travel to Maui, whether Maui was welcoming tourists or not welcoming tourists. So now that it’s clear that Maui’s more open, we have seen demand come back much more strongly.”

However, Maui’s short-term rental sector is currently in a state of flux, as the Maui County Council is considering a bill to ban short-term rentals in areas dominated by multifamily housing. 

Property owners in condo complexes that will be affected should the legislation pass tell Maui Now they are considering taking legal action to protect their investments. 

Proposed by Maui Mayor Richard Bissen last year, Bill 9 is designed to boost the island’s long-term housing supply following the loss of thousands of single-family homes and apartments in the wildfires. 

Maui County still boasts the largest number of short-term rentals in the Aloha State both in terms of available nights and inventory, with an estimated 10,666 units, which accounts for nearly 15% of the area’s entire housing stock, according to the 2025 Hawaii Housing Factbook.

Hilton Head Island, SC

Within the contiguous United States, South Carolina stood out with two coastal towns showing some of the nation’s strongest short-term revenue growth.

Despite having a year-round population of just 40,000 inhabitants, Hilton Head Island, SC, attracts over 2.5 million visitors every year.

With more than 100 miles of scenic trails and two dozen golf courses, Hilton Head is a favorite among tourists who enjoy sports and the outdoors.

Charleston, SC

Located about 100 miles to the north, Charleston, SC, ranked third in RevPAR growth, posting a 14.5% rise in revenue compared with July 2024, largely driven by higher rates.

A charming oceanside city of horse-drawn carriages, celebrated Lowcountry cooking, and well-preserved antebellum architecture, Charleston attracts an estimated 7 million tourists annually. In 2024, close to 8 million people visited “The Holy City,” according to data from the College of Charleston’s Office of Tourism Analysis, reported by Charleston City Paper.

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Every adult per trip spent an average of $1,105 last year, generating a record-breaking total economic impact of $14 billion for the city.

Lane, with AirDNA, says coastal hot spots like Hilton Head and Charleston have seen their popularity surge among domestic travelers, further bolstered by a slight slowdown in outbound international travel this summer.

“People want to go to the beach in the summer, and markets that are sort of attractive have some of the best beaches around the country,” he says.

Berner agrees that U.S. short-term rental markets have benefited from Americans opting to vacation domestically this summer rather than traveling abroad.

“The luxury segment of STRs appears to be driving growth, and one reason for this may be the weakening of the U.S. dollar against the euro,” he says. “Families who otherwise may have gone abroad this summer may be choosing to vacation stateside this year where their money goes further, and these families are choosing high-dollar rental properties in the U.S.”

What’s in store for STR investors?

This potentially spells good news for those looking to purchase an investment property as a short-term rental, following a rough patch for the industry marked by oversupply and a lack of demand, which drove revenues down in many areas.

Supply of short-term rentals stumbled in July after two months of growth, with STR listings rising 4.6%, down from 5.7% in June. 

Gallagher says that if the Federal Reserve follows through with a widely anticipated interest rate cut in September, STR supply could see stronger growth, as more people would be willing to purchase investment properties to rent out.  

“This summer’s data should signal that STRs can still be a good investment, or at least a way to help finance a vacation home purchase,” concurs Berner. “Many would-be vacation-home buyers are staring down still-high mortgage rates as another blocker, but we anticipate a bit more relief on the rate front through the rest of 2025.”