Short-term rental industry predictions for 2023
Posted by Kiera Davidson on December 22, 2022 · News
Discover the latest short-term rental predictions for 2023, including industry insights, trending technologies, popular destinations and the economic pressures of the cost of living crisis.
Travel, tourism and hospitality industries have faced one challenge after another since the 2020 pandemic. As we face another year of economic hardship, we want to help property managers and hosts stay ahead of the curve.
We’ve combined industry expert knowledge to provide you with the best, actionable takeaways to prepare for a successful 2023.
Watch our short-term rental predictions 2023 summary
An outlook of 2023
Here are the five hot topics we forecast to emerge, continue to grow, or even change throughout 2023:
- Travel and Destinations: Will there be a generational difference between ‘fly-in’ and ‘drive-in’ destinations due to the rising costs of living? Will this alter your short-term rental target audience like that of the ‘staycation’ trend of 2020?
- Direct Bookings: Once again, direct bookings are the talk of the town, but what direction is the road heading? One thing is for sure, their popularity is not dwindling. But the question remains: ‘how do you stand out in an oversaturated market?’
- Mid-Term Stays and Remote Workers: We all know the pandemic accelerated a much-needed change to the mundane office 9-5, employees want flexibility, but is there a need for property managers and hosts to continue to cater to the remote worker? How will the mid-term stay maintain the digital nomad presence throughout 2023?
- Technology and Tools: In an industry that is ever-evolving, property managers are looking to evolve their operations too, but what technologies are set to stand out as a must in 2023? The call for automation echoes on from the vacation rental conference ExpoRV, Cancun.
- Pricing and the Guest Experience: Will the economic pressures and oversaturated markets impact pricing in favour of the guest or the host? How will the guest experience change… if at all?
Let’s look at how short-term rental predictions for 2023 compare across the industry.
Travel and destination predictions
According to Expedia’s Traveller Value Index 2023, even though the cost of living crisis is sweeping each nation, a staggering 79% of travellers (asked) are still planning to take a ‘leisure trip’ in 2023, with just under 50% increasing their travel budget for the upcoming year.
This shows us the current economic climate is yet to impact the travel decisions of many – even SkyScanner’s Travel Trend Report found only 8% of travellers were looking to spend less on travel in 2023.
On the other hand, Skyscanner also suggested ‘price-driven travel’ will be the main priority for 2023. Humphrey Bowles (Know Your Guest) agrees, suggesting that the impact will be on the means of travel, with fly-in destinations being less popular in comparison to drive-in destinations, as guests will look to stay local and explore easy-to-access locations.
However, Madison Rifkin (Mount) explores this further, suggesting travel will be affected based on a generational disposition:
“I think older generations are probably going to turn more to driving because they’ve lived through a recession and they understand how to save money, whereas this new generation, gen Z – that I’m a part of – will continue to fly. We haven’t lived through a recession before, so will have to navigate that.”
With that in mind, what are the top destinations for 2023? According to Airbnb, the top trending international travel spots include:
- Malaga, Spain
- Sydney, Australia
- Melbourne, Australia
- Auckland, New Zealand
- Bangkok, Thailand
- Queenstown, New Zealand
- Florianopolis, Brazil
- Porto Seguro, Brazil
- Perth, Australia
- Salvador, Brazil
Airbnb, direct bookings or mid-term stays, which way is forward?
Despite what you may hear, there isn’t a clear-cut right or wrong answer here.
With the industry sharing short-term rental predictions for 2023, it’s important to note that not all hosts are the same, and not everyone’s aims are the same. But, there are three things we are certain will impact the industry in 2023: demand/oversaturation, direct booking channels and mid-term stays.
Demand for short-term rentals has surpassed even the highest expectations throughout 2022 (AirDNA) and 2023 growth is predicted to continue but at a slower pace.
We spoke to Erin Lenhardt, Co-Founder of STR to Wealth and Founder of The Brighthouse to find out why this may be:
“Due to oversaturation of listings, combined with economic factors, some hosts will be exiting the space and looking to turn their STRs into mid-term furnished rentals. At the same time, amateur hosts will continue to enter the market, hoping to put a few extra bucks in their pocket, especially due to recession and inflation.”
So, with short-term rental market data showing more competition than ever, and supply hitting record levels in 2022, how do you stand out from the crowd in 2023?
It seems the trending answer is direct bookings.
According to Humphrey Bowles, 2023 will be the breakout year for direct bookings with everybody looking for the best deal possible, and with the new release of The Book Direct Blueprint, hosts have a multitude of tips at their fingers to help them embark on this journey.
To implement a successful direct booking channel, hosts will need to remember 4 things:
- Provide a quality experience to every guest – make guests remember you; word of mouth is a great marketing resource.
- Market effectively to previous guests – automate your guest communication, collect their details, add them to mailing lists or even offer complimentary discounts; the possibilities are endless. Brindy Bringhurst (Airbnb Expert) predicts “guests will start noticing Airbnb hosts putting in more effort to collect emails, and greater marketing efforts to encourage returning guests”.
- Understand who your audience is – are they families, couples, digital nomads, or naturists; knowing who your audience is allows you to personalise their stay and create a greater guest experience.
- Choose the right platform to target your audience – be where your audience is; Google search can be a hard competitor – unless you’ve nailed down your SEO strategy – so if your audience uses social media, that’s where you need to be.
Also, check out the benefits of getting listed on Google’s Vacation rentals.
Building a tech stack
According to Hostfully’s report on Hospitality Trends in Vacation Rentals, an average of 3.4 software solutions were used by property managers in addition to their PMS, as part of their vacation rental management strategy in 2022.
Here is what they found:
“With increased demand, the need for integrated technologies is more important than ever” – Leo Walton, Know your Guest.
It’s evident the individual needs of software and solutions are unique to each business, but the commonality is that automation was the highest-voted (18%) obstacle faced in terms of technology.
As such, we’re predicting technology to be a popular trend for property manager investments throughout 2023, as they look to implement direct booking strategies and will need value-added solutions to do so.
So what technology and software will trend in 2023? Here’s what we think:
- Risk Management & Guest Screening – In 2023, more property managers will be turning to risk management solutions, including guest screening, noise monitoring and occupancy monitoring devices, to help mitigate the risks associated with short-term rental bookings, so they can host safely, maintain privacy and not compromise the guest experience.
- Property Management Software – The most popular software for short-term rental property managers and they won’t be going anywhere, but we could be in for some new improvements and features that will allow for greater automation, greater reservation control and website building features to support the direct booking trend.
- Damage Protection – The move towards more independence and control over listings will see more property managers and hosts look for their own damage protection solutions. Collecting a damage deposit or damage waiver and ensuring the right protection is in place will allow property managers to reduce their reliance on the big OTAs.
- Guest Communication Platforms – Automation is a key obstacle property managers are looking to solve and automated guest messaging will help streamline the whole process and boost the guest experience. These platforms can be utilised throughout the whole booking journey including post-stay communication to help retarget and market to previous guests.
4 ways to align your short-term rental management strategy ready for 2023
Here’s how you can align your property management strategy with industry expert short-term rental predictions for 2023:
- Build your brand’s presence for your direct booking website
- Get listed on multiple channels to increase your occupancy
- Build your tech stack to streamline your processes and host safely
- Know your audience to personalise the guest experience
Know Your Guest can help property managers build their risk management strategy to prevent parties, guest-related property damage and fraudulent bookings. Get in touch today.