\n<\/p>\n
Earlier this year, many Airbnb hosts expected the <\/strong>short-term rental<\/strong><\/a> market to fall off a cliff<\/strong>. With the threat of an economic recession<\/strong>, travel spending<\/strong> was supposed to crater, and with it, a slew of Airbnb failures. But that never happened. While demand did drop<\/strong>, supply increased, and daily rate growth eventually fell flat, there was no \u201c<\/strong>Airbnbust<\/strong><\/a>\u201d <\/strong>that so many doomsayers predicted. But, with another recession risk looking more real, are hosts still safe?<\/p>\n We brought AirDNA\u2019s Jamie Lane back <\/strong>to give his take on whether or not a short-term rental crash<\/strong> could happen this year or next. But that\u2019s not all; Jamie also goes over what top hosts are doing NOW to increase their revenue<\/strong> and keep their businesses afloat even as rates come off their post-pandemic highs. Plus, what\u2019s happening globally as a strong <\/strong>US dollar<\/strong><\/a> scares away would-be international travelers.<\/strong><\/p>\n If you run an Airbnb, this is data you must pay attention to.<\/strong> We\u2019ll review which short-term rental markets are in danger<\/strong>, the amenities that will explode your occupancy<\/strong>, what to do when regulations <\/strong>get introduced in your city, and how to prepare if a recession cuts into Americans\u2019 travel spending.<\/p>\n Rob: Jamie: Rob: Tony: Rob: Tony: Rob: Tony: Rob: Tony: Rob: Jamie: Rob: Jamie: Rob: Tony: Rob: Jamie: Rob: Jamie: Rob: Jamie: Tony: Rob: Tony: Rob: Jamie: Tony: Jamie: Rob: Tony: Jamie: Rob: Jamie: Rob: Jamie: Rob: Tony: Rob: Tony: Rob: Tony: Rob: Tony: Jamie: Tony: Rob: Jamie: Tony: Jamie: Rob: Jamie: Rob: Jamie: Rob: Jamie: Rob: Jamie: Rob: Jamie: Tony: Jamie: Rob: Tony: Rob: Tony: Rob: Jamie: Rob: Tony: Jamie: Rob: Jamie: Rob: Tony: Rob: Tony: Rob: Jamie: Tony: Jamie: Tony: Rob: Tony: Jamie: Tony: Rob: Jamie: Rob: Jamie: Rob: Tony: Rob: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Email <\/em>[email\u00a0protected]<\/span><\/em><\/a>.<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
Welcome to the BiggerPockets Podcast show, 835.<\/p>\n
That was definitely one of the predictions that we expected to come in for 2023 and to be a tailwind for demand. But for large city urban areas, they\u2019re still seeing some of those slowest demand growth across the country. And those markets are really highly dependent on international travelers. It\u2019s really still a function of the strength of the dollar and dollar is still really strong. We had expected it to weaken some as we got towards the summer travel season and that didn\u2019t happen.<\/p>\n
Welcome back, everyone, every week, bringing you stories, how-to\u2019s and the answers you need in order to make smart real estate decisions now in the current market and in the future markets. And today, we are taking over bigger news. So move aside Dave Meyer because it\u2019s me, Rob Abasolo, and my good friend Tony Robinson. Tony, how you doing, man?<\/p>\n
I\u2019m doing good, Rob. It\u2019s always good when we get to share the mic together, man. Our producers called us the power couple. I\u2019m going to embrace that. I\u2019m going to embrace that title, man. We got a good conversation teed up for today, Rob. We\u2019re talking to none other than Jamie Lane. Jamie\u2019s official title is SVP of Analytics and he\u2019s the chief economist for AirDNA. This guy is just like an encyclopedia of all things Airbnb. So every time we get to chat with him, I totally love it. Rob and I go over, what about those bust rumors? Are they real? How did Jamie\u2019s predictions from when we interviewed him back on episode 712 hold up, and what markets are on track for growth this year?<\/p>\n
Yeah. We\u2019re also going to be covering how you can stay one step ahead and hack your growth in the ever-changing market. Look, a lot of stuff has changed since he came on the show back in January, and he\u2019s just giving us good insights on really how to look at your overall short-term rental investment. He talked about how investors should be looking at their investments in the long-term, which makes a lot of sense. So even if you\u2019re not in the short-term rental game, I do want to say if you\u2019re a midterm or a long-term rental investor, keep listening to get ahead of how new short-term rental regulations might impact your market. And we\u2019re also going to be talking about Jamie\u2019s predictions for the overall economy or potential recession and everything in between. But before we get into it, we\u2019re going to do a quick tip brought to you by our good friend, Tony Robinson.<\/p>\n
Oh, we are? Okay. All right. Quick tip number one, head over to biggerpockets.com-<\/p>\n
I know how it feels.<\/p>\n
Quick tip number one, head over to biggerpockets.com\/tools. You guys will find an Airbnb or short-term calculator that\u2019s there. It\u2019s a free tool to help you figure out how much money your property could earn on Airbnb. And second quick tip, I want you guys all to go to Rob\u2019s upcoming event Host Con. Rob, give them details. Where can they go? How can they find out more about that?<\/p>\n
Wow. You can go to hostcon.com and it\u2019s October 28th through the 30th. It\u2019s right after BP Con, so I\u2019m going to meet all of you there. And then we\u2019ll migrate over to Houston, Texas to hear from a lot of the people we\u2019ve heard on the podcast, Pace Morby, Avery Carl. Would\u2019ve been Tony, but you\u2019re having a baby. That\u2019s all right. You\u2019ll catch the next one.<\/p>\n
Yeah. I\u2019ll be there in spirit.<\/p>\n
You will. You will. All right, well let\u2019s get into it. Jamie Lane, welcome back to the show. Glad to have you.<\/p>\n
Thank you so much for having me back.<\/p>\n
You brought up just right before this that the last time you were on the show was actually Tony and I\u2019s first duo together on the BiggerPockets Podcast.<\/p>\n
Yeah. I was so happy that I could be the reason to bring you guys together and now we get to chat again. It\u2019s been, what, nine or 10 months since we chatted last?<\/p>\n
Yeah.<\/p>\n
Yeah.<\/p>\n
That\u2019s crazy. That\u2019s crazy. Well, we know you and it\u2019s great to have you back, but can you tell all the new listeners a little about yourself for those of the listeners that didn\u2019t catch the episode about nine months ago?<\/p>\n
Yeah. So I work at AirDNA. We are a short-term rental and data analytics company. I\u2019m the chief economist and SVP of analytics at AirDNA. And it\u2019s my job to dig into the data and help interpret what\u2019s happening in our industry and make sure everyone stays informed on how the industry is performing, how do we expect it to perform going forward so you guys can all plan your next investments, figure out your strategy, and hopefully make good investments going forward.<\/p>\n
Well, like I said, glad to have you back, man. I think the last time you sat down with us was the start of the year and the Airbnb bust rumors were flying and it was doom and gloom. Sky is falling. You came in and you broke down the data on short-term rental so our listeners could keep their edge and I think we gave a lot of good useful data for everybody. I think the market now is a little different and we\u2019d love to have your insights again. So if it\u2019s cool with you, let\u2019s get into it and sort of talk about the actual general pulse for the short-term market in 2023.<\/p>\n
Yeah, so when we talked last and we were calling for a recession in 2023, and I think I was a little bearish on the outlook for the year ahead. We haven\u2019t had a recession. It\u2019s actually held up pretty strong on both the economy and the short-term rental industry. It\u2019s part of the reasons why we actually talk about multiple scenarios when we forecast. So we have our baseline, we have our upside, and downside. And so we had an upside forecast that essentially called for 13% demand growth and it\u2019s ended up about 11%. And our baseline was below that about 9%.
So I\u2019ve actually felt really good of how the years played out. It\u2019s outperformed our expectations. The economy has outperformed our expectations. We\u2019re still at 3.5% Unemployment. We\u2019re adding 150, 200,000 jobs every month. And that\u2019s sort of the key metric for me when I look at the economy is what\u2019s happening in the job market is if people have jobs, they\u2019re going to keep traveling. And that\u2019s what we\u2019ve been seeing. So our outlook did call for some weakness this year. As of the beginning year we were expecting RevPAR, that\u2019s revenue per available rental to be down about 1.5%.
Rates are ADRs up about 1.5% and that implicitly means occupancy is going to be down 3%. And that\u2019s what happened. That essentially has perfectly pegged what the industry has performed, how the industry\u2019s performed through October. So not great given that everyone is earning a little bit less money this year, but not a catastrophic collapse in revenue. Maybe some of the things we\u2019ve been hearing on Twitter these past few months.<\/p>\n
There was a very viral tweet that was Phoenix and Austin are they\u2019re half down and something like that. I believe you responded to it.<\/p>\n
Yeah. Did you guys see that tweet? Did people Tweet it at you?<\/p>\n
Of course, yeah.<\/p>\n
Yeah. All the naysayers and haters were so quick to jump on that one.<\/p>\n
Yeah. We ended up doing a whole YouTube video as a response to that tweet also. So there was a lot of folks that were riled up by that one.<\/p>\n
Well, let me ask you this, Jamie, because I believe\u2026 And refresh me. I mean I don\u2019t expect you to remember exactly what happened back in January, but I thought there was some trend where maybe occupancy was down, but ADR, which is average daily rate was up. Was that what it was back in January.<\/p>\n
Yeah. And that\u2019s what we are seeing in January and that\u2019s continued throughout the year. So for the first\u2026 And through August. So back up, we break up the US in a lot of different markets. There\u2019s 265 markets for the country and of those 265, 218 of them have seen declining occupancies through August. And essentially everywhere is seeing declines. Nationally, we\u2019re seeing about essentially flat ADR. So no one is really increasing rates, but how that breaks out among the markets is just over half of them are seeing ADR declines or you\u2019re not able to charge as much for the same property this year as you were last year.
You\u2019re getting a little bit less revenue per night and that\u2019s pushing and resulting in weaker RevPAR. At the beginning of January, we\u2019re seeing slightly higher rates. Now rates have clearly gone into the flat to negative realm.<\/p>\n
Jamie, I want to just touch on something really quickly because there\u2019s a lot of debate not just as real estate investors, but just as people in the United States and really I guess across the globe about what exactly is a recession. I just want to sidebar here quickly because I think it\u2019s an important thing to call out out because you have this consensus idea that a recession is two consecutive quarters of declining GDP, which has happened, but there\u2019s a more\u2026 Educate me and the rest of the listeners here, but there\u2019s a more formal education of what an actual recession is. Can you just talk about the nuances? Why are we not already in a recession even though we\u2019ve had two quarters of declining GDP?<\/p>\n
Yeah. So that two quarters of declining GDP, that\u2019s like a rule of thumb that people are taught in high school, but it\u2019s not actually how we define recessions. And there\u2019s this whole economic board, the National Bureau of Economic Analysis, and they actually look at the data and decide whether or not we\u2019re a recession or not. It\u2019s mostly PhD economists and the definition gets into that. We have to see broad based economic decline.
What we saw last year with the two consecutive quarters was not a broad-based economic decline. We saw some weird things happening with inventories around the pandemic, and we are at record below unemployment. We are seeing 300,000 new jobs being added every month. We are seeing five, 6% increases in wages each month. We are in no ways in a recession by really any different way you define it.
There are certain aspects of the economy that might\u2019ve been in recession, like manufacturing tech industry saw a really strong pullback and actually saw some layoffs. But in terms of overall economic decline, we weren\u2019t there. And even in the real estate industry and with rising interest rates and sort of a pullback in transactions, we\u2019ve seen quite a few real estate companies go under because of the lack of transactions, but it is in no way sort of a broad base economic decline.<\/p>\n
Interesting. So relatively, do you have a POV, a point of view on what the next year or two looks like in terms of recession? Do you think it\u2019s looming? Is there something big coming up or do you think we\u2019re just going to kind of, \u201cTell us everything\u201d? No, I\u2019m just kidding. Do you think we\u2019re going to hold this pace?<\/p>\n
And, Jamie, if I can just add one piece to that, because the goal of the Fed, what you keep hearing is that they want this \u201csoft landing\u201d where they\u2019re able to tame inflation without causing massive unemployment. But I mean, there\u2019s some things happening. You have student loans that are kicking back in October 1st. There\u2019s the strike that\u2019s going on. There\u2019s potential government shutdown. So with all these things happening, I guess to Rob\u2019s point, do you think that soft landing is even possible still?<\/p>\n
Yeah. It\u2019s still possible. It\u2019s still highly likely that we go into recession over the next year. And with what the feds had to do in terms of raising interest rates so high so quickly, and there\u2019s just such a high likelihood that something could break, and then you add on top of that, all those things that you mentioned, the government shut down, which more than likely could happen, and we\u2019re recording here at the end of September, and at the end of the week, the government could shut down.
Now, expectations are that that\u2019s a two or three week shutdown. If it pushes through the end of the year, that could have a meaningful impact and overall economic output. To the short-term rental industry too, if you\u2019ve got a rental in and around a national park, that national park is more than likely going to be shut down, and that could really impact the earnings through fall.
So if you think you\u2019ve got a property in Gatlinburg, and the biggest driver to that market is people going to visit the national park seeing lease change, and that could have an impact on that market. And then resuming student loan payments sort of impacting consumer spending. The UAW strike, actor writer strike impacting specific markets like LA and Atlanta. All these things have both direct impacts to the economy and our industry.<\/p>\n
Wow. I hadn\u2019t really considered that, but that\u2019s so true because national parks have always felt we\u2019re sort of protected in the sense that\u2026 I call them Mother Nature\u2019s Disneyland. You don\u2019t have to market the Smokies. You don\u2019t have to market Joshua Tree. You don\u2019t have to make a billboard for the Grand Canyon. People are going to go by the millions. But yes, if they shut down due to government regulation, that\u2019s going to hurt a lot of hosts.
So maybe that changes some of the POVs on the government shutdown, because I see both sides of it pretty much every single day at this point. Now, that we have a general understanding of where the economy stands, I sort of want to punch in a little bit and talk more on the municipal or even on the state level because we\u2019re seeing a lot of regulations come in. I\u2019m sure you\u2019ve heard about Dallas and New York, all the big bands, and that is definitely shaking up the short-term rental market for a lot of those operators. Which markets are being most impacted by regulations and what impacts are you seeing?<\/p>\n
Yeah. It\u2019s funny how that\u2019s now turned into that conversation that you have with your cab driver of when they ask you what you do and I say I analyze the short-term rental industry. They\u2019re like, \u201cOoh, regulations must be really impacting you guys.\u201d And it\u2019s true. The New York regulation has really brought it into the forefront of essentially a defacto ban on Airbnb as the beginning of the month when it started going into effect. We saw almost an 80% decline in short-term rental listings in New York. And that was one of Airbnb\u2019s biggest markets essentially decimated.
Now, the listings didn\u2019t leave. They\u2019re not off of Airbnb. It\u2019s essentially people moving from a short-term rental strategy to a mid to long-term rental strategy. So they\u2019ve changed their minimum stay requirements from short-term stays to 30 plus stays or longer, which we\u2019ll see how much demand there is to support that strategy for 17,000 listings all moving to long-term stays at once. I suspect that there\u2019s quite a bit of demand to support it, and we see that in a lot of other cities, but that is playing out and we saw it play out or will play out in Dallas.
We\u2019re seeing that change or a part of that change in Atlanta. We\u2019ve seen it in other large cities like Los Angeles, Boston, Chicago, that have put into place pretty onerous laws going after short-term rentals. But on the flip side, there\u2019s also been significant pushback from the host community sort of banning together working with the local municipalities. We saw that in Atlanta essentially getting the ordinance going to effect delayed and delayed, and delayed, and delayed.
We saw there was a lawsuit on the Austin laws back in 2016 that just sort of came to fruition where they overturned the ban on short-term rentals. And I\u2019m distinctly saying that there cannot be a distinction between different kinds of homeowners and how they can use their property.<\/p>\n
This is a huge one. That was a big one.<\/p>\n
That was huge.<\/p>\n
I saw that that article came out because Austin has been\u2026 They\u2019ve never really enforced it, and there were ways to get the permits and everything, but I saw an article, it was back at the beginning of August that said federal court strikes down Austin short-term rental laws and basically called them unconstitutional. And so it\u2019s interesting because it\u2019s like if that\u2019s a federal court striking down an Austin one, I mean, how does that actually affect the rest of the country?<\/p>\n
You think about Dallas, right? Dallas just effectively banned single family short-term rentals also and now you have this neighboring major city. It\u2019s like how does that impact Dallas short-term rental plan and all these other places?<\/p>\n
Exactly. Same states.<\/p>\n
Yeah. But one thing I\u2019m curious, and Rob, I want to get your insights on this too, because what I\u2019ve shared with people is that regulations are coming. It\u2019s a definitive thing. It\u2019s just how is each city and municipality going to choose to regulate short-term rentals? But they are coming. So my focus has always been on investing in true vacation markets where the primary economic driver is vacation and tourism because I feel like there\u2019s a little bit more insulation there. And if you do choose to go into markets that are more residential, call them suburban cities, major metros.
My thought has always been, \u201cIf I\u2019m going to go into that market, I need to make sure that either one of two things are true.\u201d Either first, I can still cashflow on this deal as either a midterm or a long-term rental. Or second, it should be a strategy that I can get out of relatively easily, which is arbitrage or co-hosting. Actively, we\u2019re launching three units in Dallas next week through arbitrage, but I\u2019m not worried about those because, A, it\u2019s arbitrage. I can get out of those with breaking the lease and walking away, or B, I can flip them over to midterm and they still make sense.
So Rob, what\u2019s your take on that, man? A lot of people are afraid of regulations. What\u2019s your advice to folks who want to navigate that the right way?<\/p>\n
Totally. Yeah, I mean there is a lot to cover there. I think most of the time I am trying to find a city or a municipality that has some level of regulations because at least they\u2019ve had the conversation and we know that they\u2019ve already voted on it. And if there\u2019s a process like getting a permit that\u2019s been put in place, I usually feel a lot better than that, better about that than going to a place that\u2019s like, \u201cWell, what is that?\u201d I don\u2019t know. You can just list it. And then one day it gets-<\/p>\n
[inaudible 00:18:35]<\/p>\n
Yeah, exactly. Which that\u2019s how it was back when I started in 2017 or whatever. But I have really accidentally stumbled onto the midterm market back during the pandemic because everything shut down and then travel nurses needed to stay at my place in LA. And so I was like, \u201cYeah, sure, why not?\u201d And then they stayed and I never heard from them. They were mega clean and I made just about as much money as short-terms. And so I fell in love with that from the get-go.
I would say most of the time, you\u2019re going to do yourself a disservice if you\u2019re not trying to actively create a hybrid midterm rental and short-term rental strategy. My personal preference, and again, this isn\u2019t going to work in vacation rental markets like Gatlinburg, but if I could mostly have a midterm rental strategy and fill in the gaps with short-term rentals, oh man, I would do that all day.
Really what it is, it\u2019s mostly a short-term rental and then midterm rentals come in and I have to work around that. So I honestly think that 2023, for any host that\u2019s scared of regulations, they\u2019re coming, but you really do have to actively be working on those contracts with housing companies and relocation specialists and travel agencies, nursing relocation specialists, all that kind of stuff. You want to be working on your rapport with them and your relationships with them so that, yeah, if a regulation hits, you don\u2019t have to shut down your business. You can just pivot straight into midterm rental.<\/p>\n
Jamie, one last follow-up for me on the regulation piece. As some of these cities become more regulated, what do you think the impact will be on actual property values of short-term rentals in those markets? Do you think that presents an opportunity for short-term rental hosts to get into this game, or is it more of a disadvantage?<\/p>\n
Yeah. So there\u2019s actually been a lot of academic research on the impact on property values and what regulation and means for it, and what a lot of it shows is that the option to be able to do short-term rentals is very valuable when you go to resell the home. So if you\u2019re in a neighborhood, let\u2019s say that has an HOA that you vote as your neighborhood to restrict short-term rentals in that neighborhood, you\u2019re going to severely restrict the value of homes in that neighborhood compared to the rest of the market because now future buyers know that they cannot, even if they never even thought about doing short-term rentals, but the fact that they couldn\u2019t now sort of reduces the option value there that they could go and do it in the future. So I think that\u2019s one of the downstream implications of these laws going into effect is that you can overall reduce home values in specific areas of cities and specific neighborhoods with restrictions like that going into place.<\/p>\n
And Rob, you and I both we\u2019re in the Smokies, we\u2019re in JT and I can\u2019t imagine what would happen to home values in those two cities if they severely limited. The economy, I think would collapse. That would be a forced wave of selling if they really limited short-term rentals in those markets.<\/p>\n
Big time. Interestingly, there\u2019s so many people in those markets that want the short-term rentals out, but those specific markets, the economy is propped up by the short-term rentals, not just by occupancy taxes, transient taxes, all that stuff, but also the actual employment of the Airbnb Avengers, like pest control pool, maintenance cleaners, handyman contractors, all of them make a significant portion of their livelihood from the short-term rentals side of things. So I don\u2019t know what would happen, but I hope to never find out.<\/p>\n
We did a study looking at both short-term rental and hotel revenue for different markets, and Joshua Tree was number three in terms of short-term rental revenue compared to hotel revenue where there\u2019s six times more revenue being generated by short-term rentals in that market than hotels. It just shows a market that is so dependent on tourism and it\u2019s almost 6X and coming from short-term rentals to the hotels. So if short-term rentals went away, it would just decimate that market.<\/p>\n
Jamie, what was number one and two? Because you said Josh Tree was number three.<\/p>\n
Yeah. So number one was Broken Bow Lake, a great market in Oklahoma.<\/p>\n
Oklahoma?<\/p>\n
Yeah.<\/p>\n
Okay.<\/p>\n
And then number two was Santa Rosa, Rosemary Beach area, so 30A in Florida.<\/p>\n
Wow. Man, that\u2019s super interesting. Okay. Can we talk a little bit about international short-term rentals as well? Because I think the last time we had you on the hypothesis or the thesis in general was that the pandemic basically slowed down a ton of international traffic and we were going to start seeing the floodgates reopen. And seeing a lot more international travelers coming to the US, how has that held up? Where are we at in that specific regard?<\/p>\n
So I was totally wrong on that one.<\/p>\n
Sorry. I wish I could have given you a softball.<\/p>\n
Yeah. That was definitely one of the predictions that we expected to come in for 2023 and to be a tailwind for demand. But for large city urban areas, they\u2019re still seeing some of the slowest demand growth across the country. And those markets are really highly dependent on international travelers. So you think areas like Miami, Boston, San Francisco, even going out to Oahu, as much as 40% of demand is coming from international travelers into those markets and staying in short-term rentals.
It\u2019s really still a function of the strength of the dollar and the dollar is still really strong. We had expected it to weaken some as we got towards the summer travel season, and that didn\u2019t happen. We have seen overall international travel being really strong, but it\u2019s just everyone leaving the US and traveling within Europe.<\/p>\n
I mean, that makes sense. A lot of trips were canceled. A lot of marriages postponed. A lot of anniversary trips. I mean, there\u2019s so much. I think it\u2019s going to be a trickle effect of people that their lives carried on, they had kids, everything is delayed. I haven\u2019t traveled internationally really since the\u2026 I plan on going international as soon, as I can as soon as my kids are just a little older because being on a plane with a two and a three-year-old is very difficult. But I want to travel a lot internationally. So it does make sense that a lot of people in the US are sort of going to these destinations or these dream vacations that they had to push pause on.<\/p>\n
We\u2019re actually seeing that impact now in the data where some weakness in demand and occupancy that we\u2019re seeing is those destinations that people were maybe going to because it was a domestic destination. I live in Atlanta. Everyone was driving down to 30A in 2020, 2021. Now friends, they\u2019re flying to Nice, and Cannes, and Greece, and they\u2019re not driving down to 30A anymore. You\u2019re definitely seeing some weakness in that market because of that.<\/p>\n
Jamie, let me ask. So I don\u2019t own anything internationally, but do you think that this kind of exodus of American travelers overseas presents an opportunity for folks stateside to look internationally? And if so, maybe what are\u2026 And I know obviously the world is a big place, but if so, what are some international markets that you feel are good spots for folks to get started in?<\/p>\n
Yeah. There\u2019s great options out there. It is a little bit more difficult to sort of navigate deploying capital in different countries. It\u2019s not just buying a house in North Carolina, but there are opportunities. Demand is now fully back across Europe. It\u2019s playing into different areas, just like in the US where some cities are still really impacted negatively. They\u2019re seeing even more regulation than we\u2019re seeing in the US, especially in some of those major cities.
So in Amsterdam, there\u2019s 80% fewer listings now than pre-pandemic, and a big piece of that is restrictions. So Dave Meyer is not going to be getting a short-term rental in Amsterdam, though it is a great location to travel to. So there\u2019s all the same sort of dynamics you have to work with in the US of seasonality, I be it more so. Essentially all of Europe takes off August. There\u2019s some demand in July from Americans, but it is very much a July and August dominated market where if you\u2019re not getting the majority of your revenue during those two months and you\u2019re not going to be profitable. It\u2019s like owning a short-term rental in Maine or Cape Cod.
It\u2019s like there\u2019s a very short season you have to optimize for that short season. So it\u2019s a little different than some of the markets maybe we\u2019re used to investing in.<\/p>\n
Yeah. It\u2019s definitely a different territory. Tony, what\u2019s your appetite for investing internationally? Is that something that you want to do? Is that something you dream to do?<\/p>\n
Absolutely, man. I love Costa Rica. Sarah, my wife, she\u2019s like a Mexican citizen, so we always think about buying something in Tulum or Playa Del Carmen. So I would love to go international, but to your point, Jamie, I just haven\u2019t taken the time to really figure out the financing portion of it, like how to make that piece work. But once I do, I would love to do something out there.<\/p>\n
Just buy it all cash, dude.<\/p>\n
Easier said than done, huh?<\/p>\n
Yeah. A lot of people ask me and everyone always asks me with the hope of being like, \u201cI love it, let\u2019s do it.\u201d And I\u2019m always like, \u201cI mean, it\u2019s hard enough to run a business in the US.\u201d I mean, long distance investing, you can build your dream team, I believe all that. But I have other places in the US that I would prefer to buy anyways. I\u2019ll just rent Airbnbs if I ever want to travel. But that\u2019s really interesting you say that, Jamie, because I don\u2019t really think about the risks, I think. Or not the risks, but the risks of regulation in the US.
It\u2019s hard to keep up with regulation in the US because there\u2019s so many cities and counties and neighborhoods that restrict differently. You go to an entirely different set of countries and it\u2019s like, \u201cYou don\u2019t really know what you\u2019re getting into unless you\u2019re doing a ton of research.\u201d So let\u2019s segue a little bit here because we\u2019re talking to international. We talked economy. We talked regulation in general.
Now, I also want to talk about another component of the short-term rental market, and that\u2019s natural disasters and how they\u2019ve impacted short-term rentals this year, because that\u2019s not something we really cover all that often on the show.<\/p>\n
And it\u2019s I think a growing and growing risk. We\u2019ve seen it really specifically in certain destinations this year. The fires in Maui were devastating. We saw it essentially wipe out entire towns. We\u2019ve seen hurricanes over the past few years. We saw Cape Coral, Fort Myers last year, Sanibel Island, and really get hit hard. We saw infrastructure being knocked out, the bridges there where you couldn\u2019t even access your short-term rental if it even still existed.
We saw more hurricanes hit Florida, and we\u2019re still in the middle of hurricane season. So no telling what\u2019s going to happen. You\u2019re seeing insurance rates continue to go up. So even if you have a short-term rental in these markets, one, can you insure a new investment? And then secondarily is your existing investment, are you going to be able to continue to get insurance on it?
So there\u2019s more and more risk happening. And back through the years, we saw fires in Gatlinburg, we saw fires in Tahoe. We\u2019ve seen more wind events like tornadoes hit the Midwest, I think, than any other recent year. So all sorts of\u2026 My parents have four short-term rentals in Maine, and they got impacted by the hurricane that came up there that caused I think two weeks to essentially be canceled out because of guests didn\u2019t feel comfortable getting up there with the hurricane coming.
So it definitely impacts different markets in different ways. And I think most importantly for investors is getting a sense of the type of markets you\u2019re going in. What is that risk? And if you were going to be shut down for a month or two and you think about\u2026 And people now avoiding traveling to Maui, even though most of the island is up and running, and we saw I think 30% decline in occupancy in August.
We\u2019re seeing another 20% through the first half of September. So even though the islands are telling people, tourists, please come and people are avoiding that area just because. Any number of reasons, yeah.<\/p>\n
Yeah. I mean, I think perception is probably going to\u2026 I think whether or not it\u2019s okay to travel there, I know that Hawaii was\u2026 The governor was like please keep coming. But I think a lot of people in their head are probably like, \u201cOh, I\u2019m not going to go. Obviously, everything is closed or whatever.\u201d So I think that\u2019ll probably be a lasting effect.<\/p>\n
Yeah. I want to transition, Jamie, if that\u2019s okay, to talk a little bit more just about supply and demand. You\u2019ve mentioned before that supply has slowed in terms of the rate of increase. Post pandemic, you saw a massive boom in the number of people that were listing their properties in Airbnb, and it seems like that slowed down a little bit. Demand though seems to continue to be kind of growing at a healthy pace as well. So we\u2019re waiting for that balance between supply and demand.
I guess let me take a step back first. My first question is how do you know if a market is unquote saturated? How do you know if a market has too many Airbnbs to support the demand in that market? What data point should I be looking at? Where inside of AirDNA can I even go to see that?<\/p>\n
And saturation point is all going to be around occupancy, right? So is there enough demand to support the listings that are out there in a profitable way? So when I\u2019m thinking about saturation, I\u2019m looking at both year over year change in occupancy. So is the market that I am in absorbing the supply that has come into that market? If it\u2019s absorbing it, we\u2019re going to see occupancy maintaining or increasing. If it\u2019s not able to absorb it fully, and you\u2019re going to see occupancy decreasing.
Now, one year of occupancy decreasing is not a market sort of oversaturated. Most properties take some time to ramp up and it takes time to get bookings. It takes time to and sort of figure out your niche in the market. I tend to not like to look at this on a very short-term basis of like, \u201cOh no, we saw one month of occupancy down four or five, 10%.\u201d This market is way oversaturated. You\u2019ve got to be looking at it over time.
So I do like to look at it on a sort of 12-month average. And then also looking at it relative to prior years. So 2018, 2019 is indexing off the high of 2021. I think we talked about this last time is not fair. And maybe if you underwrote it in 2021 and had that expectations to continue, that\u2019s a different conversation. But in terms of market saturation, there\u2019s a lot of demand coming into this industry. There\u2019s a lot more listings that need to be able to come in to support the growing demand.
I\u2019d argue that very few markets are actually oversaturated. It might take one or two years of slow supply growth, which we\u2019re seeing now for that supply to get fully absorbed. But if you\u2019re investing for a five, 10 year hold, just because a weak patch in occupancy today doesn\u2019t mean that that\u2019s going to not be a great investment long-term.<\/p>\n
Wow. That\u2019s interesting. I feel like most of the short-term rental peeps, we expect it to kind of hit when we list. So is the case that\u2026 I would say, I guess underwrite conservatively and expect growth from there. Because it does seem like if you\u2019re telling someone, \u201cHey, yeah, get into the short-term rental, but it\u2019s going to take you two to three years to really start hitting good revenue,\u201d that\u2019s an interesting conversation to have because I think a lot of people just wouldn\u2019t do it.<\/p>\n
Yeah. When I\u2019m helping people underwrite properties, I maybe don\u2019t do a three-year ramp, but I definitely do a two-year ramp that it\u2019s going to take you one year to figure out your market, to figure out to get good reviews. Reviews definitely help get bookings. And it\u2019s going to take you a few months, six months to get a bunch of good reviews so you can start raising rates and really profit maximizing that property. I came from the hotel industry 10 years helping people underwrite hotel investments, and there we typically did a three-year ramp of getting occupancy from when you first open the property to when you\u2019re going to stabilize that in terms of occupancy. It does take time to grow into that market.<\/p>\n
That makes sense. I mean, our Scottsdale property, we bought one and it opened up a little slower than we had thought a year in everything is up pretty considerably. I mean, the reviews I\u2019m sure have helped. We\u2019ve also added amenities like a pickleball court and that pickleball court has increased revenues by, I don\u2019t know, 60 to 80,000 at this point. So it\u2019s paid for itself two or three times at this point. So I think it\u2019s the profit maximizing that you\u2019re talking about. That\u2019s really the thing that I\u2019m focusing on with my current portfolio where a lot of people keep asking themselves, \u201cHow do I get into my next property after they\u2019ve purchased one?\u201d
What I\u2019m trying to steer people towards is instead of trying to get into your next property, how can you maximize the revenue of the current property that you have or the portfolio that you have? Because if you can invest, let\u2019s say $20,000 back into your property and increase your revenue by 10,000 bucks, that\u2019s a 50% ROI. That\u2019s so much better than what you could get if you just go and buy a new property. So this year, I\u2019m trying to still buy just because I\u2019d like to consistently purchase, but really I\u2019m putting a large majority of my capital back into my portfolio, which gets me a little impatient because all I want to do is buy.
But I do think there is a case to be made for reinvesting back into the property. Tony, have you guys gone in and ever optimized a property with amenities or have you added anything after the fact?<\/p>\n
Absolutely, man. Actually, I\u2019m going to Joshua Tree on Thursday because our newest listing, we\u2019re adding a really cool in-ground pool with a rock slide and just really trying to beef up the amenities because I feel like we\u2019re out of space right now where because so many new hosts have come onto the platform, the table stakes have increased, right? And what it takes to be a good listing today is significantly higher than what it took to be a good listing in 2019, 2020, even 2021.
Like you said, Rob, we haven\u2019t purchased a ton this year, but we\u2019ve been going back to our entire portfolio, adding new game rooms, adding the pools, adding hot tubs, adding whatever we can to make those listings stand out. And it\u2019s crazy, man. I have three properties in 29 Palms, which is the city adjacent to Joshua Tree and the one property where we invested a lot into the game room is doing 3X the monthly revenue of the other two properties that don\u2019t, which is crazy, and it\u2019s the smallest one. So it really just goes to prove the point that reinvesting into your current properties might be a better investment, like you said, Rob.<\/p>\n
Definitely. Wait, what was the amenity that you said you added to the 29 Palm ones?<\/p>\n
It was just a really cool game room. We\u2019ve got a really cool game room as an extension of the house.<\/p>\n
Yeah, for sure. I built a epic tree house deck at my Gatlinburg property. I built a mini golf course in my backyard in Crystal Beach. I did a pickleball in Scottsdale. I\u2019m adding a pickleball court to a property in Austin, Texas right now. I\u2019m probably going to add pickleball to my tiny house in Joshua Tree. So for me, again, it does suck to not be buying, but I do think it\u2019s going to be a much better return for me overall. So with that, Jamie, can you just tell us a little bit\u2026 I mean, since we\u2019re kind of talking about Joshua Tree, how have established tourist markets fared this year? Are they holding strong? Has it been pretty consistent compared to some of the other areas out there, like a metropolitan area?<\/p>\n
Yeah. So there\u2019s definitely more weakness there in some of the established destination markets. I thought it\u2019d be fun to sort of do in sort of an exercise where we walked through what we were seeing in one of the markets, and I actually pulled out a Gatlinburg, Pigeon Forge area, just to give you a sense of\u2026 It was also one of the ones called out in that sort of doom tweet by the Doom Squad of revenues dropping 40%.
So in the Gatlinburg, Pigeon Forge market year over year, we\u2019re showing RevPAR down about seven and a half percent. But these markets, especially market like Gatlinburg where supply is growing 20%, you have churn, listings leaving, it\u2019s really hard to get a sense of what is the average host actually increasing or decreasing the revenue. So we took it down further. So there\u2019s 23,000 listings with the lease one night sold in Gatlinburg over the past year.
Only 12,000 of those were available full-time. So 270 nights of the year, and then only 7,500 of those were available both full-time this year and last year. So a small subset of the 22, 23,000 listings out there. And when we look at just those 7,500, overall RevPAR was down about 9%. And it was down most at the budget and luxury end. So the middle tiers were held up the best. What I thought was really interesting was for individual hosts, so those with just one to five properties, RevPAR was only down 7% where the large property managers in that market saw 13% decline in RevPAR.<\/p>\n
Interesting. Why do you think that is, Jamie, just out of curiosity?<\/p>\n
Yeah. So that same question. So large property managers did such a better job of increasing occupancy in 2021 and 2022 in raising rates. And now they\u2019re seeing bigger declines. But if you look at what they\u2019re earning relative to 2019, they\u2019re still well outpacing individual hosts. So it tells me that most of those individual hosts are not using revenue management software. They weren\u2019t able and didn\u2019t push rates when the times are good. Now, they\u2019re not seeing as much declines when the times aren\u2019t as good, but they\u2019re still not earning as much as some of the larger PMs are in that market.<\/p>\n
And Jim, you hit on a really interesting point because I\u2019ve kind of in my heart felt that that was part of what\u2019s driving some of the decreases is that because so many of these hosts are new and they\u2019re not leveraging dynamic pricing tools, and they don\u2019t understand what their average booking window is in their market, if they\u2019re not fully booked out every 30 days, they\u2019re just dramatically dropping their prices.
And now it\u2019s impacting the entire market because now you have guests that are able to choose a $60 listing that\u2019s brand new versus the more mature host that\u2019s charging a hundred bucks per night. So I\u2019m literally launching a property management company right now because I feel that there are so many hosts that don\u2019t know what they\u2019re doing that overall they\u2019re pulling down the revenue potential for the market. So that\u2019s why Rob and I are both so focused on educating people about how to do this the right way, because if more people understand the basics of dynamic pricing, how to do it correctly, then as a host community, we all end up winning.<\/p>\n
It\u2019s always so annoying, dude, when you\u2019re comping out a property in a place like Gatlinburg and you\u2019re looking at the neighborhood and this person has this insane 20,000 square foot placed with a helicopter pad and it\u2019s like $70. It\u2019s like, \u201cWhat are you doing, man? What are you doing? You\u2019re ruining this for us.\u201d<\/p>\n
Well, Jamie, I want to ask you one last question before we start to wrap things up here. And for all of our listeners that are thinking of buying that first Airbnb, that first short-term rental right now at the tail end of 2023, what would your advice be to that person?<\/p>\n
One, it\u2019s make sure you\u2019re leveraging data to find the right market to invest in. I don\u2019t love the old adage of invest in a market that, you know, that you grew up going to. Find markets that make sense to invest in because they may not be the right market. It might not have been in the same market as a year ago, two years ago, on the cost basis of investing in homes right now has shifted dramatically over the past five years. And then the opportunity to grow revenues in these different markets has shifted dramatically.
So, one, I do a lot of research on finding the market, and then I think some of the conversations we\u2019ve had on amenities are going to be really important for the type of property you can invest in going forward is don\u2019t just look for current cashflow, look for that property that you can actually evolve and sort of grow into a good long-term investment. I try to help people think longer term like five to 10 years on that investment. Like Tony, that property you\u2019re going to in Joshua Tree, if you didn\u2019t have the ability to put in that in-ground pool, that would totally change that investment thesis for that property. Right?<\/p>\n
Yeah, absolutely.<\/p>\n
Sure. Yeah, that makes a ton of sense, man. So for people that, if you could give some advice on where people could find some of these markets, I agree. Going to a place where you grew up, not necessarily, I do like the familiarity\u2026 Oh gosh, let\u2019s not try this on air. How familiar it is. How about that? How about that? How familiar? How familiar it is should not necessarily be the driver for why you buy it. I think that\u2019s a way you can do it, but finding good markets that work, I think that\u2019s what you\u2019re saying. How can people find some of these good markets?<\/p>\n
Yeah. So thanks for the tee up. We just rereleased AirDNA this past month, and one of the tools is all around market discovery. So you can look at a list of all markets across the US, filter down to the type of investment you\u2019re looking in. So if you\u2019re looking for, in one bedroom, unique listings, you want to go in on the luxury tier and you want to find markets with the highest occupancy, highest ADRs, highest investability, we now give you that ability to dig, filter in, find the right comps, rank markets against each other, and where you can find those hidden gem markets.
We actually did a piece recently where we talked about hidden gem markets. Maybe low percent of property managers, relatively small markets, like a 100 to 500 listings where you could go in and really dominate that market by running a property well. And all that can now be done with the new tools. So you can really customize it, find markets that really fit your investment strategy, your risk tolerance, and the type of markets, mountain, coastal, urban, suburban, and find those type of cities, find those good investment opportunities.<\/p>\n
Well, awesome, man. Well, thank you so much, Jamie. For people that don\u2019t have familiarity into how to find you on the internet\u2026 See, I knew I could say it. I knew I just had to think it through a little bit. How can people find you and connect with you?<\/p>\n
Yeah. So I\u2019m active on Twitter @Jamie_Lane on LinkedIn and AirDNA. I host a podcast called the STR Data Lab where we talk about data and interview professional managers hosts on the data that they use to run their business.<\/p>\n
Super cool, man. Well, maybe Tony and I can be guests one day, the power duo, the power couple here in the short-term rental market. Well, awesome, man. Well, thank you so much, man. I do love getting into this and talking about the data with you. I think this makes me feel really good, honestly, just being armed with the proper data. So we appreciate you coming in and speaking some of these truth bombs. Tony, for anyone that wants to reach out or connect with you, how can they find you online?<\/p>\n
Yeah. First, Real Estate Rookie Podcast. We put out episodes every Wednesday and Saturday. And then personally, you guys can find me on Instagram @tonyjrobinson. And if you\u2019re on YouTube @therealestaterobinsons.<\/p>\n
Dang. All right, man. That was like three of them. All right. Well, I\u2019ll do four. You can find me on YouTube @robuilt, on Instagram @robuilt, on MySpace @robuilt, and TikTok on Robuilt. How about that? Well, thank you so much, Jamie. We appreciate it. Tony, thanks for doing this with me, man. It\u2019s always fun to share the mic with you. And for everyone at home, if you like this episode, if this inspired you, if this make you feel better, feel free to go and leave us a review on the Apple Podcast platform or wherever you download your podcasts.
This is Rob Abasolo. I\u2019m not going to do the David thing because I know I\u2019ll mess it up. But thanks everyone and we\u2019ll catch you on the next episode of BiggerPockets.<\/p>\n