Short-term rentals segment: Living on an arc of its own

The short-term rental sector has truly been living on an arc of its own. The space, packed with a fragmented set of small operators, was hit hard during the initial COVID lockdowns, but quickly became a pandemic darling once consumers realized the benefits of private and spacious accommodations that minimize exposure to contagions.

When interest rates were at an all-time low and demand had skyrocketed, new hosts flocked to the market to capitalize on the sector's success. But with increased category usage came increased scrutiny. Guests learned about the many benefits STRs can offer, but also experienced how flawed and unpredictable their stays can be, given the diverse set of operators, levels of professionalism, and the uniqueness of each individual property.

In 2025, guests have significantly more accommodation choices than during the pandemic, including the ability to stay in short-term rentals (STRs) abroad. But with many of those pandemic entrants still around, competition has increased, and some operators are more ready than others to outperform their rivals.

Phocuswright latest research report U.S. Short-Term Rentals 2025: Host and Property Manager Trends explores how operators are faring as the market inches toward its new normal. Small hosts (fewer than 10 properties, not professional managers) exhibit a range of financial goals and competitive aptitude, with noticeable differences between hosts who aim to turn a profit versus those with less ambitious financial goals. Many players are stepping up their game and recognizing the breadth and intensity of their competition. But struggles still remain in delivering consistent experiences, sustainably growing management businesses, and developing accommodation offerings that best meet guest demand and expectations.

Business challenges

Hosts feel that the most significant impediments to their business success are issues of cost management. These may be more pronounced in a time of concern over saturation and increased standards of competition, which can squeeze topline revenue and warrant more scrutiny over cost control.

Saturation & Competition

The low interest rates of the COVID era, coupled with a sharp increase in demand for the category, brought about a boom of supply and additional listings. But consumer preferences and behavior have shifted since the days of lockdowns. More hotels are open, and the privacy associated with rentals has become more of a preference than an essential health concern. This has caused concern about the ability of U.S. operators to flourish financially and warranted stronger competitive measures for those who look to maximize occupancy or attract the highest-yielding guests.

Staying Competitive

Property managers share a healthy optimism for inventory reaching equilibrium in the long-term, but express more concern over how to address these issues in the short-term.

Churn and closures

Nearly one in four current hosts has stopped renting out at least one property in the past year, whether temporarily or permanently. Additionally, 10% of homeowners surveyed were lapsed STR hosts.

Scaling: What, like it’s hard?

Despite the ambitious growth goals of multiple VC-funded management firms, SPACs and IPOs, property managers have struggled to scale sustainably.

Regulation

Regulation is a major source of uncertainty for the future of industry growth. Despite best efforts to grow and scale businesses, local or regional regulation can shut a business down virtually overnight - as was the case in New York City.

Phocuswright’s U.S. Short-Term Rentals 2025: Host and Property Manager Trends is part of a comprehensive consumer research study focused on the incredibly dynamic short-term rental travel segment. Key questions answered by this research include:

• How has the U.S. short-term rental market evolved post-pandemic, and what challenges do hosts and property managers face in 2025?
• What distinguishes successful hosts and property managers from those struggling to compete?
• How are shifting guest preferences and market saturation impacting short-term rental demand?
• What role do regulation and financial management play in the sustainability of STR businesses?



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