Short-term rentals have been a growing trend for some time now, and people are still utilizing platforms such as AirBnB as a “safe” way to make extra money or seek returns on real estate investments; however, short-term rentals are not immune to volatility and risk.
I recently did a study on the short-term rental market in Navarre Beach, Florida to test a hypothesis I had about the volatility of nightly rates.
Seasonality
As I was looking at the rates over time, I noticed that there are anywhere from 1% changes in rates to over 40% changes in rates just within a week’s time. This kind of volatility creates vacancy risk for hosts1 who aren’t familiar with market dynamics, and don’t know how to build a strong pricing strategy.
Time-to-Stay
Volatility in the nightly rates are also affected by time-to-stay. Rates for future stays are more unpredictable than rates for current stays. This creates risk, but also opportunities for hosts in the Navarre Beach area.
Limitations
Observations were made on a sample of the market
- This does have some limitations. A disproportionately priced home can swing rates. ↩︎
Chris Woodward Research 