The U.S. lodging industry is experiencing a reshuffling of power. While traditional hotels have rebounded from pandemic lows, they now face a formidable challenger that’s rewriting the rules: short-term rentals (STRs). Fueled by shifting consumer preferences, operational flexibility, and superior financial performance, STRs are claiming a growing slice of the market—and fast.
The Market Is Tilting Toward STRs
As of April 2025, short-term rentals account for 13.7% of the U.S. lodging market, and that number continues to climb. STR demand jumped 6.0% year-over-year, compared to a modest 0.1% growth for hotels. These figures reveal a key trend: guests are migrating away from traditional hotel chains and toward platforms like Airbnb and Vrbo, particularly for leisure travel and extended stays.
It’s not just about popularity—STRs are financially outperforming hotels too. Both Revenue per Available Room (RevPAR) and Average Daily Rate (ADR) for short-term rentals have surged well past pre-pandemic levels, largely supported by near-full occupancy rates. In contrast, many hotel segments are still operating below 2019 performance metrics.
What’s Driving the Shift?
1. Consumer-Centric Flexibility
Travelers are looking for more than just a place to sleep—they want comfort, space, privacy, and convenience, especially for longer stays. STRs deliver on all fronts. Whether it’s a remote cabin, beachfront condo, or downtown apartment, the breadth of options gives guests more control over their lodging experience.
2. Higher Customer Satisfaction
The numbers speak volumes: STRs score a Net Promoter Score (NPS) of 63, compared to 51 for hotels. This higher satisfaction level reflects the rising consumer loyalty toward vacation rentals. More Americans are not just trying STRs—they’re making them their default travel choice.
3. More Travelers, More Bookings
Between 2020 and 2023, STR usage among U.S. travelers grew from 7% to 11%, while hotel usage declined from 60% to 56%. STRs are expanding their footprint in leisure markets and increasingly attracting families, remote workers, and digital nomads.
4. Operational Agility
Unlike hotels with fixed costs and slower scaling capabilities, STR hosts can quickly adapt pricing and availability. This makes STRs especially competitive in volatile or seasonal markets.
Hotels Are Feeling the Pressure
Traditional hotels aren’t giving up, but they are under strain:
- Rising operating costs are squeezing margins.
- Corporate and international travel—key revenue pillars for hotels—have not fully recovered.
- In urban markets, where STR regulations are tightening, hotels are regaining some ground. But nationwide, STRs continue to grow faster, especially in resort and suburban areas.
What’s Ahead for STR Investors?
While some fear a slowdown in STR supply due to housing shortages and regulatory crackdowns, the core vacation rental segment remains robust. In fact, constrained supply could drive higher rates and profitability in the most in-demand areas.
From a macroeconomic perspective, consumer spending remains strong, and the demand for travel is unlikely to disappear—even if it temporarily softens. Investors are now viewing STRs not just as an alternative asset class, but as a primary strategy for lodging investments.
STRs Are No Longer the Underdog
The rise of short-term rentals is more than a trend—it’s a structural shift in the lodging landscape. For investors, STRs represent a fast-moving, consumer-driven opportunity with compelling returns. As the hotel sector works to catch up, savvy investors are already leaning into this new era of travel.
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