Are we seeing a short-term rentalToday we’re tackling one of the biggest questions in real estate right now is investing in Airbnbs still worth it with the passing of the one big beautiful bill and the reintroduction of 100% bonus depreciation. Airbnbs are finding the way back into the spotlight, but depending on who you ask, the data tells two completely different stories.That’s why we brought on two of the smartest data mines in the Airbnb game. We have Jamie Lane from Air DNA, and John Bianchi from STR search to help us make sense of what’s really happening in the market.This is the Real Estate Rookie podcast. I’m Ashley Kehr.And I’m Tony j Robinson. Let’s give a big warm welcome, John. Jamie Fellows, thanks so much for joining us today.Thanks for having us. Yeah, so excited to be here.I want to start with addressing the elephant in the room. Many of our listeners are questioning whether real estate investing, and this could be short-term or long-term, can still produce positive cashflow and even more so for short-term rentals because people are only willing to accept the heavier workload and the increased risk if the returns are better than long-term rentals. So John, let’s start with you. Our Airbnb is still profitable in 2025Without a doubt. It’s just a matter of getting the right property within the right area, setting it up the right way, and then managing it properly. And I can speak very confidently on that just because I have a lot of firsthand data from a lot of people that have helped find properties and their properties are performing well. If they were not, they would be coming from my neck. And so then therefore, so far so good. Definitely soProfitable. Well, we can see your neck and it looks like it’s not ized. Yeah, we’re good. And Jamie, would you agree with this statement?A hundred percent. And I put my money where my mouth was. I invested in a property late last year, five bedroom house in north Georgia, and it’s running great, super profitable and looking for more. So we’re seeing into the data, people are finding great properties, they’re running them profitably, and I think it’s maybe, and when other people are running for the hills, that’s some of the best times to invest.Jimmy, obviously you see a lot of data in your role at Air DNA, but for our listeners who don’t live in the Airbnb data every day, what are the maybe top two to three numbers that tell you how the STR market just like nationally is actually performing right now?Yeah, I’m going to give you three occupancy numbers. So the first is average occupancy today past 12 months is 55%. The other is occupancy at its peak in 2021 was 61%, and then occupancy for 2019 was 54%. And I feel like it tells this story that we’ve seen over the past five or six years where occupancy is well down from its highs of 2021, but we’re still well above what we are seeing 2018 and 2019 when we were seeing massive growth in this sector. So yes, we went through a surge of investment in 2021 and 2022 when things were amazing, but things still look really good compared to the last 10 years. And I think if you’re underwriting properties and new investments, realistically you’re going to be able to find great deals.So we’re on the track that Airbnbs are still worth it and can be profitable, but what about finding the right Airbnb? So pretend I’m a brand new Airbnb investor and I’m going to take the very first step. I have to choose a city to invest in. John, what is the approach you are taking right now in 2025 to find a city to invest in?Okay, I’m going to try and give a not too complicated answer, but there are layers to this because there just has to be, right? So first thing you need is an air DNA account because you can’t figure out if a market is profitable without one naturally, but you want to find a place that you actually enjoy. So I’ve looked into at this point, 500 plus different markets. I’ve found mountain markets, desert markets, beach markets. I’ve found all these different types of markets that work. So what do you start with that? Because if you actually truly love the market, you’re going to put a little more TLC into the property and it’s going to perform better in my opinion. So start there, then make sure to look into the regulations before you look at data, look at regulations and ensure that you can actually legally operate.
And then third, what is your budget? How much capital do you have? If you have a hundred thousand dollars to go out and buy a property, you’re not going to be buying in downtown Scottsdale. It’s just not going to work out. So find a place that with the amount of capital that you have, you can actually be very competitive within that market, which means if you have a limited budget, you may need to go into a market where there’s not steep competition, maybe a less known type of place where there aren’t extreme resorts in the backyard. And so just by following those few steps that I just mentioned, you’re going to eliminate thousands of potential areas that you could look into. Now at that point, that’s where you’re pulling up air DNA, you’re then going to open it up and you do this one thing called the 20% rule, which I can break down a little bit further, but it’s a way of looking into a market from a 10,000 foot view.
When I look into a market, I want to be able to quickly figure out if there’s any cashflow potential in that market or not. I use something called, once again, the 20% rule, which is not 20% cash on cash, it is the purchase price compared to the annual revenue. If I’m buying a $500,000 property, I want to see that it can make a hundred thousand dollars a year. The a hundred thousand dollars is 20% of the purchase price, which is why it’s the 20% rule. And so what I will do is I will go into any city and then I’ll use the filters on air DNA to lower the amount of properties that I’m looking at. So I’m looking at a very similar type of property set, right? So let’s say four bedrooms with one specific area that all have pools. And I’m going to look and try and understand how much those properties are generally making right?
Set up in a way that I know I can set up a property. I’m going to go, okay, these properties are roughly making a hundred thousand dollars a year. Now that I have that annual revenue number from a high level, I will then hop over to Zillow and take a look to see if the four bedrooms in that same area with pools are selling for 500,000. And if I can see that very quickly and this whole process can take you 15 minutes, right? If I can see that, then I know within that market there’s cashflow potential and it’s a market that is worth deep diving right now. The vast majority of the times, and again, I’ve looked at 500 plus markets, the vast majority of the times you’ll see that the properties are making a hundred thousand. Then you go to look for the ones that are for sale and they’re for sale for 800, 900 or a million dollars, and you’re like, okay, well they’re not meeting the 20% rule or not even close, therefore there’s most likely no cashflow within this market.
Therefore it’s not worth deep diving and trying to find a property in this market. And at that point, you just remove that market from a market that you’re willing to actually deep dive. But if you do find one where it does meet the 20% rule, add that to your shortlist, and that’s a market that you want to deep dive and try and find a profitable property in because that’s where they exist. And likely the deeper you go in, the more you can find better even better properties in that market. So yeah, I know it’s complicated, but I can go layers deeper if you want. Sorry, Tony, go ahead.No, I mean, dude, I think that was a great starting point and your process, I think mirrors and echoes a lot of what I believe as well is that choosing a market is really a process of elimination with 20,000 cities that exist 20,000 plus cities in the United States, it’s not like you can just start, there’s no Goldilocks city that’s the best city for you. It’s really just trying to eliminate as many cities as you can that do not fit. And then seeing what’s left over and trying to decide from there. Because the idea that I would love a five bedroom villa on the beach in Maui, who wouldn’t want that, right? Of course that’s going to, but can I afford to actually purchase one of those is a different question. Can I buy it and it actually be profitable is a different question. So it really is chiseling away at all the things that don’t make sense there. Jamie, what about for you? Because again, you see a lot of data in your job through Air DNA. How does your approach differ, if at all, from what John laid up?It’s funny. Every time I hear John talk, then I just try to take what he says and make it easier to do within the air DNA system. So he sort of described this a few times for me. So now within the air DNA tool, we bring in every single for sale home within the country, we’re then running a rental, so that’s our property earning estimate calculator. So going in and finding nearby comps, what are they earning, showing what it is, putting that sort of 20% rule, that calculation on the of for sale card. So what do we think that property could earn? What is that as a percent of the for sale price? And then allowing you to sort by that gross yield figure. And so you can click into any market around the world or in the us look at the properties with the highest gross shield in that market, maybe filter to just three or four bedroom homes, homes greater that are in your sort of buy box three to 600 K or whatever that number is.
I get a sense of, okay, are there any properties that are currently for sale today that sort of meet that threshold? Are there a lot? Are there just a few? And then I’m sure we’ll talk through that sort of next layer of digging into how much you actually think that that property could earn. But that’s a great sort of filter of once you get a sense of, and when I started my search, I was like, I want to look at markets in a four hour radius from where I live. That filters it down to what 10 markets and then it’s not too hard to go through this 10 markets get a sense of, okay, which areas look like they could have some investment potential.Jimmy, I think the one thing I’d add, because I love the fact that you can see for sale properties inside of Air DNA, but I think the challenge is that sometimes there’s not enough supply currently for sale in that market. So what I’ll do sometimes is I’ll go and I’ll look at recently sold properties in that market and do that same analysis. So since we’re taking suggestions here, if we can get previously sold properties inside of Air DNA as well, I think it’ll really allow us to do that full analysis within that tool and not have to go to the Zillows or Redfins and kind of piece it all together.Not to give too much, but we’re building something where it looks at every previously sold home and matching it up with those that are actually running as a short-term rental and what their revenue is. So we could get a historical gross yield index for that market and where it’s trending. So absolutely, looking at historicals is so helpful for getting an understanding of one, what are investors willing to pay today? Are they going after properties that are trending on the yield of 10%, 15%? Is it back during COVID where it was John sort of was saying 30% that then now he’s saying 20%, maybe next year he’ll be saying 15 percent’s. Okay. But yeah, I love looking at the historical data too.Well, Tony and I have a great debate going. He invests in larger markets that for short-term rentals, and I’m in very rural areas with my short-term rentals. So where are you going to see the profit coming into 2026? What are going to be the better markets, the larger markets or the small rural areasI’ll on what we see people doing? And it’s absolutely going after the smaller markets. We’ve seen growth right now, year over year change in supply is about 10%. For the smaller markets, it’s about three or 4% year over year growth in some of the larger markets. So clearly people are finding opportunities in those smaller markets. When we look at the data, a lot of those smaller markets have seen much lower levels of home appreciation. So there’s still deals to be found. And it’s not like you go into the major cities where, and people have really driven up home values. It’s not like where you go into a lot of the major mountain or coastal areas where people were looking for second homes during COVID and really drove up the values in a lot of these rural markets. There’s still great home value to be found and the demands still growing. We still see more people choosing to stay in rural areas than ever before, and it’s still the fastest growing in terms of demand growth as well.Jimmy, two quick follow-ups to that. One, I agree with you. I think that there’s a tremendous opportunity in some of these smaller up and coming markets because we haven’t seen the crazy increase in prices where Smoky Mountains prices have doubled since COVID. And I think there’s also less competition in terms of you’re not competing with the guys and girls who are doing this full time and have built up these massive portfolios. They know all the ins and outs. So there’s obviously a lot of opportunity there. But I think two questions I have for you. Number one, how do you define between a large market and a small market? What are you looking at to make that determination? And then second, are you at all concerned in these smaller markets about even if the balance between supply and demand is healthy today, are you at all concerned that maybe a year from now or two years from now that if the supply growth continues that there might end up being an imbalance in a couple of years down the road?So I’ll start with how I define the market. So at Air DNA, we break up the country into 317 different markets. About 275 of those markets are sort of defined name areas, think like Gatlinburg, pigeon Forge, Cape Cod, and then there’s about in 45 of those areas that are, and we sort of define state areas, so it’ll be like Georgia area or Mississippi area, and they’ll sort of encompass all the small markets. They’re still sort of named defined submarkets, but it’ll be smaller lake areas, there’ll be more rural areas there. You can dive into all the submarkets, but it’s sort of outside of these large vacation rental center market. So I’m some of my favorites that we sort of defined. I think for the first time for the industry, it’s like you can go in and look at the Adirondacks, you can go and look at Coachella Valley, you can go and see how the Lake Tahoe market, these are some huge vacation rental markets that have been around for and hundreds of years where people have been and sort of vacationing that vacation homes are the primary type of lodging in those areas.
There’s not a ton of hotels in a lot of these areas. So I love knowing that the local economy is sort of, it’s really dependent on vacation rentals being there. You’re not likely to see regulation that’s going to come in and see a vacation rentals be banned because then people wouldn’t have anywhere to stay and the local economies would sort of collapse. But there are so many emerging sort of new vacational markets around the country that could be the next Adirondacks or Coachella Valley where if you get in early 10, 20 years down the road, you might see your home value in two, three or even five x when you look at those compared to some of the bigger markets today.And what about the supply versus demand piece? Jamie, how do we make sure, because maybe it’s a healthy balance today, but then everyone sees like, man, this small market, say we’re Ashley House or Lake House, everyone’s like, man, Ashley’s lake house is crushing it. I want to go build a lake house right next door to Ashley. How do we protect ourselves against oversupply coming in the future or what should we be looking at to know if it’s coming maybe is a better question.And that is a big concern with going into some of these smaller markets. If there’s only 40 or 50 listings that are there and you get 10 more that come in in the next year, that increases supply 20% overnight. And that if there’s not enough demand coming into that market, then that could significantly impact your ability to generate the returns that you were expecting when you invested in that market. So you definitely have to think about how many homes are there that could turn into future competition. A market I was looking at, and it was this neighborhood that I had 200 homes in it and about 75 of them were existing short-term rentals. And it just felt like all too quickly all of those homes could be competition. All the homes look pretty similar. And then you could see yourself having to out monetize outspend to attract people to your properties if you’re the best home in that market and maybe you’re able to weather that, but if you’re sort of an average home in that market, I’d be really worried about the future supply that could come in.Now, John, what are you seeing compared from the larger markets that are traditionally well known for short-term rentals compared to these smaller rural areas?So I work with a ton of different clients, ton of different people that have a ton of different things that they want. What I am noticing is that there’s still opportunity in the larger markets and then there is opportunity in the smaller markets, but I’m afraid of going too small. So what Jamie was just saying there, if you had 40 listings within one market and they add 10 more, then all of a sudden that market is oversaturated literally within six months if people find out about it. But I see opportunity in both. It’s just a matter of what is your objective and what is your goal? So when it comes to these larger class A markets is what I like to call them, your Gatlinburg, your Scottsdale’s, things along those lines, a lot of people tend to go to those markets because of appreciation or because of tax savings.
So in Gatlinburg right now, we have people that are coming to us because they can just buy these existing Airbnbs that are already furnished and have a track record of being profitable and they’re taking them over. Now they’re not cash flowing kings, you know what I mean? Cows, they’re barely breaking even, but you’re putting 10% down on the property with a second home loan and you’re buying a million dollar property for like a hundred thousand dollars. And then your tax savings on that, depending on your tax bracket, can almost cover all of that. And so you can almost get all of your money back on day one just by not having to pay the government your tax savings. And so we see a lot of people being interested in these types of very established markets simply for the tax play. But then if you’re wanting to go more and more on the cashflow, you have to go more and more into the areas where you do have the cheaper homes, but you still have good demand and those are going to naturally become those smaller markets.
But I do think there is a threshold of being too small and then you can kind of ruin yourself. So when I do look into smaller markets, I like for the market to have not be the main destination. So upstate New York is an example of this where there’s a ton of these really, really small markets, but people are going from New York to anywhere in upstate New York. So it’s technically this massive market that’s spread across a hundred small towns. I mean, Jamie, your property is a similar example of that as well, right? It’s not like they’re not going to one specific spot, but it’s in this general area. And so I think there’s opportunity in both without a doubt. It’s just a matter of what is your strategy and what are you trying to optimize for cashflow appreciation or tax savings, and what kind of protection do you want long-term with your property? Do you want something where 10 more properties can show up and you’re kind of like, you’re screwed because I’ve heard of people in markets in Maine where that’s happened. And so it is scary to think about that. I don’t want to be in that situation and I don’t want to put a client in that situation. So it’s a matter of just knowing what you are trying to optimize for and then finding the market that allows you to optimize for that.Jamie, what would you say is the biggest mistake that Airbnb investors make when they look at the macro data for the short-term rental industry?And it is almost inherent in the definition of macro. It is the market average. No one actually operates at market average. One of my best examples is looking at review scores. So the average Airbnb listing has a 4.8 review score. The average individual host has a 4.9, and the average full-time host that’s like I’m doing well has a 4.95. And then you look at the difference in earnings, the average and going from a 4.8 to a 5.0 increases your rev far earnings by about 14%. So going into a market and looking at the percentiles of what is 50 percentile, that’s average, what’s earning in the market, that’s what we’re going to show on the main page. But then going in and see, okay, what are the earnings at the top 75%? What are the earnings at the top 90% of what people are doing that are really going in and operating well, they’re getting the top review scores, they’re monetizing in a way that and guests really love the property might give you a much better sense of what a strongly run property could earn. And then likewise, I’m sure we’ll get into it, but if you’re not going to be running or if you’re hiring a property manager that’s running at a 4.7, you might want to lower your expectation if you think your property might actually run at the average.Jamie, what data signals should rookies track that opt-in, predict the market softening when they’re looking at this data?So that’s where I do see some indicators at the macro level that are really instructive. So I always like to start at where is and supply growth in the market? How are more listings coming in? Is supply growing? Is it flat versus last year? Is it declining? Are investors actually leaving that market? Are they coming in? Is it growing 10, 15%? What is it relative to national average? And then looking at changes in occupancy. Is this a market where occupancies are softening relative to last year or the year before? Is this a market where ADR are increasing? It could absolutely be a prediction of market softening if supply is growing and occupancy and ADR are decreasing, that’s essentially the definition of saturation and something that you should be worried about when looking at a market today. I’d say right now most markets are not seeing that. In most markets we see occupancies are either flat or slightly increasing. So there are in lots of great signals there on which markets have momentum. And those are great high level filters to look at when evaluating a market.So the macro data gives us direction, but it doesn’t always predict how your Airbnb will perform after this break. We’ll zoom into the property level where the real money is made or lost. We’ll be right back. Alright, so we’ve talked about what’s happening across the market. Now let’s bring it down to the property level. John, what are the top mistakes that rookies are making when they are analyzing an Airbnb for purchase?They’re overestimating what their property can actually do. So they’re taking a look at the property and they’re assuming that they are going to perform at the top of the market even if their property doesn’t have the things that it needs to be at the top. And one of my favorite examples of this is that somebody showed me their property and then they showed me the property that they compared themselves to and the property they compared themselves to had a giant backyard with a whole bunch of amenities. Their property, the backyard went down a hill right away. So there was no room in the backyard to add anything. And they’re like, yeah, we were comparing to that. We were trying to perform as well as them. And I’m like, well, how? You know what I mean? They’re selling 10 more things in their backyard when somebody rents out the property where you can’t do any of those things.
And so then therefore there’s no, that’s not apples to apples comparison. And so then therefore, your property always has to be cheaper because selling less things in comparison. Therefore, you can never make as much as them. And so I think if you’re newer to this and you’re trying to get this started and you’re trying to figure out how much do I think this Airbnb is going to make, being more conservative will save you in the long run. Look at that property that you want to consider to be comparable to you and say, okay, if it’s making a hundred thousand dollars, what if I made 80? What if I made 75? Could I live with this worst case scenario? And if so, then everything else is a cherry on top, right? If you’re not losing sleep at night, that’s sort of the best way of going about it. So make sure that when you’re analyzing a property, it is truly comparable and it’s not significantly better. And then be more conservative with your estimates. And those two things alone will help you avoid buying a bad deal.One thing that I always like to do when I’m looking at comparables is look at the reviews and what are the items that people are calling out in the reviews? Because those are probably the amenities or the things that’s actually driving that revenue up that everybody’s appreciating. So I always try and look at that to see what the expectations are, what people want in a rental.You can take it one step further with copying every single review, throwing in a chat GPT and asking it that question saying, why are people booking this place? And it’ll just spit out the answers for you.Not to get too technical, but you can take it even further. And John, you probably know this, but have you used Appify before? And I’m going to get real nerdy here, but Appify is this scraping tool and they’ve got an Airbnb review scraper where you can just drop in a bunch of different Airbnb links to different listings and it’ll pull all of the reviews for you and you get this massive Excel file. So that’s me and John probably just being more nerdy than the normal person.And then here’s me with my pad of paper and my pen.And then here’s me with you guys predicting our product lineup. We’ve got coming to our property pages within Air DNA, the Airbnb review summary that’s going to tell you what guests like.Jamie, I’m so glad you’re on this podcast.We got one more if we use appify to check to see if there’s been one to three reviews every single month for the past 12 months with a listing. And if can, so we will pull the data, we’ll extra clean it. If you throw that into air DNA, that would just be lightning in a bottle.Cherry on top. There you go. This has turned into the, we’re just trying to add things to the air DNA roadmap right now, but let me ask you guys this next question about analyzing deals, because obviously things have changed since post COVID. So how has your approach to analyzing Airbnb’s changed from the gold rush to today? And Jamie, we’ll start with you.And one thing that changed, and it was tough to talk with people about it during the COVID area because our app didn’t do a good job of highlighting it, was that the past 12 months wasn’t always predictive of the next few years. And that’s where, because occupancy levels were at record highs, taking a realistic like, yes, it says your property is going to generate and 70% occupancy over the next 12 months. You might want to get a sense of, okay, how much are occupancies up relative to 2019 to then predict how much they might be coming down over the next few years? We knew that those levels were not going to maintain that high, that they were going to be coming down and now sort of juxtapose that to what we’re seeing today. I do believe that now the next 12 months for most markets are pretty predictive of the next five years. So I’m much more comfortable today taking and trailing 12 month performance and using that to project forward. But that is something to look at a market, look at its historical performance, and are things relatively stable today? Are they in significant, higher or lower than near term history is a great sort of check of whether or not I could use these projections for the next few years as I’m sort of underwriting that investment.AndThen John, same question for you. How has yourApproach changed?Yeah, I think the gold rush era was one of the worst things ever happened to Airbnbs. The amount of people that jumped in and jumped on a hype of a market when it was performing well is left a really bad taste in the mouth for a lot of people. But the approach that I have taken has changed significantly where I’ve become extremely conservative because I was operating about 15 Airbnbs in the middle of a city when COVID hit and all of those bookings disappeared overnight. So that business was just essentially wiped out with the lockdowns. And so whenever I am analyzing properties, thinking about properties, I’m always trying to think of worst case scenario, how do we deal with this? So I am very conservative, but I’m also trying to find a lot of different ways that I can add things to my property that is going to allow it to be way ahead of the competition.
And so I take this approach where I’m trying to create a property that if we do hit, or sorry, when we do hit a recession and the stock market drops by 20, 30% and people are scared to travel and all that kind of stuff, that my property or the properties I help people with still have the ability to get booked. And so the strategy is very, very, very conservative. In other words, the logic is if my property has 10 different things to it, all these amenities, it’s really fun. It’s one of the best properties in the market. That’s what I want because when the recession does happen, all I have to do is lower my prices to the same prices as the not so exciting Airbnbs and mine will definitely get booked over theirs because when a recession does happen, it doesn’t hit everybody equally, right?
Certain sectors get hit, but people still travel. It’s just less people. And so I want to have one of the Airbnbs that can still get booked during that timeframe, even though I’m not going to make that record high money, I’m going to be able to still at least acquire some bookings. That’s the strategy that I have been using for the past four years when I’m helping anybody determine which properties get set up. It’s like let’s build in these protections so that when this time does come, we have those already in place. And that’s how I’ve really changed since COVID. I feel like somebody who went through the 1920s when everything went terrible, and now I’m going to just be conservative for the rest of my life, and I’m okay with that.I feel like the same thing happened in large multifamily where people went in, you could make tons of money and then now people are getting burned. But I think in the short term rental industry and also multifamily, the people that are surviving and really coming out of it are the operators, the people that really put in the time to build their operations, to give those unique experiences to go above and beyond, have their systems and processes in place, know what asset management is and actually do asset management and bought off of being conservative or how they’re going to operate and not just banking on this gold rush and banking on the appreciation. That was crazy happening over those couple years. But I think that’s a big difference too, is really understanding how to operate or hiring the right co-host or property management company to operate your property too. Now, John, is it possible for an Airbnb property to perform well even if the market that it is in is underperforming? ItIs. And I typically never like to talk about the markets that we help our clients purchase in, just because I don’t want to give away those markets make it harder for them to hit their numbers.Oh, you’re gatekeeping on us.I’m a hundred percent gatekeeping. I’ve helped invest too much money into these markets to hurt those people. But with that being said, there’s one market that’s so complicated and requires so much capital that I feel okay talking about it, and that’s the Scottsdale Phoenix market. So I mean, Phoenix made the headlines for the Airbnb bust right after the Super Bowl went through there. Everybody was talking about how all these properties were not performing, all these properties are not booked out, blah, blah, blah, blah, blah. And meanwhile we had 20 plus properties in that area that were all record highs. And so what I sort of learned through that process is, and Jamie kind touched on this a little bit, is saturation is not as straightforward as what is the, it’s not as straightforward as I thought it was. Okay. It’s really, really, really niched down.
So as an example, in Miami, there are 18,000 or 20,000 Airbnbs somewhere around that number, but 10,000 of them are one bedrooms. And so if you were to ask me, Hey, is Miami saturated? I would say, well, are you trying to cater to couples or are you trying to cater to groups of 16 people? Because that vastly changes it. Then the next question then becomes, well, are you trying to cater to groups of guys or groups of girls because there’s a lot of bachelor pads, but there’s not a lot of bachelorette pads. And then the next question is like, well, you’re going, are you going for luxury bachelorette groups or are you going for just regular whatever type of homes? And so what I’m trying to say is that when you’re creating an Airbnb, you’re creating it for a very specific demographic. And the question then becomes is that demographic saturated for that market? And what we found in Scottsdale was that the market that we were targeting or the demographic that we were targeting was not saturated, but the Phoenix market as a whole was more saturated in comparison to other places for a variety of reasons. And so yes, without a doubt it’s possible for the property within a market to still perform that’s underperforming.And John, I would love that. That takes so much. You and I, we chatted a couple of weeks ago and you shared that same logic with me and I was like, dude, I’ve never thought about it that way, but it makes so much sense. Saturation is really at the property level, and who are you competing against? Not necessarily just what the market is doing. So I love that take Now guys, there’s, there’s really this Airbnb amenities, arms race that’s happening right now in the industry. How important are amenities for profitability and which amenities have you seen drive maybe the biggest value, Jamie, we’ll start with you,Is the answer. It depends. So we at RDNA, I’ve got a huge team of data scientists and researchers and we’ve been trying to really understand the answer to this question of and take a hot tub, plop it into any market around the country, and what is that incremental value going to be? And it varies dramatically, but something I want to call out is it varies in ways that I think are very logical. If you think about investing in maybe some of these smaller markets or more rural areas, the homes that you’re investing in is you are creating that destination. There’s not going to be a lot of demand drivers nearby. People are going because your home is amenitized, and the incremental value of those amenities is double that of what we see in some of the larger markets. So you look at our typical coastal market, you get a 10% a DR increase.
You look at a small city rural area, you get a 21% a DR increase, a similar impact with saunas or where it’s almost nothing in a beach market for adding asana. It’s like a 10% increase in a more rural market. So people are willing to pay for those amenities if there’s not going to be a lot of other things to do nearby. And then there’s some things are the exact opposite in terms of the impact. So we’re looking at EV chargers. If you’re a beach or mountain market that’s within a two or three hour drive of a major metro, having an EV charger can make a 5% difference on a DR, and that can be a huge incremental value for a relatively low cost.Yeah, I feel like the amenities discussion is such an important one because people just think that if they just stuff their listing with a bunch of different things that it’s going to make the difference. And that’s partially true. And Jim, you just alluded to that, but I think there’s also maybe an upper limit on the return of those amenities as well. And if you are in an incredibly small market where the ceiling on revenue is $100,000, it doesn’t matter if you put Disneyland in your backyard, it’s like the cap is the cap. So you’ve got to be able to gauge what is the return on that investment and not just can I actually add it to the property?That goes the same for long-term rentals too, is in your market, you can’t go and put granite countertops and expect to get another $200 and rent per month because there’s just the cap that people won’t pay more than that even if you go and add all of these super nice high-end finishes. So it’s the same thing as finding that fine line of what to add and where to stop, but also the maintenance and the upkeep of that amenity. Like a hot tub. I don’t have any of my properties. I think of, okay, do you have to have somebody come and drain it every time? Do you have maintenance on it, issues, it’s not working, things like that. So I think also kind of thinking about what you want to deal with also.For sure, we stopped buying air hockey tables for that reason. They’re just so hard to maintain. The little fans kept going out. Handymen aren’t super knowledgeable of how to work with those, so we stopped buying air hockey tables for that reason. John, what about you? What’s your take on the Airbnb amenities arms raceIs are they important? How important are they? Right. The answer is without a doubt, they’re extraordinarily important in today’s Airbnb space. I always like to explain this in a couple different ways. So if Jamie has an Airbnb with no amenities, he’s selling bedrooms, bathrooms, living room, dining room, and a kitchen. But then if I have my home, I’m selling all those exact same things. Every single Airbnb sells those exact same things. But if I then am also offering a fire pit, a hot tub and a pickleball court, I now have these additional things that somebody is buying from me for the three days that they’re going to be there. Therefore that’s going to help me be able to sell my property at a higher nightly rate and at a higher occupancy, it’s going to be easier for me to get the booking, especially if I lower that nightly rate to match Jamie, it’s going to be an obvious choice that they just get more with me.
I kind of like to explain it. If you take a regular car and then you take a truck, a truck is almost always more expensive because it has a truck bed. You can just do more things with a truck. And so when you get this Airbnb that just has more amenities, more things to do, more entertainment while on vacation, people are naturally going to book it more easily and at a higher nightly rate. But I’m glad Jamie had to say it. I didn’t have to say it. It depends, right? It depends on so many factors. Is a hot tub important in Michigan? Yes. Is it important in the keys? Probably not, right? So it’s like logically, you got to think about what amenity makes the most sense here. And then from there it’s like you just said Tony, it’s not just about throwing a bunch of amenities at it.
It’s thinking, who is my demographic and now let’s create a space for them. One thing I’ve seen multiple times, and I always just kind of laugh at it, is a bachelorette themed homes with jungle gyms in the backyard. So a full out pink home and it’s got a jungle gym in the backyard. I’m like, what are we doing here? You know what I mean? Who are we targeting? And so it’s like create the experience through the amenities and they’re super, super, super important. They just give you a leg up. Pools are obviously one of the biggest revenue drivers. The bigger the amenity, the more you can tend to see it next up. Yeah, sorry. Pools are definitely one of the biggest revenue drivers. Technically the bigger the amenity, the more you’re going to see that pull from the amenity. But they’re just really important.I’ll say we did not want bachelorette and bachelor parties in our property, so we put the jungle in to purposely deter people from booking our propertyFor that purpose. Or Jim, you just encouraged everyoneTo book the bachelor party and bring their kids along. So now you’re dealing with both groups,Every mother’s dream, bringing your kids to a bachelorette party.Alright guys, so we’ve learned how to pick the right property, but staying profitable is an entirely new challenge. So after the break, we’ll look at how today’s top hosts are adapting to win in 2025. Okay, so we’ve talked about markets and properties, but now let’s focus on what comes next. How are hosts actually adapting in 2025? So we’re going to put you guys on the spot here, John, you get a pass because you mentioned this earlier by saying Scottsdale and Phoenix. So Jamie, this one comes to you. So I’m going to put you on the spot here, Jamie, because everyone’s wondering the same question. If you were to buy an Airbnb today, what market would you go into and why?I won’t give the exact answer of where my property is, and I told you guys it was in the North Georgia Mountains. I’m looking for drive to destinations near major metro areas that are seeing and growing population because those are, you think about more people going into that destination and then that they’re going to then be taking more vacations. So I want to be in an area that’s going to have that strong tailwind to it. And it’s not necessarily, you think about a destination. Broken Bow is a great example. Right now it’s in Oklahoma is a drive from all these major Texas markets like Dallas, Houston, Fort Worth, even Austin. They’ve got all these major tailwinds of all these new people moving into those areas and now they’re starting to vacation. It’s been one of the fastest growing markets for new short-term rentals for the amount of demand that’s coming in. But also you look at the fastest growing MSAs, they’ve all been in Texas, so it sort of makes sense that this market has been able to support that. So I want to make an investment in an area that’s going to have that tailwind and sort of put myself in front of the upcoming demand that’s going to eventually be there.Now John, I’ll throw this one to you. Do you expect the short-term rental landscape to consolidate at all? So you’re seeing smaller house selling and then the pros that have actually operated starting to scale. Will individuals still have an edge getting started?Without a doubt. I think I’m very well positioned to answer this question because I worked for the largest short-term rental investment fund in America as their head of data for two years. We still work with them and they even just received another 10 million plus, another 90 million that’s going to be coming them to buy another 300 plus properties over the next three to five years. So this is the largest short-term rental investment fund. Somewhere between a five to seven year period, they will have accumulated about 500 properties. In America right now there’s 2 million Airbnbs in I think France, there’s like 1.7 million. So then you could just keep going. The reality is that there’s too much demand for short-term rentals for these funds to be able to control and oversee all of these properties. Plus right now they’re managing 150. It is unbelievably difficult to maintain those at the quality that they need to be.
They actually were recently Air DNA named them as the most property management company in all of America, which is amazing. But I saw the work that went through to actually get to that point. I know the people, I know how hard they worked. It was insane, right? They pulled data you wouldn’t believe just on reviews to be able to figure out which cleaners to fire. It was a nuts operation to get to that point, but they did it. But what I’ve seen is to operate at that scale is just so unbelievably hard. SSA look at their stock market or their stock price, what’s happened with them, look at evolve these people when they try and go bigger and bigger and bigger. It just is so hard to do and that mom and pop care and love and that’s what Airbnb was built off of and I don’t see that going anywhere.
Do I think you could manage 10 and still give that same quality? For sure, right? I’ve been in that scenario. But to say that the STR landscape is going to consolidate because of these larger funds that are getting involved, not at all. And I have people reach out to me all the time. Just this week I had somebody reach out and say, Hey, do you want to be my head of data for a fund? I’m going to open. And then I go and talk to ’em like, how many Airbnbs have you bought so far? And they’re like, none. I’m like, okay, call me when you’ve bought 10 and we’ll talk then we’ll see how we feel about it then. So yeah, just without a doubt the answer is that it’s not going to consolidate.Now Jamie, are you seeing anything different?Yeah, so we track and every host around the world how many listen they have and how inventory is consolidating or not. And in general, what we see is with the large property managers, they sort of manage about and 35% of inventory. And that’s been pretty steady over the past six, seven years. We’ve seen individual hosts go from managing about 50% of inventory to managing about 45%. So there’s this middle here and this sort of middle is what I see is really expanding. And these are, they’re not the large vac casas cascos E evolves. They’re not the small individual hosts like me. There’s these small hyper-local, some call that are managing anywhere from six to 20 listings. They’re generating in amazing review scores. They’re outperforming the market in terms of RevPAR. They are eating a lot of these large property managers lunch in the markets that they’re operating.
And we see that their sort of inventory is growing from about 10% of the market up to over 15%. So they’re growing dramatically. And we’ve seen their inventory grow at 13% year over year this year where both individuals and large property management companies are growing like two or 3%. So they are absolutely expanding. And I see we see the large property managers responding in kind and with CACO and the CASA merging, they are to turning into a franchise model where they’re going to have locally owned and operated Costco franchises. A lot of these private equity that are out there are keeping the local brands so people don’t even know that it’s part of this large national company and they’re keeping local ownership or local management and control. So they see local is better, especially for short-term rentals. Like hospitality is really hard to scale and is more and more you keep local the better.Jimmy, can I ask you one question on that? Which is, you had mentioned that the very large property management companies like the Vacas have steadily owned about 35% of the entire market over the past six years, but yet the smaller property management companies have increased their market share by 5%, meaning that the really, that 5% is all from just individual hosts. So individual hosts are handing over their properties to smaller property management companies, but yet somehow these VE CASAS and larger companies are still in control of the 35%. I would’ve thought for sure it’d be the exact opposite because we see such low performance from CASA type companies that you would assume that those really well-managed property management companies that are smaller would be gobbling up their clients left, right and center. But that’s not the case,Not the case. And we do see a lot of these property management companies growing and they’re raising money, they’re growing their funds. We have seen Vac CASA give up a lot of their inventory, but for and every vac CASA that’s out there, there’s a new one that’s at a hundred, 150 listings that is growing super fast. And you see great examples of those in our best property management company list. There’s some great examples of ones that are scaling and doing an efficiently, I would say this can account for too, that there’s been a lot that were single maybe two units in 20 18, 20 19 that had enough experience that during this short-term rental boom in investing, they greatly expanded their number of units that they owned and managed themselves. So we did see this emergence of in small to middle size operators happen as people expanded their portfolio.Gotcha. Just to clarify too, when you guys asked that question, I figured you were talking about the consolidation of investment funds buying up all the homes, but when it comes to property management companies and those size, a lot of people are definitely building businesses in that five to 50 management. It’s a great business to own and very scalable as well. SoNo, it was great to get your viewpoint on that because it was very interesting to see how much they actually own compared to individuals. Yeah.Guys, I’ve absolutely loved this discussion and I appreciate the insights that both of you have shared. And I guess in closing, I got one last question for you guys, but I think what we’re seeing right now in the short-term rental industry is we’ve seen in other industries in the modern US economy as well, I’m in my thirties, so I was young when the dotcom crash happened. I was alive and very much impacted by the 2008 crash, but it was the same thing, right? There was all this hype around this new thing that was coming out. Initial people got really, really great returns and then too many people piled in, bubble happens bubble pops. A lot of people get hurt, but the internet’s still here, right? The dotcom crash shouldn’t kill the internet. Real estate investing is still here. 2008 didn’t kill off real estate investing.
And I believe that the Airbnb industry has gone through the same thing where a lot of the early folks made incredible returns, drove a lot of hype, a lot of people who had no business maybe getting into the short-term rental industry did it in hopes of chasing or capturing some of that gold. The bubble popped and now we’re seeing it mature and stabilized. So my last question for you guys is as we look forward the next 5, 10, 30 years in the short-term rental industry, what do you guys see as just the foundational things that will allow people to remain successful now that we’re entering into this new kind of mature phase of the industry? And John, we can start with youLove that question. I kind of mentioned this already. The strategy that we go for when it comes to finding these properties and how conservative I am. I’m conservative in the sense of how I’m estimating what the revenue’s going to be, but also what we need to do to outperform our competition. So every single property that we are trying to find, we are trying to think how could we have an advantage over our competition for the next five to 10 years. Now there’s a variety of different things that allow for that to happen. As an example, there’s a property we’re looking at right now in North Georgia, not near you Jamie, so no worries, but it’s in north Georgia and almost nobody has flat land out there. But this has this one little spot where you can throw a pickleball court on it. And I find it so fascinating because nobody within this 20 minute drive of this little town has a pickleball court because there’s just no flat land.
That’s a gigantic advantage that you’re going to have forever. Another good example of this is take the southeast of Florida, which is essentially your West Palm all the way down to Miami. Almost all of that land is built, right? If you look at a map, they’ve got the water on the one side and then they have that Everglades on the other side, right? There’s almost no land in West Palm in that strip to continue to out build and outperform. And so in other words, whatever’s built is what it’s going to be and the price is just going to continue to go up. We have seen forever when it comes to real estate and eventually it’s going to hit a point where the real estate is going to be so expensive that there’s no return that you can get from those properties. Right now, the way I look at it is that some of those properties and some of those lots have massive backyards and that’s their competitive advantage.
And if you get ’em at the right price and put ’em together properly, eventually the home prices are going to go so high that there’s no more cashflow left. But you’ve locked in a property that can cash flow because of the purchase price and your neighbors can’t outperform you because they don’t have a large backyard. And if somebody goes and buys this mega mansion, they’re not going to be able to do anything. So the land itself gives you this advantage. And so I’m always looking for those types of opportunities where there’s just built in moats around the property for the next five to 10 years. And if you can continue to hold onto that property for five to 10 years, everyone looks like a genius who holds onto real estate that long. Right? So that’s the objective when it comes to thatLove, that approach. And I love what you said about the moat and I talk about that so often. And there there’s location, their size of the property, size of the lot. There’s a construction quality, there’s the uniqueness of the construction. If I have a tree house that’s like cantilevered off the side of a mountain and you got to take a glass escalator to get down to it, there’s all these different things you can do, but it’s like how can you build that moat? I love that, man. Jimmy, what about you? What’s your take? What’s the foundational things we should be focusing on to survive and thrive going into the next 5, 10, 30 years?Yeah, I’m going to zoom out. You gave me the permission to talk about 30 years from now. High level, you see this and greatly expanding middle class globally. You’re going to have a billion people from China and India and move from lower income to middle income. And what do you want to do when you’re in the middle income? You want to travel and we’re seeing so many more people begin to travel internationally. US is one of those top destinations for the first world countries. You see people trading things for experiences that if you look at the share of every dollar spent, more and more people are spending on travel and experiences and they think more granular on the competition that’s happening between short-term rentals and hotels. Past 30 years, hotel industry supply has grown at 2%. Last decade it’s grown at half a percent. Right now it’s sort of reaccelerating and it’s just below 1%.
And so we’ve seen a way under development of hotels and you see short-term rentals grabbing so much more share of overall travel spend both in the US and around the world. So if travel is going to be one of these big secular trends that more and more people are going to be spending on travel, more people are going to be traveling around the world, coming to the US and there’s just not going to be enough hotels to accommodate them. That’s why I’m buying short-term rentals and why I think that there is going to be a long-term steady more and more demand coming into our sector.Jamie, I got to ask one follow-up question to that. And I love the long-term thinking. Airbnb and John, I want to get your take on this as well, but Airbnb’s made a lot of changes recently that have maybe rattled or upset a lot of hosts, right? There’s the fee changes coming up here shortly. There was the chargeback thing that they did recently. There are changes in their cancellation policies. There’s a lot more people now who are talking about building independent of Airbnb and obviously they’re the dominant player in the short-term rental single family space. But when you think about hotels, think like Hilton doesn’t just rely on booking.com and Kayak and name the website. Hilton has the Hilton brand. Marriott has Marriott brand. Do you guys think that we’ll see more single family, short-term rental brands that grow to obviously maybe not the size of a Hilton, but they grow in the mold of a Hilton or a Marriott where they are getting the majority of their reservations may be direct. So Jamie, 30,000 foot view, 30 years out. Do you see that on the horizon?Yeah, absolutely. And at Air DNA, we’re putting our money where the mouth is. If you’re watching the video, I’m wearing an uplifting shirt. We bought up uplifting, it’s a property management system about a year and a half ago and why we do it, we saw that trend of Airbnb’s dominance in the sector is going to decline a bit. And it’s because people, as they build their businesses, they need to be multi-channel. They need to be on vrbo, they need to be on booking, they need to have a direct booking site. And we wanted to give hosts the tools to be able to do that. And now when you go to Air DNA, you get the option of you can buy a subscription like you’ve done always, or you can pay an additional 25 months and we’re going to throw an up listing. And so you can go run your business in an automated way. And we see that’s long-term where the industry is going to be going. John, what about for you?I might have a different answer, but can I ask a clarifying question? When you say that the Hilton brand and talking about individual hosts doing this, are you saying somebody buys has one Airbnb, let’s just say, and they then turn that into its own brand and have a direct booking site specifically for that one Airbnb?I think both right at the micro level where it’s just like, Hey, I’m one host, I’ve got a really killer property. I’m going to do my best to brand this and make it its own thing. I don’t know if you guys are familiar with the Joshua Tree house, but they’re one of the first brands that I saw on social media where they had a really beautiful home in Joshua Tree and their social media was driving the majority of their bookings. But then there’s also on the other side where there’re the funds, there’s wander who are building these brands and they’re not Hilton, but they’re the short term rentals equivalent of that. So both of those at a macro kind of large scale and at a micro individual host.So the macro I definitely agree with, especially with the brand you just mentioned wander, you see a lot of this where these specific niches are turning into their own sort of booking site. So we have one here in Canada called Canada Cottages or something along those lines. And my fiance owns an Airbnb in Canada and she actually gets more bookings from that website than she does from Airbnb. There’s just more demand for that. I’ve seen one for Hawking Hills in Ohio, right? That’s that national park out there. So I’ve seen there’s one specifically for that. Wanders a good example of that more luxury type style. So I definitely see those ones from, there’s a couple of wanders out there, so I’m not sure if we’re talking about the same one. There’s one that’s all about luxury and it’s really, really beautiful, but when it comes the individual hosts, that’s where I’m still not sold.
And I’ve heard a lot of people talking about this and I’m curious to see how it’s going to play out over the next five years. Because one of the reasons I loved doing Airbnb in the first place when I first started doing this back in 2017 was that Airbnb was the marketing, right? I always knew I wanted to own a business, but I didn’t know how to do marketing. And I was like, well, Airbnb took care of that and so now I can have that done. And so with these individual booking sites, you have to then learn how to be marketing. You then have to learn how to go viral, have that website, create the content on a regular basis and get people to actually come to your place. And the more unique your place is, the better you’ll be able to do that. The better you’re at marketing, the better you’ll be able to do that.
But there are going to be also tons of homes that are just like, I’m in the right location. I’ve got the bedrooms that you’re looking for. Come stay at my place. You know what I mean? A property in the middle of Scottsdale doesn’t necessarily need to have its own booking channel because there’s so much demand in that area through Airbnb. It’s hard to stand out. So I think it depends on the different scenarios and situations and the property type and the macro versus micro, but I don’t see any negative in doing it. Right? I don’t see any downside. Let’s figuring it out, trying to take control of your listing, being able to keep more of that revenue that’s coming through for putting in that additional work. So I’m all for it.Yeah. One last thing before we close out here is emails. So everybody says you build your following on social media, you’re building your personal brand, collect emails because Facebook could go away. TikTok we’ve already gotten threatened is going away. Do you think there’s some other kind of capture that you should be doing for your short-term rentals? Say Airbnb goes away or VRBO goes away or something like that where you have your own collection of emails per se?For sure. I mean emails. It comes back to marketing 1 0 1, right? So I mean I’ve been trying to build up an online following for years now. It’s hard. You know what I mean? I almost swore there. It’s hard. And one of the big things that you want to do is get those emails and be able to provide value through those emails and let people know you exist. And that’s sort of like the rock or your foundation when it comes to marketing. So yeah, couldn’t recommend emails enough, but there’s a lot to the entire marketing strategy you’d have to do. Not trying to scare anybody saying try it, genuinely try it. Try and make it happen if you can.John, you probably just need to dance more to get those followers and those views off. Well thank you guys so much. We’re joining us today. We really appreciated it. Jamie, where can people reach out to you and find out more information?And feel free to reach out to me on LinkedIn if you have any questions or find [email protected]. We do a blog where it’s free. You can get the latest trends on us, short-term rentals and get a sense of where the market’s going and have our own podcast, the STR data lab, where we update every week on trends across short-term rentals around the world.And John, where can people find you?I recommend just going straight to our website, STR search.com. I’ve got a free Airbnb data course on there, so it’s free seven days. Learn exactly how to analyze data and markets and be able to get good at finding a good property. Can’t recommend it enough. That’s the best place to go. If you really want to find how to reach out to me, if you go there, you’ll figure out how to reach out to me. Sostr search.com is a great resource for learning Airbnb data.John and Jamie, thank you so much. I learned so much through this episode, so I really appreciate you both taking the time to enlighten us and to share your knowledge and information with us today. I’m Ashley, he is Tony. And thank you guys so much for listening. We’ll see you on the next episode.
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