Research into the best cities for Airbnb businesses is fast becoming a trending topic among aspiring Airbnb property investors. In the past decade, short-term rentals have proven to be the more profitable rental strategy in the majority of the global real estate market. The main reason for this is the high demand for vacation rentals among travelers and the ability to charge a higher daily rate than with traditional, long-term rental properties.
Savvy real estate investors are wondering how to take advantage of this lucrative real estate strategy. The best way to do this is to buy an Airbnb rental property in one of the top locations in the US or the European housing markets.
To help you out, we have put together a list of the best cities for Airbnb businesses in the US and Europe in collaboration with Transparent — a vacation rental data and intelligence provider that helps property owners and managers optimize their business strategies.
Transparent has analyzed vacation rental data from the top 500 US and European markets by supply to assess which earns the most return per available night on the most popular online travel agencies. Read on to see who tops the list.
However, let’s first take a look at a few different factors that in combination produce a top location for investing in a short-term rental. These are:
First, we should consider the demand among leisure tourists and business travelers. Naturally, busy cities with a booming economy and numerous tourist attractions welcome the most Airbnb guests on average. In most cases, they can maintain high demand regardless of the season.
As a result, property owners in popular tourist destinations can benefit from a high Airbnb occupancy rate, which is one of the most important factors for a high return on investment.
However, recent market trends show a shift in demand among leisure tourists. As our list will demonstrate, demand in non-urban areas is on the rise, and hence the average Airbnb occupancy rates in these areas.
Second, the best cities for Airbnb businesses are those which bring real estate investors a high return on investment. Such locations offer not only an above-average Airbnb occupancy rate but also a high average daily rate.
There are many ways to measure profitability in vacation rental investment property, and in this article, we focus on revenue earned per available rental, or RevPAR for short.
RevPAR is a measure of the average occupancy rate in relation to the average daily rate in each city. It tries to find the ideal balance between these two factors to maximize the potential for how profitable your Airbnb rental can be in a particular city.
If a listing has a high average daily rate, it does not give enough information about the behavior of your Airbnb occupancy rate. Likewise, even if you have a 100% occupancy rate, you could be pricing too low and taking home too little rental income. Therefore, the RevPAR metric provides a more detailed insight into how lucrative a certain area is by taking into account both potential revenue and occupancy.
Last but not least, the top locations for buying an Airbnb property are those which place no or very few restrictions on renting out on a short-term basis.
After the emergence of Airbnb and other similar home-sharing platforms, many cities have started introducing severe restrictions on the operation of short-term rental properties. The restrictions aimed to protect the local housing market and residents from the influx of real estate investment seekers and short-term rental visitors. Rules and regulations have been particularly restraining for non-owner-occupied short-term rentals.
Having analyzed 500 US markets by RevPAR, Transparent has identified the best locations for investment in short-term rentals. See below the top 20 best cities to invest in a vacation rental property:
As we can see, Malibu, California, takes the top spot with $394 RevPAR. The best states for Airbnb investment are Colorado, Florida, and New York. Each of these states have three or more of their cities featured on the list.
Transparent adds insight that every one of the top 25 cities is non-urban. While these cities are great options to invest in, it is still critical to do further research before making a decision as big as purchasing vacation rental properties. While these cities indicate a profitable environment to launch your Airbnb, there are still other factors to consider that we discuss a little later. But first, let’s see which of Europe’s cities have made the top 20 list for Airbnb investment.
As another leading market in the vacation rental investment industry, Europe also boasts cities that provide the perfect opportunity for Airbnb investment. Here are the top 20 best cities for Airbnb investment based on Transparent’s in-depth analysis into the top 500 European markets:
While the UK cities account for over 70% of the list, Zermatt, Switzerland, takes the number one spot on the list.
Again, Transparent sees a pattern of the majority of the top cities in the European market following a non-urban trend. Vacation rentals that follow this trend seem to be enjoying higher cash flows and RevPAR because of it.
While the metrics discussed above are a good indicator for the best cities for Airbnb investment, they are not the only factors to consider when choosing the best short-term rental property for maximizing your rental income.
Other important factors to consider are:
Take nearby attractions (like a beach or a town with a party district) and institutions (like a university or business offices) in the city into account. This will indicate the type of guests your neighborhood will attract (party goers, business people, students, etc.). This, in turn, will determine the price you set for your rental property.
Property taxes that are imposed by the city and business licensing requirements of your chosen neighborhood will affect the profitability of your vacation rental.
It is crucial to research the crime rate in the neighborhood you’re considering. Properties in a city with higher crime rates will not attract as many visitors.
Your guests will most likely be a stranger to the neighborhood and will want to feel assured that they are safe. Putting your money into a city with a high crime rate will needlessly increase the risk of your investment.
The amenities on offer in the city, like a national park or beach, a mountain range or natural springs, and great restaurants can make a big difference in terms of the daily rate you charge and how profitable your business will be.
You should also consider the amenities that the properties themselves offer, like a pool, ample space to park cars, and enough rooms for the type of Airbnb you want to offer.
When researching the amenities that each of the properties may offer, you will need to be sure about which features are important for the kind of Airbnb you want to run. For example, are you looking to run a single-bedroom Airbnb apartment like in New York City, or a multiple-bedroom family home like in Los Angeles or Texas?
If there are any plans for future development in the neighborhood, it may increase the city’s property value and, in turn, the price you could charge for your Airbnb rental.
Before you spend money on any property, you will need to understand where the economy is heading in a certain location. If the city’s infrastructure is being continuously improved and developed, you can view it as a sign of a healthy economy.
It’s essential to be sure that the price of your investment property will only grow over time. So it makes sense to invest in cities with stable economies or resilient to economic fluctuations to ensure you won’t go bankrupt if something goes off the rails.
Consider the number of listings and vacancies in the city. This could give you an indication of how many competitors you’ll have in the same town. You can use this data to ensure your properties are either located away from dense competition or to ensure your rental is the most competitive listing in town.
The average rental income in the city gives you an idea of how much money you could be making at the current average occupancy rates. It will inform how you can set your prices to be competitive and can help you plan for what expenses to expect based on your estimated revenue.
Research the natural disasters in the city to get an idea of what to prepare for and include in your insurance cover. For example, locations close to a beach will face an increased risk of flooding and damaging tidal waves.
This includes any limitations on how many days your short-term rental can be rented out. Even though a property might be located in an area where vacation rental property is allowed, real estate regulations may impose limits on the number of days allowed.
While selecting the right real estate property in the right city is key to generating profit, it’s also vital to ensure impeccable property management. This is the smartest strategy to help your short-term rental business generate a greater return.
iGMS vacation rental software can help optimize your occupancy rates, maximize your rental income, and save time on property management. By using our robust automation tools, you will be able to master the property investing industry and scale your Airbnb business faster than your competitors.
With iGMS, you are able to:
About the Author
Callan Riddles is the Content and Social Media Specialist at iGMS. Callan has a passion for finding new ways to help vacation rental businesses thrive. In her free time, she loves to travel, read, and experience all the new things that life has to offer.
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