Last updated on April 24th, 2024
2 Proven Strategies to Find Best Airbnb Markets in 2024
This is the complete Airbnb market research guide for property investors. 1. City analysis (high rental yield, appreciation, and regulations) 2. Neighborhood analysis
- Last updated April 24, 2024
Best Airbnb Markets provide you with high rental yields and good appreciation potential. The local government’s standpoint on short-term rental is important as well.
In some markets, you can make four times more than a traditional rental. Start Airbnb in the right location!
This blog isn’t about the top market list but about short-term rental market analysis. So, you can find profitable markets among your preferred markets. There are some blog posts and YouTube videos online talking about the top Airbnb markets. There’s a good chance that those markets will become saturated after a dozen investors enter the area this year and more next year.
The successful short-term rental market research step is as follows
- City Analysis: Find 2-3 good markets with 1) high rental yield, 2) good appreciation outlook, and 3) STR-friendly government.
- Neighborhood Analysis: Identify the profitable neighborhoods and types of property
Now you’ve found a profitable property, and it’s up and running, giving you a good rental income. What more can you do?
Increase the value of your property as a turnkey property by
- Refurbishments
- Remodel
- Expansion
- getting a short-term rental permit
- increase your occupancy rate by optimizing your Airbnb listing
As you can see, there are more chances for you to increase the value of your real estate investment as a short-term rental than a traditional long-term rental.
City Analysis: 3 pillars of good short-term rental markets
Use these 3 criteria to identify markets that will give you a better return. These pillars are for choosing the right markets, not the right property. In a market fitting those 3 criteria, you will have higher cash flow. You will expand your property investment business faster.
Start with listing down 10 cities that you are considering to start an Airbnb. It’s good if you have some connections in the place or you’d like to spend a good amount of your time. It can be your favorite vacation spot, or have family living down there. After doing the city analysis, you will have clarity on the top 2-3 markets out of the 10 markets you were considering.
High Airbnb Rental Yield
The first pillar is a rental yield as a short-term rental. This is the ratio between the property price and your first-year short-term rental revenue. The higher the average rental yield, the better.
Tip: You’ll compare different cities during this research. Choose a specific number of bedrooms to calculate your Airbnb rental yield.
How to find short-term rental revenue in a city?
You can get this data easily from a free Airbnb analyzer. Enter any global market names after signing up for Airbtics. Then, you will get the average year-round short-term rental revenue, daily rate, and occupancy rate of a market.
This will also answer the following questions. How much does an average listing in the city make per year? What’s the year-round average occupancy rate? How much do they charge per night?
How does this data work? Airbtics tracks over 10 million short-term rentals from various sources every day. Please note that the occupancy rate per number of bedrooms is only available in the premium account.
How to find an average property price?
It’s time to find cities with cheap property prices. Heated property markets, like San Francisco, aren’t usually an ideal place. Whereas places like Joshua Tree with cheap prices, are better.
Different countries have different sources of information
US, Canada: Redfin, Zillow
UK: Rightmove
Spain, Portugal, France, Italy: Casafari
Australia: realestate.com.au
Market research summary
- 1) Use an Airbnb analytics tool to get the average Airbnb revenue potential.
- 2) Use a real estate site to get the average property sale price.
- 3) Get gross rental yield by dividing Airbnb revenue into property prices.
Population and economic trends
In the end, you’ll earn money from both rental income and equity appreciation. Real estate market analysis is what you need to incorporate here. Typical factors you need to look into are as follows, and you want them to be on an inclining side in the last 5 year
– Population growth
– Income growth
– Crime rate decline
– Employment rate growth
You would also look into planned major real estate developments.
However, you could simply focus on two major indicators: Population and income growth. You may incorporate other indicators. This sort of data is usually available from government websites.
What you want to do here is to check population and average household income changes over the past 5 years. Then, calculate the “change rate in the past 5 years” for both population and income changes. Finally, get the average of those two rates.
How to calculate the change rate? it’ll be (population_2022 – population_2018) / (population_2022)
Short-term rental regulation
Some city governments are more welcoming to visitors to the city. It’s usually the cities where tourism is a major economic activity.
You should verify the following information for each city
- 1. What is the current short-term rental regulation?
- 2. How strictly is it enforced?
- 3. Read through news about short-term rental regulations in the city.
What is the current short-term rental regulation? The short-term rental regulations are somewhat similar worldwide. I’ve sorted out regulations by most “strict” to “lenient”. The one at the top is the most strict. Put the “regulation” score between 1 (strict) and 5 (lenient).
- 1. The owner must live on the property
- 2. Only able to rent out as a short-term rental for a certain number of days (90 days, 3. 180 days, etc)
- 4. Only certain zone or type of property is allowed to do short-term rentals
- 5. Required to apply for a short-term rental permit and pay annual fees
- 6. Required to inform the local government
How strictly is it enforced? Take a look at Airbnb in the market, and read the recent reviews in the listings. Verify if the laws are really enforced. They might say the owner must live on a property, but some hosts may run 10 units in the same market. There are many markets where the regulations are not properly enforced for various reasons. In this case, you should re-adjust the regulation score.
Read through the recent 2 years’ news. Search on Google to go through the news about short-term rentals in the market. Is the mayor talking negatively about short-term rentals? You can see the sentiment towards short-term rentals by checking the news. If they talk negatively about reducing the regulation score by 1, if they talk positively about it, increase the regulation score by 1.
How use these numbers?
The final result should look something like this.
Here’s the link to this worksheet if you need – https://docs.google.com/spreadsheets/d/1nNFlWmvYr7vYB71_ftRJRVz5GOXjs9I91yBie8E3CbA/edit?usp=sharing
From here, it is up to you to determine your focused markets. There is no set-in-stone formula to determine because it depends on what you put more weight on whether short-term profit or long-term appreciation.
Personally, I first took a look at the top 2 by Airbnb rental yield and the top 2 by appreciation factors. I removed the one with strict regulation (where they restrict STR by number of days a year).
In the above example, I’d choose Liverpool and Lisbon for the high gross rental yield and friendly STR regulation. Their population and income changes are positive as well.
Don’t choose more than 3 cities. You will need to do neighborhood analyses of those 3 cities as the next step. You can add more cities after doing the neighborhood analysis. Each city would have at least 3 interesting neighborhoods. This can lead to 9 neighborhood analyses if you choose 3 cities. Having to do so many neighborhood analyses will lead you to decision paralysis.
Try to do a neighborhood analysis on at least 2 cities. This will help you to be detached from one specific city you love.
Have 2-3 cities ready? Then, read below to learn how to do neighborhood-level analysis!
Neighborhood Analysis: How to choose the right property type?
Once you’ve got the idea of 2-3 good markets to start an Airbnb, it’s time for you to do a more specific analysis. You need to find a good neighborhood and the right type of property.
The outcome of this analysis is as below
- 1) Top 2-3 most desirable neighborhoods for short-term rentals
- 2) Best number of bedrooms (E.g. 3 or 4 bedrooms)
- 3) Best property type (E.g. House with a pool)
Finding the neighbourhoods.
Neighborhoods don’t have to be zipcodes or certain administrative divisions. It just refers to an area with a similar property price and Airbnb revenue. This can be determined by how close your place is from specific landmarks or many other ways.
In the same market, different neighborhoods have different levels of demand. Starting in the right neighborhood goes a long way since you can’t change the neighborhood once you commit to it. This can be counterintuitive. There is a case where in-land properties have a higher occupancy rate than beachfront properties. After our analysis, we found out people like to stay near train stations for easier access to restaurants and public transport.
How to?
So, how can you find an area with high demand? You can use the heatmap feature from the Airbtics app. Dark red represents an area with a high occupancy rate. You can change the color to represent a number of listings or year-over-year change in occupancy. This will give you where are the hotspots and with a high demand.
Number of bedrooms
First of all, it depends on your budget. Are you looking for a big size or a small size property?
Then, take a closer look at occupancy rates and the number of listings per number of bedrooms. A certain number of bedrooms may do better than the other. Keep in mind – the number of bedrooms is one of the most important factors for Airbnb guests.
Here, write down on your worksheet about average yearly revenue of different sizes of bedrooms. This will give you a good guide once you start looking at different properties for sale.
Neighbourhood A (Airbnb yearly revenue)
- 2 bd: $85,000
- 3 bd: $92,000
- 4 bd: $135,000
Neighbourhood B (Airbnb yearly revenue)
- 3 bd: $59,000
- 4 bd: $70.000
- 5 bd: $92,000
Type of property:
Take a look at the top properties in each of the neighborhoods. What do they look like?
Firstly – is it a condo or a standalone house?
Secondly – what other characteristics?
It might be a wood cabin or a tiny house or a condo with many amenities. Note this down in your worksheet.
How to?
You can achieve this by using the Airbtics app. There is a section called “Top properties”. This section shows the top-performing properties in a specific neighborhood that you see on the map.
Ensure your data is accurate
Your entire market research should not depend on a single data source unless it is from an official source.
For Airbnb revenue data, there is no officially available data anywhere. If you are using the Airbtics app, it’s a good idea to cross-check with other data platforms’ free data. Check if the occupancy rate or yearly revenue is similar in multiple data sources. If yes, the data you are using should be fine. If they all show very different numbers, you may have to check further. Go and check the Airbnb website and review the listings. Ask realtors or hosts in the area.
Review of best Airbnb markets available online
Data source: Airbtics, 2022 Nov – 2023 Oct data.
Sedona, AZ
- Occupancy rate – 68 %
- Daily rate – $235
- Yearly revenue – $32,116
- Number of listings – 1,116
Santa Fe, New Mexico
- Occupancy rate – 74%
- Daily rate – $196
- Yearly revenue – $55,174
- Number of listings – 1,318
Savannah, GA
- Occupancy rate – 67%
- Daily rate – $189
- Yearly revenue – $29,674
- Number of listings – 2,597
Barcelona, Spain
- Occupancy rate – 88%
- Daily rate – €128
- Yearly revenue – €10,591
- Number of listings – 13,829
Bourne, MA
- Occupancy rate – 68%
- Daily rate – $284
- Yearly revenue – $59,251
- Number of listings – 23
Colorado Springs, CO
- Occupancy rate – 70%
- Daily rate – $121
- Yearly revenue – $32,502
- Number of listings – 2,492
Dallas, TX
- Occupancy rate – 59%
- Daily rate – $124
- Yearly revenue – $8,863
- Number of listings – 5,0525
Eureka, IL
- Occupancy rate – 55$
- Daily rate – $80
- Yearly revenue – $19,010
- Number of listings – 11
London, United Kingdom
- Occupancy rate – 82$
- Daily rate – £236
- Yearly revenue – £16,812
- Number of listings – 4,432
Melbourne, Australia
- Occupancy rate – 66%
- Daily rate – A$196
- Yearly revenue – A$17,641
- Number of listings – 20,327
Pascagoula, MS
- Occupancy rate – 48%
- Daily rate – $124
- Yearly revenue – $24,355
- Number of listings – 26
Rome, Italy
- Occupancy rate – 96%
- Daily rate – €129
- Yearly revenue – €17,033
- Number of listings – 22,863
Salt Lake City, UT
- Occupancy rate – 71%
- Daily rate – $98
- Yearly revenue – $27,401
- Number of listings – 1,845
Vancouver, Canada
- Occupancy rate – 85%
- Daily rate – C$182
- Yearly revenue – C$53,282
- Number of listings – 5,361
Conclusion
Here’s a recap. The goal of this market research is to find the best cities for you to start an Airbnb. You’ll start with 10 cities you like to consider starting an Airbnb. You’ll select 2-3 cities based on appreciation factor, STR regulation, and yearly rental yield. After this, you’ll do a more specific neighborhood-level analysis.
Now, this is it! You have 2-3 cities. You have 2 neighborhoods in each city with the best number of bedrooms and type of properties. Use this knowledge to search for properties for sale. Let the realtors know about your criteria. Go and visit the properties for sale.
It’s a good idea to tweak a little on this framework so that it makes more sense to you. Best luck!
