The short-term rental (STR) sector is no longer a niche—it has become a solid and mature segment of the travel economy. In this article, we explore how to approach the vacation rental business in 2025, how to compete in an increasingly crowded market, and which factors are expected to drive growth in the coming years.
We’ll cover:
- The most important trends shaping STR demand in 2025
- Investment opportunities and rental hotspots around the globe
- Practical tips for evaluating markets with high predictability of returns
- The top tools professionals use to maintain a competitive edge
The Vacation Rental Industry at a Glance
According to Precedence Research, the global vacation rental market is valued at USD 97.85 billion in 2025 and is forecasted to reach USD 134.26 billion by 2034.
Other reports predict a market size of USD 94.83 billion in 2025, growing at a CAGR of nearly 6% (The Business Research Company).
In the United States, demand remains robust. As of April 2025, occupancy rates surpassed the pre-pandemic average of 55.4% (AirDNA).
Online booking channels continue to dominate STR distribution, though direct bookings are gaining traction as property managers seek to bypass commission fees (StayFi).
Overall, the industry is showing strong signs of maturity and steady expansion.
Key Market Trends in 2025
Sustainability as a Competitive Edge
Guest preferences are shifting towards eco-friendly rentals. Travelers expect solar energy, low-carbon design, and energy-efficient appliances. Studies indicate that nearly 90% of travelers prefer sustainable options, and half are willing to pay more for them. Metrics such as “EcoGrade” scores are being adopted to quantify sustainability performance.
Regulatory Adjustments
Urban markets like New York and Los Angeles continue to enforce stricter licensing, zoning, and renewal requirements. Many investors are shifting to suburban, rural, or tourist-destination areas where the legal framework is more predictable.
The Rise of Multi-Channel Distribution
Relying solely on Airbnb is outdated. Today, professional hosts spread their listings across multiple platforms—Airbnb, Booking.com, Vrbo, and their own direct booking sites. A channel manager (e.g., iGMS) is now essential for syncing availability and maximizing occupancy.
Growing Demand for Unique Rentals
From cabins and treehouses to themed homes (potato houses, spaceship villas), unique stays are in high demand. Between 2020 and 2024, unique rental listings increased by 123% (AirDNA). Design, branding, and memorable experiences are the differentiators in 2025.
Services, Wellness & Lifestyle Tourism
Travelers increasingly want more than just a place to sleep. Airbnb’s “Services” feature (launched in 2025) now allows guests to book extras such as massages, photoshoots, chef-prepared dinners, or spa treatments. This trend expands revenue potential for hosts who collaborate with local providers.
Longer Stays & Remote Work
Remote and hybrid work still shape STR demand. Stays of 30+ days are on the rise, as mid-term rentals appeal to digital nomads, remote professionals, and long-stay travelers. U.S. data shows the average stay has increased to 4.1–4.4 nights, while 28+ day bookings are now more frequent than ever.
Artificial Intelligence & Automation
AI is no longer experimental—it’s becoming a core tool in STR operations. From dynamic pricing and demand forecasting to guest personalization, AI applications are helping hosts optimize performance. Platforms increasingly use machine learning for tailored booking suggestions and smart home integrations.
Where to Invest in 2025
United States & North America
Urban restrictions push investors toward beach towns, mountain resorts, lakefronts, and suburban escapes. Smaller Midwest cities like Indianapolis, Kansas City, and Wichita are outperforming expectations thanks to affordability and consistent demand.
Europe
While capitals such as Paris and Rome remain strong, cities like Madrid, Krakow, Budapest, and Seville are rising stars. The Azores, Portugal show exceptional performance with ~64% occupancy and growing eco-tourism appeal.
Global Hotspots
Beyond Europe and North America, destinations like Puerto Vallarta (Mexico), Cape Town (South Africa), Dubai, and Marrakesh are gaining momentum. Latin America shows the fastest Airbnb growth, fueled by tourism expansion and digital nomad inflows.
How to Conduct a Market Analysis
The best STR investment decisions combine data analytics with local knowledge.
Key Metrics to Track:
- ADR (Average Daily Rate) – benchmark against comparable properties
- Occupancy Rate – should remain above 50%, especially in peak season
- RevPAR (Revenue per Available Rental) – revenue per night, regardless of occupancy
- Annual Revenue – best measure of profitability amid seasonal fluctuations
- NOI (Net Operating Income) – core profitability before taxes and mortgages
- Cash-on-Cash Return – annual ROI based on actual cash invested
- Break-even Occupancy – minimum occupancy needed to cover costs
Practical Steps:
- Compare costs vs. expected revenue (utilities, maintenance, taxes).
- Study local regulations and licensing requirements.
- Evaluate demand drivers: events, attractions, accessibility.
- Analyze property types in demand: condos, tiny homes, luxury villas, etc.
- Consider whether to self-manage or hire a property manager (usually 15–25% fee).
Essential Tools for STR Market Research
- AirDNA: MarketMinder tool for ADR, RevPAR, and demand analytics.
- Airbtics: Real-time pricing insights and ROI forecasts by property type.
- Mashvisor: U.S.-focused, with heatmaps, calculators, and MLS listings integration.
Conclusion
The STR market in 2025 is strong, evolving, and filled with opportunities for data-driven investors. However, success isn’t just about analytics—it’s about combining data, intuition, and differentiation.
Whether you’re expanding a portfolio or just entering the market, the key lies in identifying high-demand areas, navigating regulations smartly, and offering memorable guest experiences.