In Episode 61 of STR Data Lab, Jamie Lane sits down with Bram Gallagher, fellow economist at AirDNA, to review this year's performance and forecast the 2024 outlook for the U.S. short-term rental industry.

2023 brought challenges for STR operators, with a 4.9% drop in RevPAR — the first annual decline since AirDNA began tracking data in 2014. Yet, the industry saw remarkable milestones, with record-high demand in July and over 1.6 million listings by September. The economic landscape showed resilience, with unemployment remaining below 4% and a trend of declining inflation. However, these positive economic indicators, along with a growth in property supply, led to a leveling off in occupancy gains. STR operators experienced reduced pricing flexibility, as travelers showed a growing preference for more budget-friendly accommodation options.

The absence of a recession in 2023, thanks to effective Federal Reserve measures, paves the way for a stable economic outlook in 2024. Factors such as declining inflation, strong employment, and excess savings are expected to fuel consumer spending. While the Fed may maintain high-interest rates, a potential rate cut by the end of 2024 could influence mortgage rates. The housing market, currently grappling with affordability issues, faces potential risks, with projections indicating a 2% decrease in home prices by 2024. The economic scenarios discussed include moderate downside, upside, and severe downside, each impacting revenue growth.

The AirDNA 2024 Outlook Report predicts a positive shift in the market. Economic recovery is expected to boost demand growth to 10.7%, a rebound from 6.7% in 2023. Supply growth, moderated by high mortgage rates, is likely to align with demand, estimated at 10.9%. Occupancy rates are projected to stabilize at 54.7%, similar to 2023 levels. Average Daily Rates are expected to increase by 2.1%, leading to a 1.9% rise in RevPAR. Despite some economic uncertainties, the market outlook is cautiously optimistic. Bram concludes with a positive note on strong labor market growth as a promising sign for the coming year.