Are STR's headed for trouble?
Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesVictor Minasce has some compelling data suggested there may be trouble ahead for Short Term Rentals.
Victor Minasce has some compelling data suggested there may be trouble ahead for Short Term Rentals.
I'm in Scottsdale. I just bought a house to make into a high end STR in Phoenix.
Think of it this way, if you sell bananas and everybody decides to sell bananas, there is still a demand for bananas even though there is more competition.
But, those selling nice bananas will always have an audience and those selling bruised, rotten, spoiled bananas will no longer have an audience.
It's called "capitalism". Those who offer the better product will do well and those who go cheap will eventually fade into the night.
Meh. Just one man's opinion. And indicative (maybe) of one market.
Although like with any business, if you are not prepared, and don't run it like a business.....you will pay the price. I think STRs are here to stay and will grow in popularity as the years go by. As I've mentioned before, a majority of the people we are getting at our STRs are first timers, and older folks too. They are just discovering the beauty of STRs and say they will start using them every time they travel now that they know about them.
Of course, due to the economy, there may be a dip in numbers for those that are not well run/managed.
Meh. Just one man's opinion. And indicative (maybe) of one market.
Although like with any business, if you are not prepared, and don't run it like a business.....you will pay the price. I think STRs are here to stay and will grow in popularity as the years go by. As I've mentioned before, a majority of the people we are getting at our STRs are first timers, and older folks too. They are just discovering the beauty of STRs and say they will start using them every time they travel now that they know about them.
Of course, due to the economy, there may be a dip in numbers for those that are not well run/managed.
100.
sometimes it's the feedback.
everyone just relied on someone else feedback.
From the podcasted referenced by OP:
“Analysis of the short term rental market in the Phoenix area shows that 65% of listings had less than 90 days of occupancy throughout the year.“
Seems like many of these operators are going to be in a dire financial position.
I'd imagine a good portion of the STR market is still passive people listing out their primary residence at various times.
I think cities are going to tighten this up very quickly.
they are getting people to buy license, pay tax. why do you think they would want to give up that revenue?
Cities can get that easy revenue, but lose the real living population. Any area that gets heavily rental based loses it's appeal to long term residents. There's a reason A+ neighborhoods don't cash flow.
From the podcasted referenced by OP:
“Analysis of the short term rental market in the Phoenix area shows that 65% of listings had less than 90 days of occupancy throughout the year.“
Seems like many of these operators are going to be in a dire financial position.
I'd imagine a good portion of the STR market is still passive people listing out their primary residence at various times.
I think cities are going to tighten this up very quickly.
they are getting people to buy license, pay tax. why do you think they would want to give up that revenue?
Cities can get that easy revenue, but lose the real living population. Any area that gets heavily rental based loses it's appeal to long term residents. There's a reason A+ neighborhoods don't cash flow.
plenty of long term residents in Orlando. lots of vacation destinations that do well for cities. Panama City, Myrtle Beach, Gulf Shores. Galveston. areas that might not have a large population normally, and get a lot of money from visitors. I agree that many long term residents dont want to live in the middle of STR's, but they do live in other areas near them.
plenty of long term residents in Orlando. lots of vacation destinations that do well for cities. Panama City, Myrtle Beach, Gulf Shores. Galveston. areas that might not have a large population normally, and get a lot of money from visitors. I agree that many long term residents dont want to live in the middle of STR's, but they do live in other areas near them.
Yes these are good "proper" vacation destinations.
The original question in this topic is actually referring to cities like Phoenix. Since when Phoenix becomes a tourist destination.
Also, the article refers to Vegas, where the city has an oversupply of "cheap" hotel rooms and housing oversupply with inadequate job growth.
Imagine if you're a tourist from MN, why in the world do you want to stay for $200/day in Phoenix rather than just staying in Sedona for the same price?
Actually, I've been confused about this Airbnb business for a long time. I've checked the booking between these two cities has a different booking pattern.
Imagine if you're a tourist from MN, why in the world do you want to stay for $200/day in Phoenix rather than just staying in Sedona for the same price?
Actually, I've been confused about this Airbnb business for a long time. I've checked the booking between these two cities has a different booking pattern.
Phoenix has a lot more to offer. Yes, Sedona has the natural beauty of the Red Rocks, but Phoenix has it's own natural beauty, and a whole lot more. Especially in the winter when the weather is amongst the best in the world.
I took 3 AZ vacations in 2022, and they were all to PHX/Scottsdale. Not to Sedona (been there, done that)
From the podcasted referenced by OP:
“Analysis of the short term rental market in the Phoenix area shows that 65% of listings had less than 90 days of occupancy throughout the year.“
Seems like many of these operators are going to be in a dire financial position.
I'd imagine a good portion of the STR market is still passive people listing out their primary residence at various times.
I think cities are going to tighten this up very quickly.
they are getting people to buy license, pay tax. why do you think they would want to give up that revenue?
Cities can get that easy revenue, but lose the real living population. Any area that gets heavily rental based loses it's appeal to long term residents. There's a reason A+ neighborhoods don't cash flow.
plenty of long term residents in Orlando. lots of vacation destinations that do well for cities. Panama City, Myrtle Beach, Gulf Shores. Galveston. areas that might not have a large population normally, and get a lot of money from visitors. I agree that many long term residents dont want to live in the middle of STR's, but they do live in other areas near them.
In those cities, yes. I think in cities that are more or less coastal spots and/or destination STRs, you're correct. I'm talking about like my main city Austin and cities that aren't geared towards that vacation feel but you have homeowners trying to capitalize.
OMG I just checked even Sedona's Airbnb > $300/day doesn't have many January/February/March bookings, less than 40% filled.
There is higher occupancy for a $100/day room.
Sedona itself has 1K STR, and Phoenix has 1K STR. Totally saturated. I'm also aware visitor to AZ has been declining since 2017.
There's another interesting phenomenon that I see.
In 2017, the gap between Phoenix and Sedona's average home is $200k, Sedona is higher and the price is trending up.
In 2022, the gap between Phoenix and Sedona's average home is $450k, so the appreciation rate is double in Sedona (also in Scottsdale) recently.
Another proof is that tourist destination home appreciation has better appreciation than regular city appreciation.
It's good to invest in STR, but only in vacation-city.
I think there are two points to be made about STRs:
1. They will suffer just like any other tourism-based business will during a recession. Those who do a good job will be fine and those who don't will find their way into other businesses.
2. The last few years have been the "wild west" of STR. Those operators who nickel and dime their customers, provide terrible service, and place greed above their customer's experience will lead many municipalities to begin enforcing rules and regulations. Again, those who don't belong will (hopefully) be forced out while those who provide quality experiences will be fine.
Just my 2 cents!
This is probably an oversimplified perspective but with my personal STRs, I got spoiled with a lot of expensive, long, and unprecedented stays thanks to Covid. The numbers were far better than I expected them to be when I bought the properties.
Now that Covid is not a driving factor in travel or stays, we're simply going back to the traditional STR supply and demand. If investors were basing their numbers of the Covid boost, they're going to be underperforming. If they're crunching numbers like we all were back in 2019, they'll be fine.
We're just cruising into the new normal like any other faucet of real estate. Demand and competition will continue to grow as the market levels off.
That's the problem right there. A flurry bought end of 21, top of 22, so they're facing a harsh(er) reality.
Meh. Just one man's opinion. And indicative (maybe) of one market.
Although like with any business, if you are not prepared, and don't run it like a business.....you will pay the price. I think STRs are here to stay and will grow in popularity as the years go by. As I've mentioned before, a majority of the people we are getting at our STRs are first timers, and older folks too. They are just discovering the beauty of STRs and say they will start using them every time they travel now that they know about them.
Of course, due to the economy, there may be a dip in numbers for those that are not well run/managed.
You hit the nail on the head. The key here - is it well run/managed. As a higher end VRBO renter of many years, the higher end market does not get affected as much as the lower end. This is true with not just STRs too. I know what someone like me is expecting out of a vacation rental, and have the time and means to make sure all of my properties not only meet expectations, but exceed them. So far, I have not been affected by the market, and that includes the 2007-2008 downturn. If you know your market and are good at that niche, stay in your lane. The others will weed themselves out.
Despite the potential consequences of the pandemic, it's clear that certain investments can still be viable. It just goes to show that with a little bit of research and strategy, real estate is an investment opportunity that will never die. Even in uncertain times like these, it pays to focus on fundamentals and being smart about where you make your investment. So if you're looking for a long-term option, real estate might just be your best bet!
That said, there are some cautionary tales as well - so make sure you do your due diligence before investing in any property. That way, you'll have a better idea of what kind of returns (or losses) you might incur. But by keeping your ears open and doing your research, you can ensure that your investment is one that will pay off in the long run.
Good luck!
Airdna predicts revenue will decline -1.6%, not unlike the greater economy perhaps.
These news stories of airbnBust with 30+% drop offs just aren’t backed by data from the Marco environment.
Certainly, markets are unique, and bad hosts might get raked over the coals, but that’s not the economy’s fault. 2021 wasn’t going to last forever.
But the fear mongering huge dips for the foreseeable future….most asset based markets just don’t move that much. People still want to vacation
@Carlos Ptriawan Phoenix is a huge tourist city...after cities in Florida, it's likely the next top snowbird destination in the country.
Meh. Just one man's opinion. And indicative (maybe) of one market.
Although like with any business, if you are not prepared, and don't run it like a business.....you will pay the price. I think STRs are here to stay and will grow in popularity as the years go by. As I've mentioned before, a majority of the people we are getting at our STRs are first timers, and older folks too. They are just discovering the beauty of STRs and say they will start using them every time they travel now that they know about them.
Of course, due to the economy, there may be a dip in numbers for those that are not well run/managed.
Would you be open to an audit of a STR I'm in the process of acquiring? Looking to do everything I can to boost occupancy and get set up for the busy season during these next slow months (Jan-May).
Airdna predicts revenue will decline -1.6%, not unlike the greater economy perhaps.
I really doubt Airdna's methodology as it aggregates all listings, but unlike Zillow, I can't verify the data set manually.
What I want to see is what's average Airbnb future booking for the next 30 days from a set configuration of hosts.
One thing that I do agree, it seems the Airbnb booking is more solid for beachfront.
OMG I just checked even Sedona's Airbnb > $300/day doesn't have many January/February/March bookings, less than 40% filled.
There is higher occupancy for a $100/day room.
Sedona itself has 1K STR, and Phoenix has 1K STR. Totally saturated. I'm also aware visitor to AZ has been declining since 2017.
Your Comment: "Phoenix has 1K STR"
I'm not sure if you mean Phoenix in particular or the Phoenix metro area, but Scottsdale alone has over 4,000 STRs in south Scottsdale and over 2,000 STRs in north Scottsdale. And yes, that makes things a bit crowded.
Phoenix is showing 5,576 STRs
holy cow .... so it has nothing to do with the recession I guess, but it's more of a saturated market with declined visitors.
Phoenix is showing 5,576 STRs
holy cow .... so it has nothing to do with the recession I guess, but it's more of a saturated market with declined visitors.