If Someone Tells Me “STR’s are dead” One more time I am going to crash out.

I often see people say some version of "Airbnb is dead" or "the market is saturated" and I think thats a really lazy way to look at what is actually happening. Are there STR owners getting crushed right now? Absolutely, and there are definitely markets that got oversupplied, people who bought bad deals at the top, operating costs that went up and way too many owners who thought this was passive income. But that doesnt mean Airbnb stopped working, it means the environment changed and a lot of people were never really as good at this as they thought they were.

The bigger story is real estate got harder basically across the board, and that started with the cost of money changing dramatically. At the beginning of 2021 the average 30 year mortgage rate got down to 2.65%, and now we are back above 6%, which alone completely changes the economics of a deal before we even talk about Airbnb. At the same time 2021 was kind of an insane environment because you had cheap debt, exploding domestic travel, home values ripping and less competition all happening at once. AirDNA reported STR occupancy hit record levels in 2021 and 2022, then the market went through 23 straight months of year over year occupancy declines before that streak finally ended in early 2024, which looks a lot more like normalization than death.

And this is the part I think gets missed, this is not just an STR problem. National multifamily asking rents were up only about 0.2% year over year recently, Austin rents were down around 3.7%, and self storage advertised rents were down about 1.6% year over year. Nobody serious is saying apartments or storage are dead, they are just in a harder part of the cycle and investors have had to adjust. That is basically what is happening with STRs too.

Even regular housing has reset and again, nobody is saying residential real estate as an asset class is over. Realtor.com recently had national median listing prices down about 1.3% year over year, price per square foot down around 1.8%, and 36 of the top 50 metros seeing declines in price per square foot. Austin was one of the biggest examples, with price per square foot down around 8.1% year over year, which is a very real reset from where things were a few years ago. So is Austin real estate dead too? Obviously not, the market changed.

The funny part is demand itself didnt disappear, which is why I think the "Airbnb doesnt work anymore" argument falls apart pretty quickly. AirDNA reported STR demand up 11.4% year over year in May 2024, occupancy up 3.1% and nights booked up 12.7%, and more recent data has shown occupancy getting back to growth again, ADR remaining positive and booking pace improving. So when somebody says Airbnb doesnt work anymore, I always want to ask what exactly are we talking about because people clearly still book them. If what they really mean is you cant buy a random house, furnish it from Wayfair, throw up mediocre photos and make a bunch of money without knowing hospitality or revenue management, then yeah that part might actually be dead and honestly good.

STRs have matured into a real business now and I think thats where a lot of people got caught off guard. You have to understand acquisition, regulations, design, revenue management, operations, guest experience, costs and most importantly why somebody is going to choose your property over all the other options. There also isnt really one “Airbnb market” because a 4 bedroom house in Austin is not the same business as a cabin in Gatlinburg or a condo in Miami. Even two houses a mile apart can perform wildly differently because of bedroom count, amenities, design, parking, outdoor space and demand drivers.

AirDNA has shown how extreme those differences can get around specific demand events too. In some college football markets, game weekends have produced RevPAR 300% to 450%+ higher than non game periods, which shows how useless broad averages can be if you are trying to underwrite one specific deal. So telling me “the Airbnb market averages X” tells me almost nothing because I’m not buying the average, I’m buying one property. The whole job is figuring out whether that specific property has a real reason to win.

And this is probably the part that will annoy some people, but a lot of ****** Airbnbs probably deserve to fail. Bad furniture, ****** towels, terrible mattresses, weak photos, no design, no revenue strategy and an owner who barely manages the thing is not a great business plan. Then revenue comes in below some overly aggressive projection and suddenly Airbnb is the scam, when really they just bought a bad business and operated it badly. The market used to cover those mistakes because appreciation, cheap debt and crazy demand covered a lot of sins, and now it doesnt.

Weirdly thats part of why I still like the opportunity right now because the harder environment is creating better buying situations in some markets. Here in Austin values have reset pretty materially, sellers have less leverage and deals that would have had 20 offers a few years ago can actually be negotiated today. Yes financing sucks compared to 2021, but I would rather buy at a better basis and potentially refinance later than massively overpay just because debt happens to be cheap. You can refinance debt, you cannot refinance what you paid for the property.

I dont think STRs are easier today because they absolutely are not. They are harder, more competitive and you need to be much better at the actual business than you did a few years ago, but “harder” and “dead” are not remotely the same thing. The market matured, the standard got higher and mediocre operators are getting exposed, which I actually think is healthy long term. You can still absolutely crush it, you just cant freeball it anymore.