BiggerPockets Real Estate Podcast - 835: BiggerNews: How Hosts Are Making More Money Even As Airbnb Demand Drops w/Jamie Lane

Episode Date: October 24, 2023

Earlier this year, many Airbnb hosts expected the short-term rental market to fall off a cliff. With the threat of an economic recession, travel spending was supposed to crater, and with it, a slew of Airbnb failures. But that never happened. While demand did drop, supply increased, and daily rate growth eventually fell flat, there was no “Airbnbust” that so many doomsayers predicted. But, with another recession risk looking more real, are hosts still safe? We brought AirDNA’s Jamie Lane back to give his take on whether or not a short-term rental crash could happen this year or next. But that’s not all; Jamie also goes over what top hosts are doing NOW to increase their revenue and keep their businesses afloat even as rates come off their post-pandemic highs. Plus, what’s happening globally as a strong US dollar scares away would-be international travelers. If you run an Airbnb, this is data you must pay attention to. We’ll review which short-term rental markets are in danger, the amenities that will explode your occupancy, what to do when regulations get introduced in your city, and how to prepare if a recession cuts into Americans’ travel spending. In This Episode We Cover: The “Airbnbust” that never happened and why the short-term rental market held up Supply, demand, and why average daily rates are starting to fall across the industry Airbnb bans and short-term rental regulations that could immediately impact your business Global Airbnbs and why international travelers are steering clear of vacationing in the US Fires, floods, hurricanes, and other natural disasters threatening lives and Airbnb businesses Jamie’s advice on getting your first Airbnb and how to find a market that will last And So Much More! Links from the Show Find an Agent Find a Lender BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast BiggerPockets Merch Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts Get More Deals Done with The BiggerPockets Investing Tools Find a BiggerPockets Real Estate Meetup in Your Area Rob's BiggerPockets Profile Rob's Instagram Rob's TikTok Rob's Twitter Rob's YouTube Tony's BiggerPockets Profile Tony's Instagram Hear Our Last Episode with Jamie Hear More from Tony on the “Real Estate Rookie Podcast” Use the BiggerPockets Airbnb Calculator Try AirDNA Today Attend Host Con with Rob Connect with Jamie: Jamie’s LinkedIn Jamie’s Twitter Jamie’s Podcast Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-835 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets podcast show, 835. Yeah, that was definitely one of the predictions that we expected to come in for 2023 and to be a tailwind for demand. But for large city urban areas, like they're still seeing some of the slowest demand growth across the country. And those markets are really highly dependent on international travelers. So, and it's really still a function of the strength of the dollar. And it's still, the dollar is still really strong. We had expected it to weaken some as we got towards the summer travel season. And that didn't happen.

Welcome back, everyone. Every week bringing you stories, how-toes, and the answers you need in order to make smart real estate decisions now in the current market and in the future markets. And today we are taking over bigger news. So move aside, Dave Meyer, because it's me, Rob Abasolo and my good friend, Tony Robinson. Tony, how you doing, man? I'm doing good, Rob. It's always good when we get to share the mic together, man. You know, our producers call this the power couple. And I'm just going to, I'm going to embrace that. I'm going to embrace that title, man. Yeah, we got a good conversation seat up for today, Rob. We're talking to none other than Jamie Lane. And Jamie's official title is

SVP of analytics. And he's the chief economist for AirDNA. And this guy is just like an encyclopedia of all things, Airbnb. So every time we get to chat with them, I totally love it. Rob and I go over. What about those Airbnb bust rumors, are they real? How did Jamie's predictions from when we interviewed him back on episode 712 hold up? And what markets are on track for growth this year? Yeah, we're also going to be covering how you can stay one step ahead and hack your growth in the ever-changing market. Look, a lot of stuff has changed since he came on the show back in January. And he's just giving us good insights on really how to look at your overall short-term rental investment. And he talked about how investors should be looking at their investments in the long term, which makes a lot of sense.

So even if you're not in the short-term rental game, I do want to say if you're a midterm or a long-term rental investor, keep listening to get ahead of how new short-term rental regulations might impact your market. And we're also going to be talking about Jamie's predictions for the overall economy or potential recession and everything in between. But before we get into it, we're going to do a quick tip brought to you by our good friend, Tony Robinson. Oh, we are. Okay. All right. Quick tip number one, head over to bigger pockets.com. Quick tip number one, head over to biggerpockus.com slash tools. You guys will find an Airbnb or short-term into calculator that's there. It's a free tool to help you figure out how much money your

property could earn on Airbnb. And second quick tip, I want you guys all to go to Rob's upcoming event. HostCon. Rob, given the details, where can they go? How can they find out more about that? Wow, you can go to hostcon.com and it's October 28 through the 30th. It's right after BPCon. So I'm going to meet all of you there. And then we'll migrate over to Houston, Texas, to, yeah, to hear from some, a lot of the people we've heard on the podcast, Pace Morby, Avery Carl, would have been Tony, but you're having a baby, but it's all right. You'll catch the next one. Yeah, I'll be there in spirit. You will, you will. Managing properties can feel like a full-on circus. You're juggling vendors, tracking payments, chasing approvals across multiple properties,

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That's A-V-A-I-L-C-O-Bigger Pockets. All right, well, let's get into it. Jamie Lane, welcome back to the show. Glad to have you. Thank you so much for having me back. You know, you brought up last time, just like right before this, that the last time you were on the show was actually Tony and I's first duo together on the Bigger Pockets podcast. Yeah, I was so happy that I could have been the reason to bring you guys together. And now we get to chat again.

It's been, what, nine or ten months since we chatted last. Yeah. Yeah. That's crazy. That's crazy. Well, you know, we know you, and it's great to have you back. But can you tell all the new listeners a little about yourself for those of the listeners. the listeners that didn't catch the episode about nine months ago? Yeah, so I work at AirDNA.

We are a short-term rental and data analytics company. I am the chief economist and SVP of analytics at AirDNA. And it's sort of my job to dig into the data and help interpret what's happening in our industry and make sure everyone sort of stays informed on how the industry is performing. How do we expect it to perform going forward? So you guys and I'll plan your next investments, figure out your strategy, and hopefully make good investments going forward. Like I said, glad to have you back, man. I think the last time you sat down with us was the start of the year and the Airbnb bust rumors were flying and it was doom and gloom, sky is falling. You came in and you broke down the data on short-term rental so our listeners

could keep their edge. And I think we gave a lot of good useful data for everybody. I think the market now is a little different. And we'd love to have your insights again. So if it's cool with you, let's get into it and sort of talk about the, the actual, like the general pulse for the short-term market in 2023. Yeah. So when we talked last, and we were calling for a recession in 2023, and I think I was a little bearish on the outlook for the year ahead. And we haven't had a recession.

It's actually held up pretty strong on both the economy and the short-term rental industry. And it's part of the reasons why we actually talk about multiple scenarios when we forecast. So we have our baseline, we have our upside and downside. And so we had an upside forecast that essentially called for 13% demand growth. And it's ended up about 11%. And our baseline was below that about 9%. So I've actually felt really good of how the years played out. It's outperformed our expectations. The economies outperformed our expectations. We're still at, I mean, three and a half percent unemployment, we're adding 150, 200,000 jobs every month. And that's sort of, I mean, the key metric for me when I look at the economy is what's happening in the job market.

Because if people have jobs, they're going to keep traveling. And that's what we've been seeing. So our outlook did call for some weakness this year. as of the beginning year, we're expecting RevPAR, that's revenue per available rental, to be down about 1.5% rates are ADRs up about 1.5% and that implicitly means occupancy is going to be down 3%. And that's what happened. That essentially has imperfectly pegged what the industry has performed, how the industry's performed through October. So not great, given that everyone's earning a little bit less money this year, but not a

catastrophic collapse in revenue, maybe some of the things we've been hearing on Twitter these past few months. Yeah, there was a very viral tweet that was like, Phoenix and Austin are they're half down and something like that. I believe you responded to it. Yeah. Did you guys see that tweet? Did people do that we did at you? Yeah.

Yeah. Yeah. All the naysayers and haters were like so quick to jump on that one. Yeah. We ended up doing a whole YouTube video as a response to that tweet also. So there's a lot of folks that were riled up by that one. Well, let me ask you this, Jamie, because I believe, and refresh me. I mean, I don't expect you to remember exactly what happened back in January. But I thought there was some trend where maybe occupancy was down, but ADR. which is average daily rate was up. Was that what it was back in January?

Yeah. And that's what we're seeing in January. And that's continued throughout the year. So for the first and through August, so back up, we break up the U.S. into a lot of different markets. There's 265 markets for the country. And of those 265, 218 of them have seen declassive. occupancies through August.

So that, and essentially everywhere is seeing declines. Nationally, we're seeing about an essentially flat ADR, so no one is really increasing rates. But how that breaks out among the markets is just over half of them are seeing 80-R declines, or you're not able to charge as much for the same property this year as you were last year. You're getting a little bit less revenue per night. And that's pushing and resulting in a weaker, weaker rev par. So we're at the beginning of January, we're seeing slightly higher rates. Now rates have clearly gone into the flat to negative realm.

Jamie, I want to just touch on something really quickly because there's a lot of debate, not just as real estate investors, but just as like people in the United States and really, I guess, across the globe about what exactly is. is a recession. And I just want to sidebar here quickly because I think it's an important thing to call out because you you have this consensus idea that a recession is two consecutive quarters of declining GDP, which has happened. But there's a more, you know, educate me and the rest of the listeners here, but there's a more formal education of what an actual recession is. Can you just like talk about the nuances? Like, why are we not already in a recession even though we've had two

quarters of declining GDP? Yeah. So that two quarters of declining GDP, that's like a rule of of thumb that people are sort of taught in high school, but it's not actually how we define recessions. And there's this whole economic board, the National Bureau of Economic Analysis, and they actually look at the data and decide whether or not we're a recession or not. It's mostly like PhD economists. And the definition gets into that we have to see broad-based economic decline. And what we saw last year with the two consecutive quarters was not a broad-based economic decline.

We saw some weird things happening with inventories around the pandemic. And we're at record low unemployment. We're seeing 300,000 new jobs being added every month. We're seeing five, six percent increases in wages each month. We are in no ways in a recession. by really any different way you define it. There are certain aspects of the economy that might have been in recession. Like manufacturing tech industry saw a really strong pullback and actually saw some layoffs.

But in terms of overall economic decline, we weren't there. And even in the real estate industry, and with rising interest rates and sort of a pullback in transactions, we've seen quite a few real estate companies go under because of the lack of transactions, but it is in no way as sort of a broad-based economic decline. Interesting. So are you relatively, do you have a POV, a point of view on what the next year or two looks like in terms of recession? Like, do you think it's looming? Like, is there something big coming up? Or do you think we're just going to like kind of tell us everything? No, I'm just kidding. Do you think we're going to kind of hold this pace? Well, because the, and Jamie, if I can just add one one piece of that, right?

because the goal of the Fed, what you keep hearing is that they want this, quote, unquote, soft landing, where they're able to tame inflation without causing massive unemployment. But, I mean, there's like some things happening. You have student loans that are kicking back in October 1st. There's the strike that's going on, this potential government shut down. So, like, with all these things happening, I guess, to Rob's point, like, do you think that soft landing is even possible? Yeah. And it's still possible.

It's still highly likely that we go into recession. over the next year. And it is, and with what the feds had to do in terms of raising interest rates so high, so quickly, and there's just such a high likelihood that something could break. And then you add on top of that, all those things that you mentioned, the government shutdown, which more than likely could happen. And we're recording here at the end of September and at the end of the week, the government could shut down that. Now, expectations are that that's a two or three week shutdown. If it, pushes through the end of the year, that could have a meaningful impact and overall economic

output. To the short-term rental industry, too, if you've got a rental in and around a national park, that national park is more than likely going to be shut down. And that could really impact the earnings through fall. So if you think, like, you've got a property in Gatlinburg, and the biggest driver to that market is people going to visit the national park seeing lease change. Like, and that could that could have an impact on that market. And then I'm resuming student loan payments, sort of impacting consumer spending, the UAW strike, actor-writer strike, impacting specific markets like LA and Atlanta. Like all these things have both direct impacts to the economy and our industry. Wow. Yeah, I hadn't really considered that. But that's so true because national parks I've always felt

were sort of protected in the sense that I call them Mother Nature's Disneyland, right? Like you don't have to market the smokies. You don't. don't have to market. Joshua Tree, you don't have to make a billboard for the Grand Canyon. People are going to go by the millions. But yes, if they shut down due to government regulation, that's going to hurt a lot of hosts. So maybe that changes some of the POVs on the government shutdown because I see both sides of it pretty much every single day at this point. Now that we have a general understanding of sort of where the economy stands, I sort of want to punch in a little bit and talk more on the municipal or even on the state level, because

we're seeing a lot of regulations come in. I'm sure you've heard about Dallas and in New York, all the big bands. And that is definitely shaking up the short-term rental market for a lot of those operators. Which markets are being most impacted by regulations and what impacts are you seeing? Yeah. It's funny how that's now turned in to that conversation that you have with your cab driver of like when they ask you what you do. And I say, I like analyze the short-term rental industry. they're like, oh, regulations must be really impacting you guys. And it's true. The New York regulation has really sort of brought it into the forefront of essentially a de facto ban on Airbnb.

As the beginning of the month, when it started going into effect, we saw almost an 80% decline in short-term rental listings in New York. And that was one of Airbnb's biggest markets essentially decimated. Now, the listings didn't leave. Like, they're not off of Airbnb. It's essentially people moving from a short-term rental strategy to a mid-to-larnt terminal strategy. So they've changed their minimum stay requirements from short-term stays to 30-plus night stays or longer, which we'll see how much demand there is to support that

strategy for 17,000 listings, all moving to long-term stays at once. I suspect that there's quite a bit of demand. to support it, and we see that in a lot of other cities. But that is playing out, and we saw it play out or will play out in Dallas. We're seeing that change or a part of that change in Atlanta. We've seen it in other large cities like Los Angeles, Boston, Chicago that have put in into place pretty onerous laws going after short-term rentals. But on the flip side, there's also been significant pushback from the host community, sort of banning together, working with the local municipalities. We saw that in Atlanta, essentially getting the ordinance going to

affect delayed and delayed and delayed and delayed. We saw, there was a lawsuit on the Austin laws back in 2016 that just sort of came to fruition, where they overturned the ban on short-term rentals. And I'm distinctly saying that there cannot be a distinction between different kinds of homeowners and how they can use their property. This is a huge one. That was a big one. I saw that article came out because Austin has been, they've never really enforced it. And there were ways to get the permits and everything. But yeah, I saw an article. It was back at the beginning of August that said federal court strikes down Austin short term rental laws and basically called them unconstitutional. And so it's interesting because it's like if that's a federal court striking down in Austin one,

I mean, how does that actually affect the rest of the country? Yeah. And even like you think about Dallas, right? Dallas is effectively banned single family short term intels also. And now you have this neighboring major city. It's like how does that impact Dallas's short term? Exactly. And all these other places.

Yeah. But, you know, one thing I'm curious. And Rob, I want to get your insights on this to you, right? Because what I've shared with people is that regulations are coming. Like it's a definitive thing. It's just how is each city and municipality going to choose to regulate short-term rentals? But they are coming. So my focus has always been on investing in true vacation markets where the primary economic driver is vacation and tourism because I feel like there's a little bit more insulation there. And if you do choose to go into markets that are more

residential, call them, you know, suburban cities, major metros, my thought has always been, if I'm going to go into that market, I need to make sure that either one of two things are true. Either first, I can still cash flow on this deal as either a midterm or a long-term rental. Or second, it should be a strategy that I can get out of relatively easily, which is like arbitrage or co-hosting. So like we're actively, we're launching three units in Dallas next week through arbitrage. But I'm not worried about those because, A, it's arbitrage, right? I can get out of those with the, you know, breaking the lease and walking away. Or B, I can flip them over to midterm and they still make sense.

So, Rob, what's your take on that, man? Like, a lot of people are afraid of regulations. Like, what's your advice to folks want to navigate that the right way? Totally. I mean, there is a lot to cover there. I think most of the time I'm trying to find a city or a municipality that has some level of regulations because at least they've had the conversation, right? And we know that they've already voted on it.

And, you know, if there's a process like getting a permit that's been put in place, I usually feel a lot better than that, better about that than going to a place that's like, well, what is that? I don't know. You can just list it. And then one day it gets, yeah, exactly, which, you know, that's how it was back back when I started in like 2017 or whatever. But I, I have really kind of accidentally stumbled on to the midterm market back like during the pandemic because everything shut down and then travel nurses needed to stay at my place in L.A. And so I was like, yeah, sure, why not? And then they stayed and I never heard from them. They were mega clean and I made just about as much money as short terms. And so I kind of fell in love with that from the get go. I would say most of the time, you're going to do yourself a disservice if you're not trying to actively create a hybrid midterm rental and short-term rental strategy. My personal preference, and again, this isn't going to work in vacation rental markets like Gatlinburg. But if I could mostly have a midterm rental strategy and fill in the gaps with short-term rentals, oh man, I would do that all day. Really what it is,

it's mostly a short-term rental, and then mid-term rentals come in and I have to work around that. So I honestly think that 2023, for any host that's scared of regulations, they're coming, but you really do have to actively be working on those contracts, you know, with housing companies and relocation specialists and travel agencies, nursing, you know, nursing relocation specialists, all that kind of stuff. You want to be working on your rapport with them, in your relationships with them so that, yeah, if a regulation hits, you don't have to shut down your business. You can just pivot straight into midterm rental. Jamie, one last follow up for me on the on the regulation piece, as as some of these cities become more regulated, what do you think

the impact will be on like actual property values of short-term rentals in those markets? Like, do you think that presents an opportunity for short-term rental hosts to get into this game? Or is it more of a disadvantage? Yeah. So there's actually been a lot of academic research on the impact on property values and what regulation and means for it. And what of a lot of it shows is that the option, to be able to do short-term rentals is very valuable when you go to resell the home. So if you're in a neighborhood, let's say that has an HOA that you vote as your neighborhood to restrict short-term rentals in that neighborhood, you're going to severely restrict the value

of homes in that neighborhood compared to the rest of the market because now future buyers know that they cannot sort of, even if they never even thought about doing short-term rentals, but the fact that they couldn't now sort of reduces the option value there that they could go and do it in the future. So I think that's one of the downstream implications of these laws going into effect is that you can sort of overall reduce home values in specific areas of cities and specific neighborhoods with restrictions like that going into place. Did you know, you can go on vacation and actually earn money? Because while you're out exploring new horizons, your home is sitting there, dark, silent, and wildly underemployed.

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like, that would be a force wave of selling if they really limited short-term rentals in those markets. Big time. Interestingly, yeah, there's so many people in those markets that, like, want the short-term rentals out. But the market, those specific markets, the economy is propped up by the short-term rentals, not just by occupancy taxes, transient taxes, all that stuff, but also like the actual employment of, you know, the Airbnb Avengers, right? Like pest control, pool maintenance, cleaners, handymen contractors, all of them make a significant portion of their livelihood from the short-term rental side of things. So I don't know what would happen, but I hope to never find out. We actually did a study looking at both short-term rental and hotel revenue for,

at different markets. And Joshua Tree was number three in terms of short-term rental revenue compared to hotel revenue where there's six times more revenue being generated by short-term rentals in that market than hotels. And it just shows like a market that is so dependent on tourism. And it's almost, I'm six X coming from short-term rentals to the hotels. So if short-term rentals went away, it would just decimate that market. Jamie, what was number one and two? You said Josh True was number three. Yeah, so number one was Broken Bow Lake, a great market in Oklahoma. Yeah. Okay. And then number two was Santa Rosa, Rosemary Beach area, so 30A in Florida. Wow. Man, that's that's super interesting. So, okay, can we talk a little bit about international short-term rentals as well?

because I think the last time we had you on the hypothesis or the thesis in general was that the pandemic basically slowed down a ton of international traffic and we were going to start seeing the floodgates reopen and seeing a lot more international travelers coming to the U.S. How has that held up? Where are we at in that specific regard? Yeah, so I was totally wrong on that one. Sorry, I wish I could have given you a softball. Yeah, that was definitely one of the predictions that we expected to come in for 2023 and to be a tailwind for demand. But for large city urban areas, they're still seeing some of the slowest demand growth across the country. And those markets are really highly dependent on international travelers. So you think areas like Miami, Boston, San Francisco,

Even going out to Oahu, as much as 40% of demand is coming from international travelers into those markets and staying in short-term rentals. And it's really still a function of the strength of the dollar. And it's still, the dollar is still really strong. We had expected it to weaken some as we got towards the summer travel season. And that didn't happen. We have seen overall international travel being really strong, but it's just everyone leaving the U.S. and traveling within Europe. I mean, that makes sense.

A lot of trips were canceled. A lot of marriages postponed, a lot of anniversary trip. I mean, there's so much. I think this is sort of, it's going to be a trickle effect of people that their lives carried on. They had kids. Everything is delayed. You know, I haven't traveled internationally, really, since the pen.

And I plan on going international as soon as I can. As soon as my kids are just a little older because being on a plan with a one in a two-year-old or a two- and a three-year-old is very difficult. But, you know, I want to travel a lot internationally. So it does make sense that a lot of people in the U.S. are sort of going to these destinations or these dream vacations that they had to push pause on. Yeah. And we're actually seeing that impact now in the data where some weakness and demand and occupancy that we're seeing is those destinations that people were maybe going to because it was a domestic destination.

Like, I live in Atlanta. Like, everyone was driving down to 30A in 2020, 2021. Now, like, friends, they're flying to Nice and Khan and Greece and they're not driving down a 30A anymore. And you're definitely seeing some weakness in that market because of that. Jamie, let me ask, right? So I don't own anything internationally. But do you think that this kind of exodus of American travelers overseas presents an

opportunity for folks' stateside to look internationally? And if so, maybe what are, and I know the, you know, obviously the world's a big place. But if so, like, what are some international markets that you think? filler good spots for folks to get started in. Yeah. There's great options out there. It is a little bit more difficult to sort of navigate sort of deploying capital in different countries. It's not like just buying a house in North Carolina. But there are opportunities. Demand is now fully back across Europe. It's playing into different areas just like in the U.S. where some cities are still and really impacted negatively.

They're seeing even more regulation than we're seeing in the U.S., especially in some of those major cities. So like in Amsterdam, there's 80% fewer listings now than pre-pandemic, and a big piece of that is restriction. So Dave Meyer is not going to be getting a short-term rental in Amsterdam, though it is a great location to travel to. So there's all the same sort of dynamics you have to work with in the U.S. of seasonality, ibe it more so, more so.

Essentially all of Europe takes off August. There's some demand in July from Americans, but it is very much a July and August dominated market where if you're not getting the majority of your revenue during those two months, and you're not going to be profitable. It's like owning a short-term rental in Maine or Cape Cod. It's like there's a very short season. You have to optimize for that short season. So it's a little different than some of the markets.

Maybe we're used to investing in. Yeah, it's definitely a different territory. Tony, what's your appetite for investing internationally? Is that something that you want to do? Is that something you dream to do? Absolutely, man. Like I love Costa Rica. Sarah, my wife, she's like a Mexican citizen.

So we always think about buying something in Tulum or, Plato Carmen. So I would love to go international. But to your point, Jamie, I just haven't taken the time to really figure out the financing portion of it, like how to make that piece work. But once I do, I would love to do something out there. Just buy it all cash, dude. Duh. Easier said than done, huh? Yeah, a lot of people ask me. And everyone always asked me with the hope of being like, I love it. Let's do it. And I'm always like, I mean, it's hard enough to run a business in the U.S. I mean, long distance investing, you can build your dream team. I believe all that. But, I have other places in the U.S. that I would prefer to buy anyways. I'll just rent

Airbnb's if I ever want to travel. But that's really interesting. You say that, Jamie, because it, yeah, I don't really think about the risks. I think, or not the risks, but the risks of regulation in the U.S. It's kind of hard to keep up with regulation in the U.S. because there's so many cities and counties and neighborhoods that restrict differently. You go to an entirely different set of countries and it's like, yeah, you don't really know what you're getting into unless you're doing a ton of research. So let's segue a little bit here because we're talking to international. We talked economy. We talked regulation in general. Now, so we're going to talk about another component of the short-term rental market, and that's natural disasters and how they've impacted short-term

rentals this year because that's not something we really cover all that often on the show. Yeah. And it's, I think, a growing and growing risk. We've seen it really specifically in certain destinations this year. So the fires and fires in Maui were devastating. We saw it essentially wipe out entire towns. We've seen hurricanes over the past few years. So we saw Cape Coral, Fort Myers last year, Sanibel Island, like I really get hit hard. We saw infrastructure being knocked out the bridges there. We couldn't even access your short-term rental if it even still existed. We saw more hurricanes hit Florida and we're still in the middle of hurricane season. So I know telling what's going to happen. You're seeing insurance rates continue to go up. So even if you

have a short-term rental in these markets, like one, can you insure a new investment? And then secondarily, is your existing investment, are you going to be able to continue to get insurance on it? So there's more and more risk happening. Back through the years, we saw fires in Gatlinburg. We saw fires in Tahoe. We've seen more wind events like tornadoes sort of hit the Midwest, I think, than any other recent year. So all sorts of things. My parents have four short terminals in Maine, and they got impacted by the hurricane that came up there that caused, I think,

think two weeks to essentially be canceled out because of guests didn't feel comfortable getting up there with the hurricane coming. So it definitely impacts different markets in different ways. And I think most importantly for investors is getting a sense of the type of markets you're going in. What is that risk? And if you were going to be shut down for a month or two or and you think about people now avoiding traveling to Maui, even though most of the island is up and running, and they're still and we saw, I think, 30% decline in occupancy in August. We're seeing another 20% through the first half of September. So even though the islands are telling people tourists, please come, and people are avoiding

that area just because and any number reasons. Yeah. Yeah, I mean, I think perception is probably going to, I think whether or not it's okay to travel there, like, I know that Hawaii was basically, the governor was like, please keep coming. But I think a lot of people in their head are probably like, oh, I'm not going to go. obviously everything is closed or whatever. So I think that'll probably be a lasting effect. Yeah, I want to transition, Jamie, if that's okay, to talk a little bit more just about like supply and demand. You've mentioned before that supply has kind of slowed in terms of the rate of increase,

right? Post-pandemic, you saw a massive boom and the number of people that were listing their properties in Airbnb. And it seems like that slowed down a little bit. Demand, though, seems to continue to be kind of growing at a healthy pace as well. So we're waiting for that balance between supply and demand. How do you, I guess let me take a set back first. My first question is, how do you know if a market is quote unquote saturated? Like, how do you know if a market has too many Airbnbs to support the demand in that market? What data point should I be looking at? Where inside of AirDNA can I even go to to see that? Yeah. And something I, and saturation point is all going to be around occupancy, right? So are there, is there another? Is there another?

demand to support the listings that are out there in a profitable way. So when I'm thinking about saturation and looking at both year-over-year change in occupancy, so is my, is the market that I'm in sort of absorbing the supply that has come into that market? If it's absorbing it, we're going to see occupancy sort of maintaining or increasing. If it's not able to absorb it fully, and you're going to occupancy decreasing. Now, one year of occupancy decreasing is not a market sort of, I mean, oversaturated. Most properties take some time to ramp up. And it takes time to get bookings. It takes time to, I and sort of figure out your niche in the market. Like, I tend to not like to look at this on a very short term basis of like, oh, no, we saw one month

of occupancy down four, five, ten percent, like this market's way oversaturated. Like, you've got to be looking at it over time. So I do like to look at it on a sort of 12-month average. And then also looking at it relative to prior years. So 2018, 2019, is indexing off the high of 2021. I think we talked about this last time is not fair. And maybe if you underwrote it in 2021 and had that expectations that are continue. That's a different conversation. But in terms of market saturation, like there's a lot of

demand coming into this industry. There's a lot more listings that need to be able to come in to support the growing demand. And I'd argue that very few markets are actually oversaturated. It might take one or two years of slow supply growth, which we're seeing now, for that supply to get fully absorbed. But if you're investing for a five, 10-year hold, like, just because there's sort of a weak patch in occupancy today, doesn't mean that that's going to not be a great investment long term. Wow. That's interesting. I feel like most of the short-term rental peeps, like we sort of, you know, we expect it to kind of hit when we list, right? So is the case that, you know, I would say, I guess, underwrite conservatively and expect growth from there? Because it does

seem like if you're telling someone, hey, yeah, get into the short-term rental, but it's going to take you two to three years to really start, you know, hitting good revenue. That's an interesting conversation to have because I think a lot of people just wouldn't do it. Yeah. And when I'm helping people underwrite properties, and I maybe don't do a three-year ramp, but I definitely do a two-year ramp that it's going to take you one year to figure out your market, to figure out, to get good reviews. Reviews definitely help get bookings. And it's going to take you a few months, six months to get a bunch of good reviews. So you can start sort of raising rates and really profit maximizing that property. And I came from the hotel industry, 10 years helping people

underwrite hotel investments. And there we typically did a three year ramp of getting occupancy from when you sort of first open the property to when you're going to stabilize that in terms of occupancy. It does take time to sort of grow into that market. That makes sense. I mean, our Scottsdale property, we bought one and it opened up a little slower than we had thought. A year in, everything is up pretty considerably. I don't, I mean, the reviews I'm sure have helped. We've also added amenities like a pickleball court. And that pickleball court has increased revenues by like, I don't know, 60 to 80,000 at this point.

So it's paid for itself like two or three times at this point. So I think it's the profit maximizing that you're talking about. That's really the thing that I'm focusing. on with my current portfolio where a lot of people keep asking themselves, how do I get into my next property after they've purchased one? And what I'm trying to steer people towards is instead of trying to get into your next property, how can you maximize the revenue of the current property that you have or the portfolio that you have? Because if you can invest, you know, let's say $20,000 back into your property and increase your revenue by $10,000, that's a 50% ROI. That's so much better than what you could

get if you just go and buy a new property. So this year, I'm trying to still buy just because I'd like to consistently purchase, but really I'm putting a large majority of my capital back into my portfolio, which gets me a little impatient because all I want to do is buy. But I do think there is a case to be made for reinvesting back into the property. Tony, have you guys gone in and ever optimize a property with amenities or have you added anything after the fact? Absolutely, man. We're actually, I'm going to Joshua Tree on Thursday because our newest listing, we're adding like a really cool in-ground pool with like a rock slide and just really trying to beef up the amenities because I feel like we're out of space right now where because so many new hosts have come onto the platform, the

table stakes have increased, right? And what it takes to be a good listing today is significantly higher than what it took to be a good listing in 2019, 2020, even 2021. So we've, like you said, Rob, We haven't purchased a ton this year, but we've been going back to our entire portfolio, adding new game rooms, adding the pools, adding hot tubs, adding whatever we can to make those listings stand out. And it's crazy, man. We're seeing, like, I have three properties in 29 palms, which is the city adjacent to Joshua Tree. And the one property where we invest it a lot into like the game room is doing three X the monthly revenue of the other two properties that don't, which is crazy. And it's a smallest one. So it really just goes to prove,

the point that reinvesting into your current properties might be a better investment like you said, Rob. Definitely. What was the amenity that you said you added to the 29 Palm ones? It was just a really cool game room. We've got a really cool game room as an extension of the house. Yeah, yeah, for sure. I built a epic treehouse deck at my Gatlinburg property. I built a mini golf course in my backyard in Crystal Beach. I did a pickleball on Scottsdale. I'm adding a pickleball court to a property in Austin, Texas right now. I'm probably going to add pickleball to my tiny house in Joshua Tree. So for me, it's, again, it does suck to kind of not be buying, but I do think it is a lot, it's going to be a much better return for me overall. So with that, Jamie, can you just tell us a

little bit, I mean, since we're kind of talking about Joshua Tree, how have established tourist markets fared this year? Are they holding strong? Is it been pretty consistent compared to some of the other areas out there, like a metropolitan area? Yeah. So there's definitely more weakness there in some of the established destination markets. And I thought it'd be fun to sort of do an exercise where we like walk through what we were seeing in one of the markets. And I actually pulled out Gatlinburg pigeon forage area. Just to give you a sense of it was also one of the ones sort of called out in that sort of doom tweet by the doom squad of like revenues dropping 40%. So like in the Galingberg Pigeon Ford market, year over year,

we're showing Rev PAR down about 7.5%. But that, I mean, these markets, especially market like Gatenberg, where supplies growing 20%, you have churned, listings leaving. Like, it's really hard to get a sense of like, what is the average host actually increasing or decreasing the revenue? So we sort of took it down further. So there's 23,000 listings with at least one. night sold in Gatlinburg over the past year.

Only 12,000 of those were available full-time, so 270 nights of the year. And then only 7,500 of those were available both full-time this year and last year. So a small subset of the 22, 23,000 listings out there. And when we look at just those 7,500, overall Revpar was down about 9%. and it was down most at the budget and luxury end. So the middle tiers were sort of held up the best. And what I thought was really interesting was for individual hosts. So those with just like one to five properties, Revpar was only down 7%,

where the large property managers in that market saw 13% decline in RevFar. Interesting. Why do you think that is, Jamie, just out of curiosity. Yeah. So I had that same question. So large property managers did such a better job of increasing occupancy in 2021 and 2022 and raising rates. And now they're seeing bigger declines.

But if you look at what they're earning relative to 2019, they're still well outpacing individual hosts. So it tells me that most of those individual hosts are not using revenue management software. They weren't able and didn't push rates when the times are good. Now they're not seeing as much declines when the times aren't as good, but they're still not earning as much as some of the larger PMs are in that market. Yeah. And, Jimmy, you hit on a really interesting point because I've kind of, in my heart, felt that

that was part of what's driving some of the decreases, is that because so many of these hosts are new and they're not leveraging dynamic pricing tools and they don't understand, what their average booking window is in their market. Like if they're not fully booked out, you know, every 30 days, they're just like dramatically dropping their prices. And now it's impacting the entire market because now you have guests that are able to choose, you know, a $60 listing that's brand new versus the more mature host is charging $100 per night.

So like I'm literally launching a property management company right now because I feel that there are so many hosts that don't know what they're doing, that overall they're pulling down the revenue potential for the market. So that's why Rob and I are both so focused on. educating people about how to do this the right way, because if more people understand the basics of dynamic pricing, how to do it correctly, then as a host community, we all end up winning. It's always so annoying, dude, when you're combing out of property in a place like Gatlinburg and you're looking at the neighborhood and this person has this insane 20,000 square foot

place with like a helicopter pad and it's like $70. And it's like, what are you doing, man? What are you doing? You're ruining this for us. Well, Jamie, I want to ask you one last question before we start to wrap things up here. And for all of our listeners that are thinking of buying that first Airbnb, that first short-term rental right now at the tail end of 20203, what would your advice be to that person? One, it's make sure you're leveraging data to find the right market to invest in. I don't love the sort of old adage of like invest in a market that you know that you grew up going to. like find markets that make sense to invest in because they may not be the right market. It might not have been in the same market as a year ago, two years ago.

And the sort of cost basis of investing in homes right now has shifted dramatically over the past five years. And then the opportunity to grow revenues in these different markets has sort of shifted dramatically. And then so one, I do a lot of research on finding the market. And then I think some of the conversations we've had on amenities are going to be really important for the type of property you can invest in going forward is don't just look for current cash flow. Look for that property that you can actually evolve and sort of grow into a good long-term investment. I try to help people think longer term like five to 10 years on that investment.

like Tony, that property you're going to in Joshua Tree, like, if you didn't have the ability to put in that in-ground pool, like, that would totally change that investment thesis for that property, right? Yeah, absolutely. Sure. Yeah, that makes a ton of sense, man. So for people that, you know, if you could give some advice on where people could find some of these markets, right? I agree, like going to a place where you grew up, not necessarily. I do like the familiarity. Oh, gosh.

Let's not try this on air. familiar. How familiar it is. How about that? How about that? How familiar it is? Should not necessarily be the driver for why you buy it. I think that's a way you can do it. But finding good markets that work. I think that's what you're saying. How can people find some of these good markets? Yeah. So thanks for the T-Up. We just re-released AirDNA this past month. And one of the tools is all around market discovery. So you can, I know, look at a list of all markets across the U.S., filter down to the type of investment you're looking in. So if you're looking for in one-bedroom, unique listings, you want to go in on the luxury tier, like, and you want to find markets with the highest occupancy, highest ADRs, highest

investability. We now give you that ability to dig, filter in, find the right comps, rank markets against each other and where you can find those sort of hidden gym markets. We actually did a piece recently where we sort of talked about hidden gym markets. Maybe I'm low percent of property managers, relatively small markets, like 100 to 500 listings, where you could go in and really sort of dominate that market by running a property well. And all that can now be done with the new tool. So you can really customize it, find market.

markets that really sort of fit your investment strategy, your risk tolerance and the type of market sort of mountain, coastal, urban, suburban, and find those type of cities, find those good investment opportunities. Well, awesome, man. Well, thank you so much, Jamie. For people that don't have familiarity into how to find you on the internet. See, I knew I could say it. I knew I just had to think it through a little bit.

How can people find you and connect with you? Yeah, so I'm active on Twitter, Jamie underscore Lane, on LinkedIn. And at AirDNA, I host a podcast called the STR Data Lab, where we talk about data and interview professional managers hosts on the data that they use to run their business. Super cool, man. Well, maybe Tony and I can be guests one day, the power duo, the power couple here in the short-term rental market. Well, awesome, man. Well, thank you so much, man. I do love getting into this and talking about the data with you.

I think this makes me feel really good, honestly, just being armed with the proper data. So we appreciate you coming in and speaking some of these truth bombs. Tony, for anyone that wants to reach out or connect with you, how can they find you online? Yeah. First, a real estate rookie podcast. We put out episodes every Wednesday and Saturday. And then personally, you guys can find me on Instagram at Tony J. Robinson. And if you're on YouTube at the Real Estate Robinsonsons.

Dang, all right, man. That's like three of them. Right. Well, what I'll do? I'll do for. You can find me on YouTube at Raw Built, on Instagram at Rob Built, on MySpace. Rob Built and TikTok on Rob Built. How about that? Well, thank you so much, Jamie. We appreciate it. Tony, thanks for doing this with me, man. It's always fun to share the mic with you. And for everyone at home, if you like this episode, if this inspired you, if this makes you feel better, feel free to go and leave us a review on the Apple podcast platform or wherever you download your podcasts. This is Rob Abbasolo. I'm not going to do the David thing because I know I'll mess it up. But thanks everyone, and we'll catch you on the next episode of Bigger Pockets.

Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calico content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. The content of this podcast is for informational purposes only.

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