Airbnb Market Research for Profitable Investments

Diligent Airbnb market research and analysis is at the core of every successful short-term rental investment. While location is important for all real estate investing decisions, it’s absolutely crucial for vacation rentals. The market determines every aspect of the feasibility of an Airbnb business, including the daily rates, the occupancy rate, the rental income, the ROI, and the legality.

In this article, we’ll walk you through the steps of the Airbnb market analysis and research you need to implement for profitable investments. We’ll also look at the best tools to support you throughout the journey. 

Finding an Airbnb Market

The first step in investing in an Airbnb rental property is choosing the right market. With thousands of potential destinations across the US market, you need to conduct careful, data-driven research to locate the best place for your specific needs and aspirations.

The best short-term rental markets have a lot of features in common. For example, they attract numerous domestic and foreign visitors throughout the year, which drives high Airbnb occupancy rates. In addition, they are established markets with active listings which are not oversaturated yet, allowing for good nightly rates and rental revenue. They also offer affordable property prices to push up returns.

This is a lot of information to factor in, which randers the question:

How do you find the best Airbnb markets for investing?

The answer is:

With the help of the Awning Top Markets tool.

What Does the Awning Top Airbnb Markets Tool Do for Investors?

The Top Airbnb Markets tool available on the Awning platform allows investors to find the top locations for investing in short-term rentals for sale at the moment. The tool uses nationwide, up-to-date data from Airbnb as well as Awning’s proprietary algorithms to help investors make data-driven decisions.

There are two main things that Airbnb investors can do with this tool.

First of all, when you open the tool, you get a list of the 100 best Airbnb markets across the entire US. This means the 100 US cities that bring the highest ROI for vacation rentals. You can change the filter to rank the 100 best Airbnb markets based on other important criteria including:

• Highest ROI: This is the most straightforward way to search for profitable markets. However, they might be beyond your budget.
• Highest revenue: With this, you can concentrate your analysis on the locations that’ll make you the most money month after month. But property values are also likely to be high due to the standard of living, so the return might be suboptimal.
• Highest price: These markets might be appropriate for experienced investors with a lot of capital and access to the best Airbnb financing. These locations will benefit from less competition than more affordable places.
• Lowest price: This lists the most affordable Airbnb markets that are good even for beginner inventors.
• Highest number of Airbnbs: This allows you to look for well-established vacation rental markets with multiple opportunities.
• Lowest number of Airbnbs: This helps you focus your Airbnb market research on locations where supply is low and the market is not oversaturated.

Using these sorting features, investors can get a preliminary idea of what markets make sense for their specific budget and aspirations.

The second thing that investors can do with the Awning Top Airbnb Markets Tool is to focus their search on markets with certain features and characteristics.

How Investors Use the Awning Top Airbnb Markets Tool

The best way for Airbnb investors to use the Top Market tool is to start off by setting up their preferred values in the available filters. The tool provides the following options:

• State: You can choose as few or as many states as you’d like to consider for your short-term rental investments. In this way, your Airbnb market research can focus on the states with the most tourists and the best regulations.
• Market size: You can choose between a small market (less than 100 Airbnbs), medium market (100-500 Airbnbs), and large market (more than 500 Airbnbs). You can decide whether you prefer to invest in a market with more supply or less supply of short-term rental listings.
• Average Airbnb price: You can set up the minimum and maximum purchase price that matches your budget and financing options. Both cheap and expensive Airbnb markets have their pros and cons. Lower property prices might enhance the ROI as it’s present in all ROI formulas, but competition might be too fierce. Higher home values result in lower returns, but there will be fewer competitors, making Airbnb investments more feasible. In any case, make sure you don’t exceed your pre-calculated budget as that’s a guaranteed way to fail in real estate.

With the help of these filters, you can customize your Airbnb market research to match your exact situation as an investor. As soon as you set up any or all of the criteria, the list of the 100 top markets that meet these requirements will be updated. Then you can sort it by the filters mentioned in the section above.

Understanding Airbnb Market Data

Using solid Airbnb rental market data is a must for savvy investors. However, there are so many numbers that are not always intuitive and don’t always make sense, especially for beginners. Here we’ll take a look at the Airbnb data and analytics that you need to focus on when performing your vacation rental market analysis.

After you’ve identified a few potential Airbnb markets with the Awning Top Airbnb Markets tool, you can use another Awning feature for the next step of the process: The Airbnb market analysis. The tool is the Awning Airbnb Market Data.

Using the Airbnb Market Data tool on Awning is easy. All you have to do is to enter the name of any of the markets you identified during your initial research. Then, the tool will provide you with all the Airbnb market data that you need to decide if this is the best location for your investments.

What Analytics the Awning Airbnb Market Data Tool Provides

Investors get immediate access to:

• Overview: Awning offers a short description of the general Airbnb investment opportunity at the city level and lists the main factors affecting the vacation rental market.
• ROI: This is the average annual return on investment which active Airbnb hosts are able to achieve in the city. This is an excellent indicator of how good or bad a market is for short-term rental investments. Of course, individual properties might achieve significantly higher or lower results.
• Revenue: This is the average Airbnb rental income which hosts get per year. Rental revenue is one of the main determinants of ROI, together with the property price. By clicking on the Revenue tab in the Awning Airbnb market analysis, investors can see the average income breakdown by rental type (entire home vs private room vs shared room) and the number of bedrooms (from a studio to 5+ bedrooms). Moreover, there is a monthly breakdown of revenue over the past 12 months so that investors can understand vacation rental seasonality in the local Airbnb market.
• Average Airbnb price: This indicates the current average listing price in the city, indicating how affordable the market is. Investors should focus their Airbnb market research on markets within their budget to avoid a foreclosure due to the inability to cover the monthly mortgage payments.
• Market size: This Airbnb data point shows whether a city comprises a small, medium, or large Airbnb market in terms of the number of active listings for rent. A bigger market might signify more opportunities (after all, investors go to the highest ROI), but it also implies more competition from existing hosts.
• Number of Airbnbs: This shows the number of active Airbnb listings in the local market and helps you evaluate exactly how many competitors you’ll face.
• Average daily rate (ADR): The ADR measures the average nightly rate across the entire city. It is calculated as the average of all active listings, which is based on the number of days for which a property is available for rent, not all days in a year. The average daily rate is one of the two factors determining Airbnb revenue, together with occupancy. By clicking on the Rates tab, investors can see the ADR per rental type and by number of bedrooms. They can also check how daily rates change month by month to reflect seasonality in the local Airbnb market. In this way, you can get an idea of when you’ll be able to increase your listing rate to maximize income and when you’ll need to lower it to not lose guests.
• Occupancy: The Airbnb occupancy rate is one of the most important data points when analyzing the potential of a short-term rental market. Along with the ADR, it impacts the rental income that a vacation rental can bring. When doing Airbnb market research and analysis, it’s good to focus on cities with an average occupancy above 50%. The occupancy rate measures how many nights a property is reserved out of the total number of nights for which it is listed for renting by the host. As such, it is the most direct measure of demand. The Occupancy tab on the Awning Airbnb Market Data tool shows the breakdown by rental type and number of bedrooms. Monthly breakdown is also available.
• Listings by bedroom count: This is a visual representation of the distribution of all Airbnb listings by the number of bedrooms. This gives investors an idea of what property size is the most popular in the local Airbnb market.
• Amenities: The amenities section of the Awning Airbnb market analysis focuses on the two most popular and sought after extras on the Airbnb platform: swimming pools and hot tubs. Specifically, it shows how much more rental income listings that have a pool and a hot tub are able to generate per year. This is a good indicator if it’s worth buying a property with these amenities in a particular location or adding these amenities to an existing property.
• Rental type: This part of the analysis breaks down the total number of active listings by rental type including an entire home, a private room, or a shared room. If rooms are popular, it might be worth considering renting out an extra space in your primary home. If most listings comprise entire homes, you’d need to purchase an investment property to rent out on Airbnb.
• Top Airbnbs: The Top Airbnbs tab provides investors with a list of the most profitable short-term rentals in the city. While these properties are not necessarily available for sale, analyzing their features, amenities, listing information, and data points will give you insight into what to look for when buying your own vacation rental in this market. You can organize these top performers by increasing or decreasing revenue, daily rate, and occupancy.

Where Awning Gets Airbnb Market Data

All the short-term rental data available on the Awning platform comes directly from the Airbnb website. It reflects how actual listings perform and what results they are able to provide. This makes the Airbnb market analysis highly accurate and reliable.

Moreover, both the Top Airbnb Markets and the Airbnb Market Data tools are absolutely free of charge. You can research and analyze as many vacation rental markets as you want, without having to pay anything. You don’t even need an account.

Researching Airbnb Laws in a Market

Another important step in the process of finding the best Airbnb markets is researching the local short-term rental regulations. Unlike long-term rentals, Airbnbs face a lot of different restrictions at the state, county, and city level. The regulations vary from simply having to register your Airbnb business, all the way to being strictly prohibited from listing entire homes or non-owner occupied rentals. Thus, before working on buying an investment property of this type, you have to know what rules you will need to follow.

To begin with, you can check out the short-term rental laws in some of the best states and cities for this rental strategy right here on Awning.

The best source for further research on states and cities not included in our guides is the official website of the local government including the municipality website or the city hall website. In case the city code does not mention anything about short-term rentals, you should visit the county website. In some markets, the regulations are imposed at the county level, not the city level. In very rare cases, there are state-level regulations as well, with the only noteworthy example being the Florida short-term rental laws.

The Airbnb website also provides some basic information on local regulations in major cities. However, the data is not always comprehensive and updated. It’s meant to provide initial guidance, but it’s not meant to serve as legal advice.

When researching the Airbnb laws that apply to your selected market, keep an eye on the following:

• Legality of non-owned occupied short-term rentals
• Restrictions on the number of nights to rent out per year
• Limits on the number of guests per bedroom/property per night
• Safety regulations and device requirements
• Short-term rental licenses and permits as well as renewals
• Business registration and license
• Tax license
• Transient occupancy tax, sales tax, and other taxes and fees

Learning About Airbnb Guests

To run a successful Airbnb business, your research should also look at the number and type of visitors who come to your market every year as well as when they come. It makes a difference whether you need to cater to the needs of US families with small children visiting to enjoy a beach vacation or foreign business people attending work functions.

Ideally, you want to focus your efforts on a location with a lot of visitors who come year-round. The best Airbnb markets have no low season, allowing hosts to continue generating income every month.

Unfortunately, there isn’t a single one-stop-shop place where you can obtain all the tourist and visitor information that you need for any and every Airbnb market. Thus, you need to conduct your research using a number of different sources. The best ones include:

• Local city websites: The majority of US cities have a website dedicated to attracting visitors to the location that is run by a non-profit organization or for-profit enterprise. Usually the website is called something like Visit Dallas or Discover Los Angeles. In most cases, these websites will have the best tourism information you can find including the total number of visitors per year. Moreover, based on the types of activities and attractions that they highlight, you can draw conclusions about the types of tourists that come to the city. If the website promotes theme parks, it’s likely that a lot of families with small kids come over. If the website advertises walks on the beach and wine tours, your target guests are likely to be older couples.
• Local newspapers: Local online newspapers frequently publish articles with updates on the state of tourism in the city and county. These can contain a lot of useful information, such as recent trends in the number of visitors, breakdown of the kinds of tourists, the most popular attractions, what visitors are looking for, etc. To find this information, all you have to do is to enter a relevant search on your favorite online publication.
• NeighborhoodScout: The Economics & Demographics section of the city page on the NeighborhoodScout website has a breakdown of the major industries in each market. Airbnb hosts can use this data to understand if there are a lot of business travelers coming to the city.
• Airbnb: Yet another source to learn about the kind of guests that come to a certain short-term rental market is the Airbnb platform itself. You can search for listings in the area that you’re analyzing and read through guest reviews. This will paint a pretty good picture of the typical renter in the market. Moreover, you’ll get to know what they like and what they don’t like about rentals and experiences. In addition, you can filter the listings with the highest overall ratings and check out the amenities and extras that they offer. This will give you an insight into the preferences of your future target guests.

How to Use the Airbnb Guest Information to Your Advantage

Once you’ve gathered data on the kinds of guests that come to your selected Airbnb market, you need to integrate this information into your strategy.

You should consider the following steps:

1. Choose the right property type and size: You should go for the property type that will attract the most guests based on the visitor profile you’ve depicted. For instance, business people would rather stay in a studio in the downtown part of the city, while families with children would prefer a single-family home close to tourist attractions.
2. Add the top amenities: Amenities are one of the most important factors to grab the attention of interested guests and get bookings. Consider providing the amenities that are sought after in the area.
3. Furnish your rental appropriately: The furnishing of your property and the experience that it provides should match what visitors are looking for. For example, if you want to cater to the needs of traveling business people, you should provide a small home office with high-quality internet. If you want to host college students on spring break, you need to provide inflatable mattresses and extra sleeping spaces.
4. Focus your listing: The photos and the language of your Airbnb listing should be targeted towards the guests you’re trying to rent out to.
5. Target your marketing efforts: Similarly, for marketing and advertising your listing, you need to focus on the platforms where your target guests are and use copy that will appeal to them.

Pros and Cons of Airbnb Market Research and Analysis

Now that we have the Airbnb market research and analysis simplified, it’s important to know what advantages and disadvantages this brings to short-term rental property investors:

Airbnb Market Research and Analysis Pros

The main pros include:

• Data-driven decisions: Real estate investing is a numbers business. You cannot make profitable decisions without having the right numbers, or at least the chances for success are too slim.
• Low-risk investments: As you already know the market-average ROI figures, your investment is much less risky. You know what you can expect before even getting started.
• Optimal ROI results: Conducting Airbnb market research and analysis allows you to choose the top location where a property will generate the best returns.
• Competition outperformance: By finding out what property type to invest in and what visitors to cater to in the local market, you are already a few steps ahead of competitors who don’t use the best Airbnb market analysis tools.
• Legal compliance: When you check out the Airbnb laws and regulations, you can avoid legal troubles and complications.

Airbnb Market Research and Analysis Cons

Some cons to consider include:

• Time needed: Performing diligent vacation rental market research and analysis takes time. It requires a lot of data collection, analysis, and calculations. But you can solve this problem by getting access to the best tools, described below.
• Cost: Rental data costs money, not to mention the time it takes to collect it and analyze it, and time is money in real estate investing. Once again, this challenge can be addressed by getting the right tools, many of which are free.
• Tools required: Conducting quality research and analysis necessitates the use of tools. Otherwise, you cannot be as efficient and as successful as your competitors who use the right tools.

Best Airbnb Market Research Tools

While performing diligent Airbnb market research and analysis is a must for successful investments, it’s a very time-consuming and potentially expensive endeavor. As experienced investors testify, you need to spend a couple of months collecting qualitative and quantitative data, entering it into Excel spreadsheets, organizing it, cleaning it, and making calculations. Not to mention that manual Airbnb data collection and analysis are prone to human error which can quickly multiply across a spreadsheet.

Thus, you need to get access to the best Airbnb market research tools to be able to make smart and fast vacation rental investment decisions. We’ve reviewed the most popular Airbnb tools on the market and ranked the top ones for your convenience:

Awning Top Airbnb Markets and Airbnb Market Data

As described above, the Awning platform has two tools to help hosts with their Airbnb market research and analysis: The Top Airbnb Markets and the Airbnb Market Data. Together, these tools allow investors to find the best US cities for short-term rental properties, reflecting both nationwide market trends and each investor’s own unique situation.

The provided data includes all must-have Airbnb analytics, such as the ADR, occupancy, rental income, and property prices. All data comes from reliable sources and is verified. Moreover, access to this tool is completely free and unlimited, across the entire US market.

AirDNA MarketMinder

The AirDNA MarketMinder is considered one of the top Airbnb market research tools that combines both Airbnb and Vrbo data. A major drawback of this tool is that it doesn’t have the functionality to search for the best short-term rental markets. Instead, it allows investors to analyze the potential of locations that they have already selected using other sources.

The available analysis focuses on revenue, daily rates, and occupancy. The data is broken down by rental type and number of bedrooms and goes back 5 years. This allows investors to track the historical performance of a market, even before the Covid-19 pandemic.

Another disadvantage to keep in mind is the subscription price. The fee starts at $12/month for a single neighborhood or city and exceeds $299/month for the entire US market.

Mashvisor Market Finder

Another recent tool for researching and analyzing vacation rental markets is the Mashvisor Market Finder. When first launched, the Market Finder provides you with a list of the top 10 US cities for this investment strategy, based on the Mashmeter Score, rental rate, cap rate, or crime rate.

Next, the tool gives hosts the option to search for a market that meets their requirements using different filters such as the Mashmeter Score, school rankings, regulatory environment, home values, property type, monthly rental income range, occupancy rate range, and cap rate range. Then, investors can see Airbnb market analysis for each suggested market.

What sets the Mashvisor Market Finder apart from other Airbnb market research tools is the Airbnb cap rates data. However, access requires a paid subscription, with quarterly and annual plans ranging from $24.99/month to $119.99/month.

Rabbu Market Data

The Rabbu Market Data tool offers comprehensive market analysis by zip code, city, or county, with a lot of important data points. Nevertheless, it does not allow investors to search for the top locations, so it’s a good choice for those with some experience in the industry.

Rabbu provides both historical performance data (ADR, occupancy, revenue, and listings) and future projections. The latter includes many Airbnb data analytics like the daily rate, the occupancy rate, seasonalized revenue per available night, seasonalized monthly and annual revenue, active listings, and active hosts. There are different filters that investors can use to narrow down the analysis to the type of properties that they are mostly interested in, such as number of bedrooms, amenities, and number of reviews on the Airbnb platform.

Using the Rabbu Market Data tool is free.

AllTheRooms Market Overview

The Market Overview tool available on the AllTheRooms website helps investors analyze the performance of locations but not find the top cities for this strategy. They can see the expected average daily rate, occupancy rate, and monthly revenue as well as the available supply of Airbnb listings, broken down by rental type, property type, number of bedrooms, and amenities. There is both historical performance and future data.

Full access to this tool is paid and costs $19/month for 12 months of historical data and 1 month of future data and $49/month for 49 months of historical data and 6 months of future data.

PriceLabs Market Dashboard

Similar to the AirDNA MarketMinder, the PriceLabs Market Dashboard provides access to Airbnb and Vrbo data. The Airbnb market data analytics include estimated annual revenue, occupancy rate, ADR, number of active listings, number of bookings, and average length of stay.

PriceLabs allows investors to look at entire markets, professionally managed Airbnbs, and Airbnbs with 20+ reviews to see how vacation rental management and reviews by guests affect performance. However, hosts are not able to search for the top locations for short-term rentals with this platform.

The price of subscriptions to the PriceLabs tool starts at $9.99/month.

Takeaway

Now you know the four most important steps of the Airbnb market research and analysis: 1) Find a market; 2) Analyze the market rental data; 3) Study the legal regulations; and 4) Learn about the guests. Each of these steps brings its own value, which makes it an important part of the process. Meanwhile, manual research and analysis has become obsolete amid the recent growth in real estate technology. 

To analyze markets and make better investment decisions than your competition, you need access to the best Airbnb market tools. The Awning Top Markets tool and Airbnb Market Data tool, coupled with some free, publicly available resources, are able to meet the needs of all short-term rental property investors.