How hoteliers should rethink the threat posed by short term rentals

The perception of the upstart AirBnb host nabbing lucrative would-be hotel guests, and destabilizing the fragile travel ecosystem has been with us since the platform burst onto the scene in 2008.

Now, almost two decades on since the founding of AirBnB, both short-term rentals and hotels remain standing, and while the relationship between the two asset classes is complex, demand remains high enough to support both accommodation types.

That said, there still remains friction and some unresolved questions about the future, especially for short-term rentals in popular travel destinations.

If you are a hotelier who still sees short-term rentals as an existential threat, this piece will help to give you a more nuanced understanding of them- what makes them fundamentally different from hotels, where the real threats lie, but also the ways in which hoteliers can capitalize on the differences between the two.

Short-term rentals are an opportunistic threat

The first way in which we can start to re-think the threat posed by short-term rentals is by reviewing the fundamental differences between short-term rentals and hotels.

By their very nature short-term rentals are different from hotels in that they are usually private residences (a house, townhome, or apartment) that have been converted into a short-term rental. A hotel, of course, is purpose-built to be a hotel and nothing else.

Unlike hotels, short-term rentals can open up inventory with relatively short-notice, quickly sell their accommodation, host a guest, and then after the guest checks out, do something else with the property. This is very much in opposition to the operating model of a hotel which looks to capture as much revenue as possible for the entire year, as there is no other alternative.

For the short-term rental owner, there are other uses for their property outside of just being a short-term rental.

For this reason short-term rentals exhibit what might be called a more ‘opportunistic’ supply pattern when you analyze listings in aggregate.

Consider the case of a homeowner with a beach house in a desirable spring break destination. The homeowner may list their home for sale during only the few peak weeks of Spring Break, and for the remainder of the year live in the home, convert it to a traditional rental property, or put it to some other use.

When thinking about the difference between the lodging types, it is useful to visualize the supply fluctuations at a conceptual level. Short-term rental supply is more variable; ebbs and flows from month to month depend on when the most profitable times of the year fall.

By contrast hotel supply is relatively static except when a new hotel enters the market (or some other niche exceptions like closures, renovations, etc.)

What does this ‘opportunistic’ nature look like in real world data-sets? Let’s stick to our Spring Break example and start with a set of famous North American Spring break markets to see how short-term rental supply changes around the peak Spring Break travel season that falls in April.

Looking at this data from 2024, all 6 markets experienced supply growth drops between the months of April and May. South Padre Island specifically was a great example of this opportunistic supply effect; note the strong rate of month-over-month supply growth leading up to April, followed by 4 months of reductions in supply.

This trend is indicative of this opportunistic behavior: short-term rental operators capitalize on the most profitable times of the year, and then quickly take their property offline after the spring break revelers have left town.

Key takeaway: Short term rental supply reacts more nimbly to demand drivers than hotel supply. Utilize market intelligence data to understand exactly which parts of the year you are most vulnerable to short-term rental supply fluctuations.

Short term rentals are a valuable leading indicator for hotels

Have you heard the old adage “a canary in the coalmine?”

Now that we understand that short-term rentals are highly sensitive to demand fluctuations and more opportunistic, could this pose an opportunity for hoteliers? The answer is thankfully yes.

In fact, we here at Lighthouse have done research showing that short-term rental occupancy can actually be a very useful leading indicator for market demand and occupancy trends.

Across the majority of destinations we analyzed, a distinct conclusion became evident. Short-term rental accommodations tended to book earlier than hotels, which then indicated rising demand for hotels in the same area.

Read the case study

We hypothesize that large groups and high-end travellers are keen to snap up the most desirable Airbnbs well in advance, as these are often properties with unique characteristics unavailable in the rest of the market space, or at a premium.

Meaning that by monitoring the short-term rental market in-addition to a traditional hotel compset, hotels can better understand forward-looking demand trends.

For example, you may have several short-term rental properties in your market that you know to be highly desirable. By noting when those properties are changing rates, or selling out by adding them to your competitive set, they can be used as a leading indicator for which days will be highest demand.

Here’s what Niki Van den Broeck, author of this case study had to say:

"The boundary between hotels and short-term rentals is thinner than ever. By treating short-term rental data not just as competition, but as a leading indicator, hoteliers can actually see the future of their market. When high-end short-term rentals sell out months in advance, it’s a clear signal that hotel demand is right behind it. We’ve built these insights so you can stop reacting to the market and start anticipating it."

Key takeaway: Use market intelligence data to monitor short-term performance for dates far in the future to learn crucial indications for which dates will be highest demand

Key takeaway: Use market intelligence data to monitor short-term performance for dates far in the future to learn crucial indications for which dates will be highest demand

Short term rentals are vulnerable to changing legislation

Rules and regulations or the lack thereof should also be top of mind when assessing the threat level posed by short-term rentals in any given market.

If you are a hotelier it’s important to understand whether your market is lax, or more stringent when it comes to regulating short-term rentals. In a recent piece we explored this topic in detail and put the microscope on many world-famous destinations that have recently rolled out new rules and regulations for short-term rentals.

Different regulations achieve different effects; Vancouver for example has a law that specifically disallows multi-property ownership, which may be more favorable to hoteliers than regulations that simply create more hoops to jump through for “mom-and-pop” short-term rental owners.

Legislation that is overly-broad may deter small, individual short-term rental owners who aren’t actually competing with hotels in the first place, creating an environment where a higher percentage of multi-property short-term rental owners are left to survive, who will be generally more sophisticated, and pose more of a direct threat to your hotel.

A very extreme example of rules and regulations affecting short-term rental supply in a notable market is Istanbul. After implementing a new national licensing framework in 2024, supply dropped a staggering 38%, but another interesting story line that Istanbul hoteliers should be watching is the makeup of short-term rentals that are owned by multi-property owners.

As it stands in January 2025, 82.29% of short-term rental listings are owned by multi-property owners, compared with the average 66.57% in the broader EMEA (Europe and Middle East) region. This means that while there are now fewer short-term rentals overall, those that still remain are owned by owners that have multiple properties.

Key takeaway: If you’re still in the dark about what short-term rental laws are in your market, be sure to brush up on how your country, state, city is regulating short-term rentals - this will give you a better breadth of knowledge on the threat level you face.

The composition of short-term rental supply determines the threat-level to hotels

When analyzing short-term rental trends in your market, it’s important to also understand what % of short-term rentals are actually competing with your hotel in the first place.

Short-term rentals don’t fall into perfectly convenient categories; some properties directly compete with hotels and specifically operate in the hopes of capturing excess demand that hotels fail to. For these short-term rentals, offering the same amenities and comparable accommodations to a hotel is enough to turn a profit.

On the other hand, other short-term rentals have very little overlap with hotels and look more like traditional vacation rentals, offering experiences that a traditional hotel would struggle to provide.

To get an idea of the broad spectrum of short-term rentals, put yourself in the shoes of a hotelier and look at these two listings:

Which one reads as the larger existential threat as a hotelier? It’s likely that unless you are operating a very specialized type of property, the “City-center apartment” (first image) is far and away the more threatening listing. But why is this the case?

Notice attributes such as the guest capacity, number of beds and baths, location, and amenities. Also take note of the host’s willingness to accept one-night reservations. The listing on the left is what can be called “hotel-like”, a quality of short-term rentals that Lighthouse tracks for markets worldwide.

The mountain retreat listing (second image) is certainly an attractive listing for some travelers, but caters to a more specific traveler profile (think large families and social gatherings). The listing offers niche amenities like a fishing pond, and notice too that the host only accepts stays of 5 or more nights. Not very hotel-like!

Within our own data set here at Lighthouse, we track what % of short-term rentals are “Hotel-like” using several proprietary criteria including future availability trends, a guest’s ability to book shorter lengths of stay, room type composition, and party-size limits.

This data is invaluable for hoteliers looking to better understand whether they are really at risk, or are in a market with less threatening listings.

So what regions and major cities have the most ‘hotel-like’ short-term rentals and where is the threat largest for hoteliers? The results may surprise you, especially when you see just how different the various regions of the world are, and just how market-specific this metric is.

It’s clear that a hotelier in a market like Mexico City should be much more cognizant of the commercial strategy of their short-term rental competitors due to the simple fact that a staggering 57% of short-term rentals are “hotel-like”.

Contrast this with New York City, where stricter rule enforcement has led to a noticeable drop in short-term rentals that compete directly with hotels, meaning that hoteliers are somewhat ‘safer’ in this regard.

Key takeaway: Use data and analytics to understand whether your short-term rental market is composed primarily of “Hotel-like” properties looking to directly steal share, or Non-hotel-like short term rentals who are in their own lane, attracting a different traveler and co-existing with your property without much overlap.

In mature markets hotels can differentiate based on differences and amenities

Most major travel markets are now well acquainted with short-term rentals, and most polities have at least some form of regulation for short-term rentals.

Now that the post-COVID short-term rental supply boom has cooled off due to economic uncertainty and global legislation crackdowns, many more established markets have settled into something of an equilibrium where short-term rentals and hotels do compete, but not so fiercely that either is an existential threat to the other.

If you are in one of these markets, you may be wondering where to go from here. Perhaps you do feel that you are still losing more share to short-term rentals than you are comfortable with, but aren’t sure what steps you can take to maximize your visibility and revenue from all potential guests.

Thankfully everything comes full circle; the key for hoteliers moving forward lies in something simple such as highlighting the differences between your hotel and short-term rental competitors.

In recent years, guests have increasingly favored hotels over short-term rentals, a trend primarily fueled by concerns over safety and more opaque fee structures. This shift has helped traditional hotels regain the market appeal they lost during the initial boom of short-term rental platforms, which no longer offer the clear price advantage they once did.

So how to do this?

Let’s revisit Mexico City, a city that we already noted was at relatively high risk due to high % of “hotel-like” short term rentals. By taking a look at the data we can analyze exactly what amenities short-term rentals in CDMX do and don’t offer.

Hotels will likely be most interested in the lower values in this list AKA those amenities that not many short-term rentals offer that their hotel may offer.

Unsurprisingly, only a very small proportion of short-term rentals offer a gym; also fewer than half of short-term rentals in the city specifically list safety features such as a first-aid kit, smoke detector, fire-extinguisher, or bedroom door locks. Emphasizing these safety features could be a major selling point for hotels looking to attract safety-conscious travelers.

Also, hoteliers would be wise to emphasize those features that are simply impossible for a short-term rental to provide: 24-hour front desk, a concierge service, or even things like past awards for outstanding service. These are your competitive advantages that can only be offered by a hotel.

Key takeaway: Lean into the differences that make your hotel special, acknowledging that hotels, while the more ‘traditional’ option, offer fewer unknowns, a personal touch, and a more predictable travel experience for many travelers that many are acknowledging is a positive.

How Lighthouse helps you tell the full data story

Short-term rentals aren’t going anywhere any time soon. They have firmly rooted themselves in destinations worldwide as a viable hotel alternative, but one that is doesn’t completely disrupt the traditional travel model.

This is why as a hotelier you should consider monitoring some short-term rental competitors (supply, pricing, and occupancy), and also familiarize yourself with the latest laws affecting short-term rentals in your market to always have a clear picture of the threat level they pose to your hotel.

If you aren’t already, consider investing in Market Intelligence tools like Lighthouse's Pricing Plan which allows for deep market analysis of both hotel and short-term rental competitors.