Identifying investment opportunities in the short-term rental industry can be a challenging prospect; our Best Places to Invest Report highlights markets based on how suitable they may be when looking to buy an investment STR property.

The report is a quarterly breakdown of up to 1500 markets in a chosen country or state performing well across various metrics. These metrics are selected as they directly impact a market and its investment potential.

A key metric we use to identify investment markets is the AirDNA Score comprising the market rental demand, the revenue growth, and the investability score, which has a double weighting.

These data points combine to create our ultimate proprietary ranking metric, the AirDNA Investor Score.

We use percentiles to help us assess market performance. The BPTI report uses percentiles in several metrics to rank a market against the top 2000 performing markets globally in those metrics. Looking at the Total Occupancy Rate and the percentile, for example, a market could have an average occupancy of 65% over the last 12 months and show an occupancy percentile of 84, meaning that it is outperforming 84% of those 2000 markets in that metric as they would have an occupancy rate lower than 65%.

The average cost of a home in a market is a huge factor when looking at investment opportunities. We use the Zillow Home Value Index to give the average house cost in the market. It is a crucial marker in our investability metric, in which we compare the average STR income against the average home cost—making it an excellent indicator of the suitability of an investment market.

Almost all STR markets have some form of regulation; some may be stricter than others, so factoring in this regulation is a big part of market analysis. We measure this governance by looking at trends and patterns within the data, for example, if the number of STRs doesn't change or if there is a consistent pattern of listings coming onto the market one month and being removed the next.

How seasonal is the market? Knowing when people book, is it a location that receives bookings consistently throughout the year? Or is it a location defined by its geography, a ski or beach resort, for example?

The Seasonality score uses the market's revenue per available rental (RevPAR). A high score indicates low seasonality, meaning income is more evenly distributed throughout the year. A low score could signal more revenue at specific points, like the summer in a beach resort.

Revenue Potential – How much could a short-term rental generate in this market over the next year? We calculate this by looking at the average listing revenues from the last twelve months. The figure assumes that the listing would be available to be booked for the full 365 days of the next twelve months.

Active STR listings – The number of active listings in the market at the time of the report against the same time the previous year, i.e., Q2 2022 vs. Q2 2021. We define a listing as active based on whether it has received a booking in the last 30 days.

Percentage Still Available From Last Year – Here, you can see the number of listings still on the market from the same time last year. This is a valuable metric to utilize when trying to understand if a market is in decline. Hosts pulling properties could indicate low demand.

Percentage of Multi-hosts – How many hosts manage more than one listing in the market? People running multiple listings can generally be considered professional property managers, which is helpful to know if you’re looking for your first STR investment property. Professionally managed listings generally pose tougher competition when vying for market share.

The BPTI is an excellent resource for identifying investment opportunities as it gives you high-level information on promising markets. Once you have found a location of interest, we suggest looking it up in MarketMinder.

MarketMinder can give you further insight into market performance, showing data up to five years into the past in certain areas. The more detailed information accessible in MarketMinder can help you build a more robust picture of the location and analyze whether it would be a viable investment option.