Short-Term Rentals Play Important Factor in Traditional Lodging Sector Valuations

While the growth in the supply of short-term rental (STR) units has tempered in recent years, the STR market is an important factor in valuation calculations for the traditional lodging sector, according to Jamie Lane, senior managing economist of CBRE Americas Hotels Research.Speaking on the Nareit REIT Report podcast, Lane noted that with a bigger inventory of STR units now in place, year-over-year percentage growth rates for STR supply in the U.S. will continue to ease. STR unit supply grew by 26% in 2019, down from 39% in 2018, and down from the seven years of exponential growth prior to that. The rate of supply growth is expected to slow in 2020 to 19%.Despite the slower growth rate, new units have still averaged over 100,000 per year since 2016, with 2020 marking the fifth consecutive year that this threshold has been met. As a result, the supply penetration rate of STR units to traditional hotel units reached almost 10.5% in 2019 and is expected to hit 12.2% in 2020, Lane said.In 2014, the vast majority of STR units were coming online in urban areas. Lane notes that since then, most of the growth has primarily occurred in rural and suburban areas. Urban units dropped to 21% of the total STR supply in 2019 from 46% in 2014.