Navigating the Short-Term Rental Market in 2024-2025: Resilience Amidst  Regulatory Challenges

1. Regulatory Impact, and Hotel Advantage

Stricter local regulations, particularly in urban markets, resulted in inventory reduction and rising compliance costs for STR operators. New York City’s Local Law 18 (effective September 2023), which requires registration and prohibits host-absent rentals under 30 days, is the foremost example. Following the law's passage, STR listings in NYC plunged 85% between August and October 2023.

This regulatory environment directly benefited the concentrated hotel industry. NYC hotels experienced a 65% increase in average room price (from $225 to $290) in 18 months, leading to a revenue increase exceeding $2 billion. Sources indicate that hotels used their concentrated market position and lobbying efforts—termed "crony capitalism"—to push for Local Law 18, effectively blocking competition. The Hotel Trades Council openly acknowledged its central role in the bill's passage.

2. Market Bifurcation and Performance

STRs proved resilient against economic pressures and outperformed competitors. In Q2 2025, short-term rentals achieved an average RevPAR advantage of nine percentage points over hotels in every U.S. region, while hotels experienced RevPAR declines.

However, performance is unevenly distributed:

• Suburban Surge: Demand for STRs in suburban areas is 43% above 2019 levels. Suburban listings featuring three or more bedrooms have doubled since 2019.
• Urban Lag: Demand in core urban markets remains 16% below 2019 levels.
• Pricing: STRs offer a 25% price discount compared to hotels in urban markets, but they are 5% more expensive than hotels in suburban markets.

Operational challenges remain critical, including heightened competition (reported by 76% of property managers in 2024) and widespread concern (89% of operators) regarding economic slowdown and decreased demand.

3. 2025 Strategy: Profitability and Technology

Profitability is projected to be the defining focus for 2025, driven by a 7% rebound in demand and a slowing of supply growth, rebalancing the market and restoring pricing power.

Key revenue strategies include:

• Upsells: Operational upsells—specifically early check-ins, late check-outs, and damage waivers—generate significant incremental revenue, up to $147 per listing per month.
• Dynamic Pricing: Shorter travellers booking windows require constant price adjustments; 83% of property managers reported changing prices at least once per week in 2024.

AI Adoption: Technology integration is increasing, with 52% of property managers utilizing AI for functions like dynamic pricing, guest communication, and content creation