Over the last several years, the short-term rental market has exploded. Bookings surged following the COVID-19 pandemic as people wanted to get out and see the world. That led to a rush of investors and a huge increase in listings, leaving many to wonder whether the market was oversaturated and might crash.
It hasn’t and likely won’t, according to real estate professionals and short-term rental data, but the market for short-term rentals has shifted in accordance with what guests want.
This article explores what the data says about short-term rentals, what real estate and travel professionals are seeing and whether they’re still a good investment.
How the Short-Term Rental Market Got Here
The short-term rental industry rebounded from mass pandemic-related cancellations and travel restrictions to robust U.S. domestic travel and a desire to continue working remotely. Travelers and workers sought out secluded, private settings over traditional hotels for places to stay.
After demand dropped 14% in 2020, the short-term rental market climbed from 1.1 million listings (with demand increasing 16%) in 2021 to 1.3 million listings (and demand jumping another 18%) in 2022.
Growth slowed but continued in 2023, with listings hitting 1.5 million (and demand climbing 6%), and again in 2024, when they reached 1.6 million (and demand jumped 7%).
In a market analysis report, Grandview Research said, “The expanding popularity of destinations beyond traditional tourist hubs, aided by the ease of access to alternative accommodations via online platforms, is further fueling growth.”
Are We at a Saturation Point?
The 2024 STR Industry Report from Guesty says that 58% of investors who hold one to 50 short-term rentals name saturation as the biggest challenge they face. As an example, consider that Dallas has gained 6,000 new Airbnb listings since 2020, outpacing the demand for short-term rentals.
According to real estate data supplier Mashvisor, the Airbnb occupancy rate, 2025 and beyond, is normalizing. The influx of new short-term rentals across the U.S. — coupled with consumers tightening their belts because of inflation and fewer international travelers because of political uncertainty — pushed the average occupancy rate down to 50% in spring 2025 from 57% in 2024.
In April 2025, Realtor.com reported that oversaturation in some markets has led to a lack of bookings and declining margins. The competition, added to other hurdles investors face, is leading some owners of short-term rentals to consider selling.
“Buyers are going to be finding more and more homes coming on the market out here where the sellers are just tired of dealing with these regulations and restrictions, and just want to get out of the short-term market,” Bobby Kelly, a Redfin agent in Lake Tahoe, California, told Mansion Global.
Market Variability: Oversaturated in Some Places, Underserved in Others
Not every short-term rental market in the U.S. is saturated. You might find oversupply in some typical vacation locations, but a look at trends from 2025 into 2026 shows that the balance is stabilizing in many markets, and demand growth is outstripping supply in some.
Metro areas such as Indianapolis, Indiana; Buffalo-Niagara Falls, New York; Cleveland, Ohio; and Jersey City-Newark, New Jersey, are expanding in the short-term rental market. However, most of the action is taking place in small cities and rural areas: Red River Gorge, Kentucky; Ocala, Florida; College Station, Texas; and Tuscaloosa, Alabama. Demand in these smaller communities is about equal to supply or outpaces supply by high single or double digits.
“There’s an opportunity for investment across the United States, and it’s not isolated to one region, but it can take digging into different markets,” Jamie Lane, senior vice president of analytics and chief economist at AirDNA, told CNBC in February.
The Role of Regulation in STR Saturation
State or city zoning laws and regulations can make it difficult to operate short-term rentals in some markets, but restrictions or licensing requirements can help an investor by limiting available rental properties and boosting rents.
A crackdown in New York City — Local Law 18, which essentially banned short-term rentals in 2023 — reduced available listings in 2024, allowing the short-term rental market to rebound in 2025.
In Los Angeles, the city created its Home-Sharing program. Only residents can rent out their primary residence, effectively eliminating the wholesale renting of properties. In Dallas, owners must get a special permit to run a short-term rental.
“Many, many other urban centers are considering regulations, and it has a profound effect on supply development within a market,” said Bram Gallagher while discussing AirDNA’s 2025 short-term rental outlook during a webinar. “So for that reason, urban is not going to see a huge rebound in its supply growth, but it is going to go up.”
Is It Still Profitable to Invest in Short-Term Rentals?
With the saturation of some markets, you might be wondering: Is Airbnb still profitable?
In an oversupplied market, you may face increased challenges and complexities in getting the returns you want. For investors, there’s increased competition, dropping occupancy rates and downward pressure on prices. Additionally, operating costs typically increase as you upgrade a property, add amenities and increase marketing to stand out.
Rob Abasolo, founder and CEO of Host Camp, said in a LinkedIn post in July that he sees competition in a saturated market as data. Using the AirDNA analytics platform, he looks at who’s ranking at the top and who’s making the most money, and he uses that to be successful.
“Instead of getting scared, I get excited because I can take their blueprint,” Abasolo said. “I can’t take all of the things that they do right and apply that to my personal listing that I’m looking at launching in any given market.”
You can beat saturation, according to Abasolo, but you must be a proactive host and constantly optimize your property.
Frequently Asked Questions
Is Airbnb still profitable in 2025?
Yes, Airbnb is still profitable, but changing guest expectations, increased competition and evolving zoning laws and regulations require hosts to be proactive to maximize earnings. Your profitability will depend on your planning and strategic adaptation.
What happens when the short-term rental market is oversaturated?
If a short-term rental market oversaturates, occupancy rates can fall, rental prices can drop and competition among hosts can increase. This can lead to reduced profitability or some hosts selling their rental homes and leaving the market.
Which cities are most oversaturated with STRs?
Data on the most oversaturated cities is hard to come by. However, the U.S. cities with the highest number of short-term rentals are Kissimmee, Florida; Miami, Florida; Austin, Texas; Las Vegas, Nevada; and Houston, Texas. Cities considered the worst for vacation rentals, partly based on low demand and high costs, are San Jose, California; Birmingham, Alabama; San Antonio, Texas; Houston, Texas; and Sacramento, California.
