Coherent Market Insights

Vacation Rental Market to Surpass US$ 109.43 Bn by 2031

Vacation Rental Market to Surpass US$ 109.43 Bn by 2031 - Coherent Market Insights

Publish In: May 06, 2024

The Vacation Rental Market is estimated to be valued at US$ 75.05 Bn in 2024, exhibiting a CAGR of 5.5% over the forecast period (2024-2031). Furthermore, the growing tourism industry and preference for unique accommodation options are contributing to the market growth.

Market Dynamics:

Rapid growth in tourism worldwide is one of the primary drivers boosting the demand for vacation rentals. According to United Nations World Tourism Organization (UNWTO), international tourist arrivals grew by 4% in 2019 to reach 1.5 billion, demonstrating the resilience of tourism in the face of global headwinds. Tourism promotes direct and indirect job opportunities and provides incentives for investments in infrastructure development.

Additionally, millennial and Gen Z travelers are increasingly opting for unique accommodation options like vacation rentals that enable them to immerse themselves in local culture and experience like a local resident. Their growing disposable income and preference for personalized stays are supporting the expansion of the consumer base for vacation rentals. The opportunity to choose from a variety of properties suited to their travel needs and budgets also attracts customers. These factors are expected to propel the vacation rental market during the projected timeline.

Market Driver: Growing Income Levels and Disposable Income is Driving Growth in the Vacation Rental Market

As global economies recover from the pandemic and income levels start rising again, more consumers now have additional disposable income to spend on leisure activities such as vacations. According to recent reports, personal incomes have increased significantly over the past year in many countries as jobs return and wages increase. This additional spending power is directly benefiting the vacation rental market as more people are now able to afford short holidays and weekend getaways. Vacation rentals provide a more affordable accommodation alternative compared to hotels, which is appealing to these newly-empowered consumers. The growing middle class in emerging economies is also opening up a huge customer base that is eager to travel more. All of this points towards continued strong demand growth in the vacation rental sector.

Market Driver: Increasing Popularity of Experiential and Authentic Travel is Driving More Bookings

Consumers today want more from their vacations than just sun and sand. They are looking for unique, local and authentic experiences. Staying in a whole vacation home gives travelers the freedom and flexibility to truly immerse themselves in the local culture, meet locals and try new activities. It allows for a more intimate and real experience of a place compared to impersonal hotels. This push for experiential and authentic travel has been a massive driver for vacation rentals. People no longer just want accommodations - they want memorable experiences and Instagram-worthy moments. Vacation rentals provide the perfect base to fulfill this new demand. As a result, they have been taking significant market share away from traditional hotels in recent years.

Market Restraints: Shortage of Accommodation is Restraining the Market Growth

While demand has been rocketing upwards, the supply of suitable vacation rental properties has struggled to keep up in many popular tourist destinations. This is mainly due to two issues - lack of new construction and regulations. Housing shortages in cities mean there is limited excess housing stock available to join the vacation rental market. At the same time, many communities have tightened rules around whole home listings due to issues like lack of affordable housing for residents. This restriction of new supply into the market threatens to create capacity constraints that could hold back further expansion. Until supply and demand come back into balance, this restraint will continue capping the industry's full earning potential.

Market Restraints: Housing Affordability Crisis is Restraining the Market Growth

Related to the above issue of limited supply is the ongoing housing affordability crisis. In crowded and expensive housing markets, locals are pushing back against the proliferation of whole home vacation rentals via policy changes and zoning laws. They argue that these rentals are reducing the already scarce supply of long-term housing available for full-time residents and driving up rents overall. In places like London, Paris, New York, and California, regulations are being implemented to restrict or cap vacation rental activity in order to prioritize housing local families and workers. While understandable from a community impact perspective, increased regulation poses a major threat to the outlook of the whole home rental segment.

Market Opportunities: Increased Corporate Investment is Creating New Opportunities

One positive trend emerging is the influx of new corporate capital flowing into the vacation rental market. Large real estate management companies, private equity funds, and online travel agencies are making huge investments in professionally managed rental property portfolios and third-party listing platforms. This institutional investment provides opportunities for individuals without multiple properties to participate via real estate investment trusts or investment funds focused on short-term rentals. It also speeds up the development of technology tools to streamline operations for all players. As the sector continues to mature and consolidate, these new opportunities enabled by deep-pocketed investors should help sustain vitality and growth within the vacation rental ecosystem.

Market Opportunities: Emergence of New Travel Trends are Creating New Opportunities

Staycations, workcations, and leisure travel have all grown rapidly since the pandemic as hybrid work becomes more mainstream. Vacation rentals sit at the sweet spot of serving these evolving demand patterns. Whether it is working remotely from a beautiful beach house for a week or renting a cabin in the woods for a long weekend escape, the flexibility and amenities of a whole home provide an ideal base for combining work, leisure, and travel. Vacation rental operators pivoting their marketing strategies and property selections towards serving these new niche travel markets can tap into big opportunities for continued growth even in recessionary times.

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Key Developments:

  • In 2021, Booking Holdings Inc. acquired Getaroom from Court Square Capital Partners for USD 1.2 billion. With this acquisition, the company aims to enhance the value of its offerings.
  • In October 2020, Tripadvisor introduced two new technology solutions, Reputation Pro and Spotlight, for hotels. These solutions were designed to assist partners in making decisions based on forecasted data.

Key Players:

9flats,, Hotelplan Management AG, MakeMyTrip Pvt. Ltd., OYO Hotels & Homes, Trivago, Agoda Company Pte. Ltd., Yatra Online Private Limited, Hotwire, Inc., HotelsCombined,,, Inc., LLC, KAYAK, Google, Airbnb Inc., Booking Holdings Inc., Hotelplan Holding AG, MakeMyTrip Pvt. Ltd., Expedia Group Inc., NOVASOL AS, Oravel Stays Pvt. Ltd., Wyndham Destinations Inc., and TripAdvisor Inc.

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