Short-term rentals have been a growing trend for some time now, and people are still utilizing platforms such as Airbnb as a “safe” way to make extra money or seek returns on real estate investments; however, short-term rentals are not immune to volatility and risk.
I recently did a study on the short-term rental market in Navarre Beach, Florida to test a hypothesis I had about the volatility of nightly rates.
Seasonality
As I was looking at the rates over time, I noticed that there are anywhere from 1% changes in rates to over 40% changes in rates just within a week’s time. This kind of volatility creates cash-flow risk for hosts who aren’t familiar with market dynamics, and don’t know how to build a strong pricing strategy.
Time-to-Stay
Volatility in the nightly rates are also affected by time-to-stay. Rates for future stays are more unpredictable than rates for current stays. This creates risk, but also opportunities for both sides of the transaction in the Navarre Beach area.
Christopher Woodward Research 