Nashville Short-Term Rental Market Analysis: First Quarter 2024 Outlook
Overall, data from PriceLabs and online travel agencies indicates that Nashville’s short-term rental market will remain robust in 2024, driven by a combination of increased demand for distinctive accommodations and the city’s appeal as a vibrant cultural destination. For investors and property managers, these trends underscore the importance of focusing on quality, leveraging technology, and staying adaptable to changing market conditions to maximize their rental potential.
Here at BowSTRing, we obsess over the details, analyze the data, study the competition, but mostly remain focused on what is in the best interest of our owners.
Quarter 1 Analysis
In the first quarter of 2024, Nashville experienced a notable uptick in tourism, primarily driven by various events and a general increase in travel interest post-pandemic. This period typically benefits from a resurgence in conference scheduling and a robust lineup of winter and early spring events that attract both domestic and international visitors. Historical trends and recent data suggest that fluctuations in travel volumes during this period often correlate with broader economic indicators and seasonal preferences for travel.
PriceLabs data however indicated that even though there is an anticipated increase in the total number of bookings, Estimated Revenue for the average property owner is expected to decrease, driven by an increase in supply, which puts pressure on both occupancy and rates.
Nashville has seen a robust performance in its short-term rental sector. The average daily rate across platforms stood at approximately $264.40, with revenue per available rental (RevPAR) of $131.9. The Market occupancy rate was around 39%, showing a year-over-year improvement of 5% (AirDNA).
The majority of listings in Nashville are entire homes (86%), which indicates a strong market for family or group travel. One-bedroom units are the most common and competitive, comprising 42% of listings (AirDNA). None of our owners have one-bedroom units so we were never in a price-chasing position.
The average length of stay in Nashville remains consistent with typical short-term rentals, with a noticeable proportion of bookings being made for 3 nights or less, accounting for 48.7% of the minimum stays (AirDNA).
Booking Patterns
In Nashville, like many tourist-driven cities, there’s a notable difference in short-term rental occupancy rates between weekdays and weekends. Weekends typically experience higher demand due to leisure travel, events, and the influx of visitors looking to enjoy the vibrant nightlife and cultural offerings. Conversely, mid-weekdays often see lower occupancy due to a decrease in leisure travelers and a more business-oriented visitor demographic.
BowSTRing Management is strategically addressing these fluctuations with targeted marketing and dynamic pricing strategies to optimize occupancy and revenue. During mid-week, when the demand is naturally lower, BowSTRing Management employs targeted marketing campaigns aimed at business travelers and tourists interested in more relaxed or extended stays. These campaigns highlight the benefits of visiting Nashville during less crowded times, such as more intimate experiences at attractions and potentially lower costs for activities.
To make mid-week stays more appealing, BowSTRing Management also offers price reductions from Tuesday to Thursday. These reduced rates are designed to attract budget-conscious travelers and those with flexible travel dates who can take advantage of lower prices without compromising on the quality of their stay. We have also negotiated a reduction of mid-week cleaning fees which have been passed on to guests.
Conversely, for weekends, when demand spikes, BowSTRing Management capitalizes on this by increasing rates on Fridays and Saturdays. This pricing strategy is feasible due to high demand driven by concerts, festivals, and special events that typically occur over the weekend. The increased weekend rates help balance the overall revenue, compensating for lower earnings during the week.
This approach not only maximizes profitability but also maintains competitive occupancy rates throughout the week. By dynamically adjusting their pricing and marketing strategies based on demand fluctuations, BowSTRing Management ensures that their properties remain attractive and financially viable regardless of the day of the week.
Supply and Demand Factors
The demand for short-term rentals in Nashville remains robust, supported by a mix of tourists, business travelers, and event attendees who are drawn to the city’s rich musical heritage, cultural attractions, and culinary scene. This sustained interest helps maintain a strong market for unique accommodation experiences that short-term rentals offer.
The supply of short-term rental properties in Nashville has continued to grow, driven by both individual hosts and professional property management companies. This growth is partly due to the increasing number of properties entering the market to meet the rising demand, although regulatory challenges have posed some barriers.
Market data indicates that while the increased supply may intensify competition and potentially place downward pressure on rates, occupancy levels have remained relatively stable. This stability is largely due to the overall growth in tourism and the city’s appeal as a top travel destination, which continues to drive the demand for accommodations (PriceLabs) (airdna) (Rental Scale-Up).
Creating Differentiation in a Homogenous Market
BowSTRing Management adeptly targets a dynamic and price-sensitive segment of travelers by implementing more flexible cancellation policies and reducing cleaning fees, which are significant factors in a traveler’s decision-making process.
Flexible Cancellation Policies: Understanding that flexibility can be a key determinant for travelers, especially those booking on a budget or those who may need to make last-minute changes, BowSTRing Management offers more lenient cancellation options. This flexibility allows travelers to book with confidence, knowing they can adapt their plans without facing stringent penalties, which is particularly appealing to those who might be hesitant to commit to non-refundable options. Such policies not only enhance customer satisfaction but also position BowSTRing properties as more attractive compared to competitors with stricter rules.
Lower Cleaning Costs: To further appeal to cost-conscious consumers, BowSTRing Management strategically minimizes the cleaning fees associated with their rentals. By offering the lowest possible cleaning costs, they effectively lower the overall cost of staying at their properties. This is especially appealing to travelers who are extending their stays or seeking budget-friendly accommodations without sacrificing cleanliness and comfort. Lower cleaning fees can significantly reduce the total cost of a rental, which can be a decisive factor for travelers comparing options within the Nashville area. The below data from PriceLabs suggests that 40% of all bookings are mode on properties where the average cleaning fee is between $69 and $102.
These strategies are designed to attract a broader base of travelers by addressing two of the more common concerns: flexibility in planning and total accommodation cost. By aligning their policies to meet these needs, BowSTRing Management enhances its competitive edge in a bustling market like Nashville, ensuring both high occupancy rates and positive customer experiences.
New Competition
BowSTRing Management is actively addressing the challenges posed by competition from hotel chains offering boutique options, as these established chains increasingly cater to the upscale traveler segment with their branded boutique hotels. Companies like Marriott with its Autograph Collection and Hilton’s Curio Collection leverage their strong brand reputations and the allure of amenities and personalized services to differentiate themselves in the hospitality market. This competitive landscape pressures traditional short-term rentals, which, despite offering unique advantages such as more space, privacy, and a localized experience, can struggle to attract travelers who prefer the curated experiences offered by boutique hotels.
In response, BowSTRing Management is implementing several strategic initiatives. Firstly, we are enhancing the unique value propositions of their properties by focusing on personalized guest experiences and leveraging the local flavor that traditional hotels often lack. We are also focused on recommending quality improvements and luxury amenities to match the high standards set by boutique hotels. Moreover, BowSTRing is ramping up our marketing efforts to highlight the specific benefits of short-term rentals, such as greater flexibility and a more home-like environment, which are significant factors for certain traveler demographics.
Forward Look for Quarter 2
Looking ahead to the second quarter of 2024, Nashville is expected to see continued growth in both flight arrivals and automobile traffic, buoyed by the city’s spring events calendar, which features music festivals, cultural events, and sporting activities. The warmer weather of Q2 generally encourages more road trips and air travel, making it a peak time for visitors looking to experience Nashville’s outdoor attractions and vibrant street festivals.
As travel trends continue to evolve, the volume of visitors to Nashville is likely to be influenced by ongoing economic conditions, the global travel environment, and the city’s ability to adapt and cater to the changing preferences of travelers. This forward-looking perspective suggests a robust Q2 for Nashville’s tourism sector, assuming stable economic conditions and favorable weather patterns.
Upcoming Q2 events are expected to increase the occupancy rates due to the influx of visitors. We are leveraging these peak periods with appropriate pricing and availability adjustments to optimize your rental income during these times. We adjust listing words to promote event-themed stays to attract more guests looking for an enhanced experience tied to the local culture and festivities.
May 2024
- Tennessee Craft Fair (May 5-7): Held at Centennial Park, this event showcases crafts from over 200 artisans, attracting a large crowd interested in arts and crafts (Visit Nashville TN).
- Iroquois Steeplechase (May 11): A prestigious horse racing event at Percy Warner Park, which is a significant draw for visitors and could spike rental demand (Visit Nashville TN).
- Nashville Film Festival (Dates in May to be confirmed): This festival attracts filmmakers and enthusiasts from around the globe, increasing the need for accommodations (Visit Nashville TN).
June 2024
- CMA Fest (June 6-9): One of the largest music festivals in the United States, centered around country music and held downtown. It significantly impacts local tourism and accommodation demand (CMA Fest).
- Jefferson Street Jazz & Blues Festival (June 17): Celebrates Nashville’s rich history of jazz and blues, drawing music lovers to the area (Visit Nashville TN).
What are the Experts Saying?
For the Nashville market in 2024, predictions from platforms like AirDNA, Airbnb, Beyond, and others suggest varied yet optimistic outcomes for the short-term rental sector.
AirDNA highlights that Nashville is maintaining a strong performance with an average occupancy rate of 39%, which has increased by 4% over the past year. The average daily rate is also up by 3%, indicating healthy demand for short-term rentals in the area. Additionally, the report from AirDNA anticipates growth in demand for luxury and unique properties, underlining a shift towards more curated travel experiences and the greater integration of technology in managing and booking these properties (AirDNA).
Beyond’s insights align with this view, pointing out that despite pressures from urban market regulations, there’s a positive outlook for 2024. They anticipate that supply growth will stabilize without a decrease in demand, leading to a modest increase in average daily rates (ADRs) across the markets. This is particularly significant in areas like Nashville, where the demand for unique and high-quality lodging continues to grow (beyondpricing).
Further supporting this positive outlook, AirDNA’s detailed 2024 projections for the U.S. short-term rental market forecast a 10.7% growth in demand. This growth is expected to be supported by economic improvements and a resurgence in domestic travel. The occupancy rate for short-term rentals is projected to stabilize, and a slight increase in ADRs is also anticipated. These trends suggest that Nashville’s short-term rental market could continue to benefit from broader economic stability and an influx of domestic travelers looking for unique lodging options (AirDNA).
Recap of Key Points
Want to optimize your Nashville short-term rental? Connect with us today for a free consultation to discuss your specific needs and explore how our expert property management services can help you maximize your rental income. Let’s work together to unlock the full potential of your property in this thriving market.