Nashville Short-Term Rental Market Analysis: Second Quarter 2024 Outlook
The Nashville short-term rental market has shown consistent growth and resilience through the second quarter of 2024. Nashville remains a transient city and has continued to see a significant influx of visitors due to a robust lineup of spring and early summer events. During June, 5 events alone brought in over half a million visitors to Nashville.
CMA Fest (June 6-9, 2024)
One of the largest country music festivals in the world, held annually in downtown Nashville. This year the festival drew approximately 90,000 visitors daily, totaling around 360,000 attendees over the four days. (Visit Nashville TN) (CMA Fest).
Bonnaroo Music & Arts Festival (June 13-16, 2024)
Technically held in Manchester, Tennessee, Bonnaroo significantly impacted the Nashville area due to its proximity. The festival attracted about 80,000 attendees. (Nashville Go).
Nashville Pride Festival (June 22-23, 2024)
Celebrating the LGBTQ+ community, the Nashville Pride Festival at Bicentennial Capitol Mall State Park saw around 60,000 visitors over the two-day event.
Ally 400 NASCAR Cup Series Race (June 28-30, 2024)
Held at the Nashville Superspeedway, the Ally 400 attracted approximately 40,000 fans from across the country to Nashville.
Let Freedom Sing! Music City July 4th (July 4, 2024)
Occurring just after Q2, this Independence Day celebration in downtown Nashville drew about 300,000 attendees. (NASHtoday).
Market Performance Metrics
The Average Daily Rate (ADR) across our portfolio has risen to approximately $270, reflecting a 2.3% increase from Q1. This uptick is driven by heightened demand during peak event periods. Revenue per available room/night (RevPAR) has similarly seen an increase, reaching $138, indicating better overall revenue performance despite increased competition. Short-term rental bookings continue to be dominated by entire home rentals, accounting for 87% of listings. The trend towards shorter stays (3 nights or less) remains prevalent, representing 49% of all bookings.
PriceLabs (our dynamic pricing platform) data reflects an increase in revenue, occupancy, and rate during the last the last 30 days. It also shows an increase in the number of active listings. Given that we are in the high season for Nashville, none of this is surprising information.
When looking at Average Revenue and RevPAR, the data does, however, show a marked year-over-year decline. This is most likely due to the increase in rental supply, but also may be a result of less discretionary income in the household due to inflation.
The tables above show year-on-year revenue and pricing data from PriceLabs for the entire Nashville market. Each year since 2022 has seen a decline in average revenue. For example, the average revenue in June 2023 was $7,187. In June 2024 it was $6,950. Similarly, RevPar, which takes occupancy and rate into consideration declined from $259 in 2023 to $255 in June 2024.
Data reported by AirDNA, a competitor to PriceLabs, indicates a similar pattern. The table below represents the entire US market and includes projections for the balance of 2024 and 2025. Their data shows a sharp decline in both occupancy levels and ADR in 2023 but indicates a slight improvement for 2024 and 2025.
The supply of short-term rental properties has continued to expand, albeit at a slightly slower pace due to regulatory challenges. This is reflected in both the AirDNA US data above and Nashville PriceLabs below.
Active listings in Nashville are at an all-time high, but the demand pattern in our market is not consistent with broader patterns in the US with reflect increased demand. What we do know (according to AirDNA) is that there is a trend towards vacationing in costal markets, which accounts for the inconsistency in demand between the two models.
Demand remains robust, supported by a mix of leisure and business travelers. The city’s diverse cultural offerings and vibrant event schedule continue to attract a steady flow of visitors.
Year-to-Date Performance
We absolutely love what we do – we have been a Superhost on AirBnB and a Permier Host on VRBO since October 2022! In 2024, your combined properties have received 238 5-Star, 37 4-Star, and 7, 3-Star reviews.
Our dynamic pricing strategy continues to work well, increasing rates during high-demand weekends and reducing them mid-week to maintain steady occupancy. Continued emphasis on flexible cancellation policies and lower cleaning fees has proven effective in attracting budget-conscious travelers and those with flexible travel dates.
Booking patterns during the second quarter reflect much the same as what we saw in the first quarter, however, contrary to what was expected, both average occupancy (for all seven days) and average weekend pricing are down from last quarter.
Pricing between Sunday and Thursday is slightly up from what we saw in Quarter 1.
It is difficult to pinpoint precisely what is driving this trend, since it could be a result of any of several factors including increased supply, seasonal variations, economic factors, strategic pricing adjustments, changing consumer preferences, and regulatory changes. It is more likely the interplay of these factors which can collectively account for the observed decrease in average occupancy and weekend pricing, while mid-week pricing experiences an uptick.
Year-to-date, Nashville’s short-term rental market has maintained a strong performance trajectory. The market has seen a year-over-year increase in revenue, although, as outlined above, due to increasing supply, this is true for total market revenue rather than the individual property.
When comparing the performance of our managed portfolio during Quarter 2 with the same period in 2023, we see a decrease in average daily rate from $278 in 2023 to $251 in 2024. Occupancy has however increased from last year for this same timeframe. We attribute this to our multi-channel strategy which targets guests in different geographies and with different travel needs.
Travelers booking though VRBO tend to stay longer (on average) than travelers on other channels. AirBnB is still our single largest source of bookings, but we are excited to see an increasing number of reservations coming from the smaller niche channels (Partners) such as Hopper, Whimstay, and VacayMyWay.
Booking.com is significantly more popular in Europe and the majority of our international travelers book thorough that channel. These travelers also tend to stay longer and have helped to fill up mid-weeknights. Direct bookings through our booking engine, Hostaway Direct and Google still only account for a small percentage of overall reservations, however, these tend to be more profitable for owners since there are no channel fees incurred.
Being a transient market, Nashville attracts a diverse group of travelers. We actively screen every guest and have systems in place to monitor guest behaviors. To protect your investment, we routinely make adjustments based on what we are experiencing.
Below are two examples of how we have implemented practical changes in response to observed patterns.
- We have implemented mandatory damage deposits for all Booking.com guests and no longer allow same-day bookings from that platform. We found that even though that platform brings in a lot of European travelers, it also tends to attract last minute travelers looking to score a good deal.
- We have also eliminated 1-night weekend bookings unless we have an orphaned, single-day Friday or Saturday between other bookings. In these instances, our software automatically adds a 50% premium to the rate, which seems to deter troublesome guests looking for a last-minute deal. Since weekends are generally always booked, this change has not had any noticeable impact on reservations or revenue, but we have seen a significant decline in noise events, complaints from neighbors, damage to property, and the type of guests who demonstrate no respect for your property.
Forward Look for Q3 and Beyond
The summer months typically see increased travel due to school vacations and favorable weather. Music concerts and events drive the booking calendars in July and August, although August usually does slow a little due to children returning to school. When humidity and temperature levels start to drop as we enter September, we anticipate occupancy to be driven by Bachelorette groups and Football fans.
We remain optimistic and consider the ongoing growth in Music City to be reflective of the city’s sustained appeal as a top travel destination.
Nashville Housing Market
For investors looking to increase their short-term rental portfolio, the Nashville housing market shows strong performance in both new builds and resales, with prices rising due to sustained demand. Properties ideal for short-term rentals, especially in prime locations, command premium prices, reflecting their high rental income potential. According to Redfin, the price of affordable short-term rental properties in Nashville has increased by 42% since 2022, posing challenges for investors.
Several factors contribute to this trend. Zoning laws in Nashville restrict where short-term rentals can be located, impacting the availability of properties that can be legally operated as such. Caps on non-owner-occupied short-term rentals in certain residential areas further limit new permits, aiming to balance the interests of long-term residents and rental operators. Increased enforcement actions against unpermitted short-term rentals and those violating city ordinances, along with significant fines and penalties, deter property owners from entering the short-term rental market Additionally, opposition from neighborhood groups concerned about the impact on community character and safety influences restrictive regulations and city council decisions on short-term rental policies. (Redfin) (Realtor).
The overall housing market in Nashville remains competitive. Homes receive about two offers on average and sell within 48 days. The average price per square foot for homes is approximately $278, a 2% increase from last year, indicating healthy demand, especially for properties that can be converted into short-term rentals. The increasing popularity of Nashville as a tourist destination supports demand for short-term rental properties, driving price appreciation and competition for desirable properties.
The average sale price for homes during Q2 2024 is approximately $678,339, encompassing both new builds and resale properties, reflecting ongoing demand for quality housing options. The median sale price for new construction homes is around $520,000, with new developments focusing on modern amenities and prime locations. High-end properties, such as luxury townhomes and single-family homes in desirable neighborhoods, often exceed $1 million.
Resale homes have also performed well, with the median sale price for existing homes reaching around $531,422, a 3.4% increase from the previous year. Homes ideal for short-term rentals, particularly those in vibrant neighborhoods and near key attractions, typically range between $400,000 and $700,000, with higher prices for properties offering unique features or proximity to major events. (Visit Nashville TN).
Rising property prices in Nashville may challenge new homeowners, but existing short-term rental owners may benefit as new entrants face higher operating costs, leading to higher rental prices.
Recap of Key Points
Don’t miss out on the opportunity to maximize your Nashville short-term rental income. Connect with us today to learn how our expert team can help you achieve your goals. Let’s work together to unlock your property’s full potential.