Worldwide: It’s that time of year once again when I gaze into my crystal ball to predict the prevailing trends in the global short-term / vacation rental industry over the next 12 months. Yet, if 2024 has taught us anything for 2025, it is to expect the unexpected and to be resolute in the face of adversity. Even Nostradamus would have a job on his hands visualising where the next great innovation will come from or which market will announce even stricter STR legislation.
We’ve seen seismic election results in the United States, the UK and more, the Paris Olympics and Paralympics defied the cynics with a glorious summer of sport after a unique opening ceremony, and ‘overtourism’ protests have sprung up across the world with holiday rentals bearing the brunt of local residents’ ire. That’s before we’ve even mentioned the technological innovations, as M&A consolidation accelerates, conversational searches take over, and ChatGPT launches its own search engine to take on the behemoth that is Google.
After another turbulent year – economically, politically and touristically, we wait to see what 2025 has in store for this ever-expanding vertical. Despite significant headwinds, the global STR market is projected to reach a value of $138.1 billion by 2025, growing at a CAGR [compound annual growth rate] of 10.9 per cent [Furnished Finder] as shifts in travel patterns and consumer preferences power sustained demand for flexible accommodations.
If you’re looking for unique expert insights and actionable takeaways for the next 12 months and beyond, you’ve come to the right place. Read on for our forecasts for the future of artificial intelligence [AI] in searches, systemisation, loyalty, booking behaviour, and what comes next in the overtourism vs undertourism debate. And if you want even more reading material, check out our previous predictions article from a year ago to see what we got right and where we went wrong.
Scroll down as we outline our five predictions for the industry in 2025.
- The increasing ‘systemisation’ of the short-term rental sector in 2025 and a move closer to the tours and activities sector
While much of the talk in the short-term rental industry has revolved around ‘standardisation’ and ‘professionalisation’ in years gone by, we should now be preparing for a new era of ‘systemisation’. The segment itself was founded on the principles of hospitality and though standards have been elevated and processes have tightened up, the desire to drive unique guest satisfaction and exceptional service through ‘systemisation’ will be top of mind for all vendors and property managers ahead into the New Year.
The rapid rate of innovation and growth across the segment has addressed certain pain points but also left a vast number unanswered, leading a wave of disruptive players to enter the sector and provide everything guests need all in one place. One company making such a move is Resooma, which is broadening its horizons from the student accommodation market to leverage untapped demand for its services in the STR space – offering wifi details, decarbonisation advice, carbon data utilities, accounting and more all on one platform.
Co-founder Dan Jefferys hinted on the STRz 2025 predictions webinar that his startup had been “pulled” into the STR vertical to “consolidate” these tasks. In doing so, Resooma can harness the power of artificial intelligence [AI] to provide up-to-date, transparent data for hosts and property managers to maximise cost efficiency, while also ensuring that guests have the best possible experience during their stay.
Fragmented though the industry may be in terms of tech solutions, it will not stop more players from entering the sector – instead it will embolden them.
Enter ‘Airbnb for private chefs’ marketplace yhangry, which is making waves by partnering with STR property managers to offer private chef experiences for any occasion during the booking process. Co-founder Siddhi Mittal believes that her company is filling a gap in the market, amid rumours that Airbnb will also look into offering private chefs as part of a revamped Experiences program in 2025.
Mittal said: “Since the beginning of 2008, this is the first time that the STR industry is going through an over-supply of homes and is refocusing back on the guest experience. Only 33 per cent of STRs even offer any sort of upsells and it is not very professional. The whole next phase is how do you get the whole STR industry to compete versus hotels and a big part of that is food. People do want convenience and the big thing will be how can the plugin very easily offer this as a utility – it’s a complete no-brainer.”
This aligns with Bernstein’s presentation at the ShortTermRentalz Summit in November, when managing director Richard Clarke said that platforms would put a huge focus on upsells to drive ancillary revenue over the next 24 to 36 months. Mittal estimates that upselling could contribute up to 15 or 20 per cent extra margin for short-term rental operators.
Now, OTAs like Airbnb and Booking.com are not just building travel search platforms but holistic portals that offer a fully ‘connected trip’ with everything in one place for the booker’s convenience. We should therefore anticipate that more booking platforms will follow this route and take note from the burgeoning tours and activities space, which may itself diversify in the opposite direction towards accommodation to capture wider traveller demographics.
- AI to transform booking searches
Gone are the days of merely typing in a destination and booking the first property on a listing platform that takes your fancy. With the adoption of new search engines and the evolution of booking tendencies, searches will be vastly different and more specific than ever in 2025, thanks to the rise of AI.
Sites such as Plum Guide and Homes & Villas by Marriott Bonvoy have been notable pioneers in testing generative AI since its onset. The latter has spent this year perfecting an AI search tool that matches travellers with their perfect home and destination based on a natural language search describing their desired vacation. In the process, the brand is setting out to raise the bar in vacation rental quality as it enhances personalised searches through the AI-powered search tool, appealing to professional home management companies.
In the year ahead, personalised recommendations will be possible at scale, according to Simon Matthews, director of technology, data & OSS at SaaS-enabled marketplace HomeToGo. He argues: “AI will be able to analyse user data, such as past bookings, preferences and reviews, to curate hyper-personalised recommendations. At the same time, companies will need to prioritise data sovereignty, ensuring that all data is analysed in a compliant and secure manner as AI technology continues to evolve. This personalisation will make search sessions feel custom-tailored, saving time and improving satisfaction.”
While the potentially revolutionary benefits of AI are well documented, little to date has been made of how it will transform our search capabilities. Travellers are likely to evolve to engage in natural, conversational searches rather than using filters or “rigid” keywords to fulfil more complex or niche preferences. Search will become more distributed across devices and interfaces moving forward, accelerating the immersiveness between a user and their mobile device as two super power operating systems. And the rise of new search engines such as Perplexity, ChatGPT Search [powered by BING] and an “improved” BING fuelled by OpenAI’s partnership with Microsoft will lead to the combination of text, image and voice inputs, increasing accessibility and opening up new ways to discover vacation rentals.
Equally, large language models [LLMs] will play a significant role in reshaping the digital landscape, and brands must adapt to keep up with the pace of change, just like at the dawn of the mobile era. LLMs, a type of AI developed to understand and generate human-like written responses to queries, and alternative search engines will be crucial in generating visibility for travel and hospitality brands and delivering them to their target audiences.
Generative AI and LLMs will be seen less as mere ‘answer engines’ and instead as fine-tuned tools that can interpret questions and generate highly-pertinent responses. They will be able to decipher user intent more efficiently, identify keyword relevance more quickly, and prioritise coherent, contextually rich and informative content that enables brands to prioritise depth and accuracy in their messaging. In turn, these brands will rank higher through strong press coverage and brand mentions, while ultimately gaining more visibility when consumers search for their ideal trip.
The future of generative AI and what it will provide for brands is articulated in this Dune7 article: “The age of generative AI provides an opportunity for brands to focus on the entire customer journey to ensure their content is truly helpful during all stages, especially at point of conversion. Given generative AI’s predominant role as an ‘answer engine,’ customers still require depth of information that AIOs can’t currently solve for. This is especially true for high ticket items like travel.”
Further regulation of generative AI uses and the scope of AI systems is inevitable, however, as the EU AI Act takes effect from 2 February 2025. AI will be utilised intentionally in areas such as tackling fraud detection, tightening cybersecurity and deploying digital humans for customer service, and businesses will come under heavier scrutiny to deliver a return on their investment in AI initiatives as a result.
- ‘Overtourism’ to drive more radical STR regulations
Google and Deloitte are united in their assertions that people are planning more trips in 2025 – if that is true, the ‘overtourism’ conversation will only intensify as more pressure is placed on popular tourist hubs.
2024 was the year when we saw the proposal or implementation of drastic short-term rental regulations on an unprecedented scale. Barcelona plans to phase out all short-term holiday rentals for tourists by 2029. Malaga has banned new STRs in “over-saturated” areas for the next five years. One referendum has already taken place in Budapest and another is on track to be held in Lisbon.
Negative media coverage of the holiday rental sector is exacerbating the issue – according to international research agency GSIQ Tourism Insights, mentions of “overtourism” have tripled this year in the media and it is estimated that 80 per cent of travellers now visit just ten per cent of global destinations. All this is repositioning the debate to “who benefits” from tourism, fuelling local backlash and extreme reactions from national and local authorities who scapegoat the holiday rental sector for wider housing strategy failings.
This is noticeable in Spain, with YouGov detailing how more than a third of Spaniards [37 per cent] see the holiday rental industry as bringing more harm than benefits to local communities and 45 per cent having a negative view of the entire sector, compared to 21 per cent having a negative opinion of the hotel industry.
In 2025, as global tourism is due to exceed pre-pandemic records, we will see more destinations shift their social media strategies to get ahead of potential negative headlines and stories, in order to continue enticing tourists rather than detracting them.
Eva Satkute Stewart, global managing partner at GSIQ Tourism Insights, says that STR players should also consider changes to their offerings to keep up with the evolving make-up of demand and traveller preferences: “Travellers are seeking experiential travel and so, STRs must align with these shifting traveller needs. Solo travel is on the rise and remote workers represent a growing and important market segment, especially for medium-term stays. Blue-collar workers are also an overlooked category, and they are heavily reliant on STRs for stays during projects.”
Governments and authorities around the world that are in the process of regulating their national or regional STR markets will continue to impose harsh restrictions, borne out of a motivation to appease residents who are already frustrated by a shortage of affordable housing supply and a deepening cost of living crisis. However, destinations that are already further down that path will soon realise that their overreaction to tourism is reducing competition and allowing hotel operators to charge more without getting to the root of the problem. New York City, for example, could be about to partially revive STRs next year by extending hosting to owners of one- and two-family homes if an amendment to the controversial Local Law 18 is passed.
Attention will be broadened, particularly in Europe, to not only addressing ‘overtourism’ but also ‘overcrowding’ and ‘undertourism’. In an era where sought-after luxury hotspots are heralded on social media platforms such as TikTok, it will be difficult to maintain a sustainable, long-term distribution of tourists without the support and / or investment from OTAs, DMOs and property managers. Avantio chief marketing officer Alex Penades is predicting a rise in travellers “gatekeeping” their favourite spots by avoiding posting on social media when they visit “secondary” destinations.
For cities already “blessed with visitors”, McKinsey partner Margaux Constantin told The Economist that they should “avoid putting up barriers and instead enhance their readiness to welcome travellers”, e.g. by encouraging off-season travel and managing how tourists are distributed across a city or island to take advantage of the economic opportunities of tourism. If tourism chiefs and political leaders can engage in this sort of meaningful dialogue, travel redistribution will be a more realistic goal in the next 12 months.
- Boutique brands to benefit from loyalty shifts – and Airbnb to make its first steps towards a loyalty scheme
Loyalty schemes and points-based incentives are nothing new in travel and hospitality but the ways in which they are applied from now on are set to shift radically.
Brands such as Marriott [Homes & Villas by Marriott Bonvoy] and Expedia Group [Vrbo – One Key] have their own distinct loyalty schemes in the short-term rental segment, with each offering cross-brand rewards and the possibilities to reach higher tier status and instant member savings. However, despite their extensive benefits, new ‘next-generation’ loyalty programmes are emerging in the gap between hotels and rentals to fulfil modern travellers’ cravings for flexibility and personalisation.
Claiming to be the first rewards programme tailored specifically to private rentals and boutique hotels, Journey is setting out to enhance both the guest experience and operator success by boosting direct bookings and guest personalisation through AI-enabled tools. Journey’s network enables travellers to earn points and perks across a curated network of “unique, independently operated properties”, and this “alliance” between individual and private properties is a pointer to where the loyalty discussion will develop in 2025.
Zach Busekrus, head of the Journey Alliance, is envisaging a more meaningful shift in corporate travel in the year ahead, with boutique brands set to capitalise on evolving customer preferences in place of legacy names such as Marriott and Hilton. Predicting that corporate retreats will see “a massive boom”, Busekrus suggests that this demographic of traveller is growing “tired” of standard, inflexible and traditional loyalty schemes, and is instead seeking out “immersive, off-grid stays” to enhance team building. As team sizes grow smaller or are dramatically reduced through layoffs, entrepreneurs will face an unmissable opportunity to forge an intentional team culture in the remote working era, or end up missing out on the best available talent.
To avoid falling behind in the race to attract and retain new guests, large hospitality brands with long-standing loyalty schemes may well be tempted to partner with experiential travel operators – Hilton’s partnership with AutoCamp and Hyatt’s alliance with Under Canvas should be just the start of this.
To date, Airbnb’s engagement in the loyalty conversation has been minimal but that could be about to change, with co-founder and CEO, Brian Chesky, admitting that the home-sharing firm wants to launch between one and three new business lines each year from now on. AirDNA chief economist Jamie Lane has intimated that an Airbnb loyalty scheme could be “akin to Amazon Prime rather than traditional hotel rewards”, where members could enjoy discounted fees, concierge services, travel planning assistance, gym memberships or coworking space access – all for an annual fee. Busekrus is more sceptical about the imminent introduction of an Airbnb loyalty programme, however there is plenty of evidence that the company is looking to make a community play to build physical social networks and diversify into new markets.
Pierre-Camille Hamana, founder and CEO of Hospitable, believes that the intensifying battle for guest ownership between property managers and OTAs will result in more operators prioritising driving direct bookings: “Strategies are evolving from merely attracting direct bookings to actively retaining guests and nurturing long-term relationships. While property managers have long sought effective ways to encourage repeat bookings and establish brand loyalty, what will now give them the upper hand is the depth of personalisation they can deliver independently.
“Advances in AI and technology are empowering property managers to build stronger, more personalised connections with guests than ever before, delivering bespoke experiences so tailored that OTAs can’t compete. With a greater focus on fostering meaningful relationships through personalised communication and customised experiences, we’re likely going to see loyalty redefined in the STR sector,” he added.
- Shorter booking windows and more last-minute bookings
Ongoing economic uncertainty, shifts towards more flexible living and working habits and growing interest in value-driven domestic travel will all be decisive factors in tightening booking windows and surges in last-minute bookings, as per the latest outlook reports.
Sykes Holiday Cottages’ Holiday Letting Pulse Report for October indicated that booking lead times have shrunk by ten per cent over the last 12 months, while the average length of stay also declined over the same period by eight per cent, reflecting a growing trend for last-minute getaways albeit in an uncertain economic environment. Despite this, the holiday cottage agency reported that its owners had seen a small three per cent uptick in revenue per holiday, suggesting that holidaymakers may be willing to pay more even for shorter trips than before or that owners are increasing their prices to maximise revenue opportunities.
On a broader European scale, vacation rental market data provider Key Data reported that 44 per cent of all bookings for its European clients in 2024 were made to arrive within 14 days, compared to 40 per cent of all bookings in the UK. Sally Henry, vice president of business development, EMEA, predicts that it will result in a squeeze on revenue as prices drop closer to departure days, and that the late booking trend will continue as property managers continue to navigate macroeconomic headwinds while booking customers seek out the highest value for their money.
Analysing data from North America and Europe, Lodgify COO Alex Vuilleumier concurs that last-minute bookings are a lasting byproduct of post-pandemic changing traveller behaviours, rather than a hallmark of that era. As travellers plan trips with less notice, he expects people to choose trips closer to home that require minimal planning instead of long-haul journeys, suggesting a growing preference for spontaneity and flexibility.
Meanwhile, Eric Goldreyer, owner and CEO of book direct vacation rental marketplace bnbfinder, pointed to how remote working has empowered travellers to plan more ‘spur-of-the-moment’ trips than in previous years, and they no longer feel the same pressure to book trips months in advance.
Equally, the combination of an all-time-high cost of living and economic uncertainties following the US Presidential Election [including the potential impact of tariffs] is likely to fuel greater interest in domestic travel for Americans in 2025, particularly for families who emphasise the value of convenience, cost and overall experience that vacation rentals offer, according to Goldreyer. Cost-conscious travellers will prioritise finding ways to make their money go further, without compromising on investing in meaningful experiences that are unique to their specific groups.
Watch our 2025 predictions webinar now at this link.
View the presentations of selected sessions at the 2024 STRz Summit here.
Agree or disagree with our predictions? Email me at paul@internationalhospitality.media with your thoughts.
