Short-Term Rental Market Update: Q1 2024

Q1 2024 in short-term rentals. 2024 was the year the market stabilised and the tax benefit shrank, and january through march has its own shape on top of that. Here is what moved, what it meant for an owner, and what the quarter was actually for.

What was happening across the market

2024 was the stabilisation. The panic of 2023 faded, supply growth slowed in most markets, and occupancy found a floor. What changed most was the tax side: bonus depreciation at 60% meant the same property produced a materially smaller first-year deduction than it would have three years earlier.

Buyers who had waited for prices to collapse were still waiting. What actually happened was a market that stopped falling and started rewarding operators who had systems rather than luck.

Financing costs remained elevated relative to the 2021 window, and buyers had adjusted their expectations rather than waiting for a return to cheap money.

The seasonal shape of Q1

Q1 is the widest spread of the year between markets. Southwest Florida, the Arizona desert and the Gulf snowbird markets are at peak, while the Smokies, the Poconos and most lake markets are in their thinnest stretch. A portfolio that peaks together has one revenue season; a portfolio built across both shapes has two.

Reading a quarter in isolation is how owners talk themselves into bad decisions. A thin quarter in a seasonal market is not underperformance, it is the shape of the asset, and it should have been in the model at purchase.

What Q1 is actually for

Q1 is also when last year's tax position becomes final and this year's becomes changeable. The participation log either exists or it does not, and the running average period of customer use for the new year starts accumulating from January.

At 60% bonus depreciation, the strategy still worked and the margin was thinner. Buyers doing the arithmetic properly found that purchase basis and marginal rate mattered more than they had when the deduction was 100%.

The Q1 checklist

1. Compute last year's average period of customer use from booking-level data before filing, rather than estimating it.
2. Total participation hours by person and by property, including managers and cleaners, because two of the seven tests depend on that comparison.
3. Start this year's log in January rather than reconstructing it in December.
4. Book preventive maintenance for the spring: HVAC service before summer, and pool or hot tub servicing before the season turns.
5. Review pricing for the coming peak against the comparable set as it stands now, not as it stood when you bought.

The risk carried into Q1 2024

The live risk in 2024 was regulatory rather than economic. Several resort markets tightened permits, and the direction of travel in high-pressure housing markets was consistently toward restriction.

2024 was a year to buy on fundamentals rather than on the tax benefit, because the tax benefit alone no longer carried a marginal deal.

The consistent thread across every quarter on this site is that the environment changes and the discipline does not. Twelve individual monthly revenue figures, a complete expense stack including reserves, and a stress test at 75% of projection that still covers debt service.

What to carry into the next quarter

January through March is one quarter of a business that is measured annually. The number that matters is not what this quarter produced but whether the year is tracking to the model, and whether the reserve is intact.

If the year is behind the model, the useful question is which input was wrong: revenue, cost, or the assumption about the market. Each has a different fix, and discounting is the right answer to only one of them.

If the year is ahead, the useful question is whether that is the property or the market. A property outperforming a flat market is a property to buy more of. A property matching a rising market has told you nothing yet.

Frequently asked questions