The New Normal: U.S. Short&Term Rental Market Trends and Challenges in 2025

The short-term rental (STR) sector has undergone significant changes due to the pandemic, with increased competition, stringent scrutiny, and diverse financial goals among small hosts. The industry faces challenges in cost management, saturation, and regulation, which are affecting its growth and sustainability.

The short-term rental (STR) industry has experienced a unique arc of growth and development, particularly during the COVID-19 pandemic. Initially hit hard by the lockdowns, the sector quickly rebounded as consumers recognized the benefits of private, spacious accommodations, which reduced exposure to contagions.

The low interest rates and soaring demand during the pandemic drew new hosts to the market, eager to capitalize on the sector’s success. However, this surge in category usage also led to increased scrutiny. While guests enjoyed STRs’ benefits, they also encountered inconsistencies in their experiences due to the diverse range of operators, varying levels of professionalism, and unique features of each property.

By 2025, the accommodation options available to guests have expanded significantly, including the opportunity to stay in STRs abroad. The competition has intensified with the continued presence of pandemic entrants, challenging some operators to outperform their rivals.

Phocuswright’s latest report, “U.S. Short-Term Rentals 2025: Host and Property Manager Trends,” examines how operators cope as the market gradually adjusts to its new normal. The report highlights a range of financial goals and competitive capabilities among small hosts (those with fewer than 10 properties and not professional managers). Many operators are stepping up their game, acknowledging the breadth and intensity of the competition. However, challenges persist in delivering consistent experiences, sustainably expanding management businesses, and developing accommodation offerings that align with guest demand and expectations.

The financial goals of hosts are crucial to understanding the market dynamics. The small host market is diverse, with many professional approaches and business objectives. Unlike the hotel sector, where profit is the primary driving force, 45% of STR hosts seek profit, 28% aim to offset their monthly home expenses, and 27% aspire to cover them completely through their rental revenue.

Hosts identify cost management issues as the most significant obstacles to their business success. These challenges have become more pronounced due to market saturation and increased competition standards, which can negatively affect revenue and necessitate stricter cost control.

The competitive landscape has evolved since the pandemic, with more hotels reopening and the privacy associated with rentals transitioning from a health necessity to a preference. This shift has raised concerns about the financial viability of U.S. operators and underscored the need for stronger competitive strategies.

About one in four current hosts has ceased renting out at least one property in the past year, either temporarily or permanently. Furthermore, 10% of surveyed homeowners were former STR hosts. Despite the ambitious growth goals of several VC-backed management firms and IPOs, property managers have struggled to scale sustainably.

Regulation is an additional source of uncertainty for industry growth. Despite best efforts to expand and scale businesses, local or regional regulations can shut a business down almost instantly, as happened in New York City.

Phocuswright’s “U.S. Short-Term Rentals 2025: Host and Property Manager Trends” report is part of an extensive consumer research study focusing on the dynamic short-term rental travel segment. Avalara, Expedia Group, and Allianz Partners sponsor the study.