Do higher gas prices affect the short-term rental market? Well, it depends! Read on for more info.
By now, you have probably heard about or experienced higher gasoline prices at your local gas station. The reasons for this increase in price are many, some political and some economic.
It doesn’t really matter why prices have risen if you’re in the short-term rental business. It just matters that prices are higher, and these elevated prices may impact your profitability with your STR business.
You no doubt know that Russia's invasion of Ukraine has caused gas prices to rise quite a bit. Additionally, there was quite the pent-up demand for travel and other goods and services coming out of the COVID-19 pandemic and all the shutdowns and supply chain issues that it caused.
It's impossible to predict how the war in Ukraine will develop or how new sanctions imposed on Russia will affect gas prices in the long-term, but we do know that higher prices overall and gas prices specifically will reduce the number of people traveling.
This could, and probably will or already has, impact your vacancy rate, which has a direct impact on your revenue and profit.
If your short-term rentals are in vacation spots like Palm Springs, California, Vail, Colorado, or the Smoky Mountains, which require—for most people—extensive travel time, you can bet those “out-of-state” visitors will decline in volume and, therefore, reduce your potential customer base.
However, let’s not be too hasty in this assessment. It’s clear from the data we see that travel expenditures have gone up post-pandemic versus pre-pandemic.
So what’s really going on here?
The answer: It depends.
Some destinations will fare better than others.
For example, so-called “drive destinations” that aren't too far away are very popular compared to places that require a long drive or even more expensive air travel. (Don’t forget, gas prices rose in large part due to skyrocketing oil prices, which drives up all fossil fuel prices, including jet fuel.)
These locations seem more varied at first glance. However, the majority are merely a few hours' drive from major cities:
- Pennsylvania's Pocono Mountains (243 average miles)
- Oklahoma’s Broken Bow Lake (266 miles)
- The shores of Delaware and Maryland (284 miles)
- Coasts of western Michigan (297 miles)
- Maryland's Cambridge and Salisbury (329 miles)
- Missouri's Ozark Mountain range (334 miles)
- California's Big Bear (338 miles)
- New Jersey's Jersey Shore (341 miles)
- Missouri's Lake of the Ozarks (341 miles)
These are just a few of the destinations many folks are driving to in the short-term rental market. Of course, there are dozens upon dozens of other places in the United States that people are traveling to, either by car or by air. For example, many people fly or drive to Las Vegas for various events, both for business and pleasure. Some of the best places to set up a short-term rental is in suburban areas outside major cities. A perfect example is Henderson, Nevada, which is just outside Las Vegas and only a few minutes from Harry Reid (formerly McCarran) International Airport.
Outside of major cities, residential real estate is less expensive; you can often get more square footage in both homes and land; and it has a more laid-back atmosphere that people prefer over a cramped hotel room for a weekend.
In short, higher gas prices may have an effect on your short-term rental unit. But if you plan and market your business well and keep a close eye on your costs, you can have a great year right now, even if or maybe because gas prices have gone up.
If you need some help with your short-term rentals, you can always count on one of our dedicated short-term rental consultants.