The Future of Short-Term Rentals: Evolving or Stagnating?

Despite initial popularity during the pandemic, the short-term rental sector faces stagnation and challenges in maintaining customer loyalty due to growing scrutiny and high expectations.

The short-term rental (STR) sector, once a beacon during the pandemic era, now finds itself at a crossroads. According to a recent report from Phocuswright, U.S. Short-Term Rentals 2025: Guest Attitudes and Decision Making, the usage of STRs among leisure travelers in the United States has stagnated at approximately one-quarter of the market since 2020.

While companies like Airbnb continue to report strong earnings, the STR sector grapples with a reputational drag. This is due to various factors, including viral negative headlines, inconsistent guest experiences, and increased scrutiny from the next generation of travelers.

Madeline List, author of the report and manager of research and special projects for Phocuswright, stated that although rental guests have expressed high satisfaction with recent stays, they are not exclusively loyal to the STR sector. “In addition to their STR stays, 68% of rental guests also stayed in a hotel and 18% in a resort. These travelers are highly cognizant of hotel standards and compare the two types of accommodations in both shopping processes and the stays themselves.”

Younger guests, those under 35, are exhibiting signs of skepticism. They are less likely to view STRs as offering the best overall stay and are more sensitive to negative press. Furthermore, they question whether rentals deliver real value for money, despite the STR sector’s space, amenities, and flexibility advantages. If these perceptions persist, the future growth of the STR sector is at risk.

Hosts within the STR sector also acknowledge these issues. A majority agree that unprofessional behavior in the sector is undermining consumer trust. This is a significant concern, as nearly two-thirds of guests have indicated negative stories have impacted their decision-making process. Consequently, public perception is as crucial as product delivery in the STR sector.

“As guest expectations continue rising to mirror those of hotels, many property managers expect to see a fallout in the competitive scene,” List said. “Properties that adhere to the highest standards are expected to win more guests, especially in a market saturated with rental inventory. Those who fail to meet these challenges are at greater risk of financial failure and exiting the market.”

The STR industry is not just maturing—it is under pressure to adapt. Transparency, consistency, and reputation management have become non-negotiable aspects of future relevance. In a saturated marketplace, shaping public perception may be as critical as the product quality behind the door.

“A stable portion of leisure travelers are staying in rentals in recent years, though their frequency of category usage and amount spent on these accommodations may have fluctuated,” List said. “The vast majority of travelers who use rentals have been pleased with their recent stays, but significant issues persist that will need to be addressed for STRs to make further inroads on hotels.”

The future of the short-term rental sector seems to hinge on its ability to evolve and meet users’ rising expectations. With the industry at a crossroads, the next few years will undoubtedly shape its trajectory.

Phocuswright’s report, U.S. Short-Term Rentals 2025: Guest Attitudes and Decision Making, is part of a comprehensive consumer research study focused on the dynamic short-term rental travel segment.