What Are the 25 Best North American Cities for Short-term Rental Investment Opportunities in 2024?

North America represents one of the fastest growing vacation rental markets in the world, with the number of short-term rental listings jumping 53% between June 2022 and June 2024.

With this comes opportunities for investors, who can potentially make hundreds of dollars per day, per property from a vacation rental in a high-demand market.

However, as with any investment there comes risk, and North America is a vast pool of possible locations, all with their own different characteristics.

To help narrow the field, we selected the top 25 destinations by Revenue per Available Rental (RevPAR) and analyzed both the potential income and the cost of acquiring properties in these areas.

What is RevPAR & why is it important for property investors?

Revenue Per Available Rental (RevPAR) represents the revenue generated by a property, averaged across all availability in a given period. If a property is 50% occupied for an available month with a booked ADR of $100, the RevPAR would be $50.

The magic of this metric is as a combined barometer of rate and occupancy to help to measure and project revenue performance, also allowing hosts to factor this into pricing accordingly. The metric also aids in benchmarking against other properties or brands.

On another hand, DMOs and tourism bodies can use RevPAR metrics for a myriad of business tasks. This knowledge enables them to assess economic impact, evaluate destination competitiveness, monitor performance, forecast and attract investments and foster collaboration opportunities, all of which contribute to the sustainable growth and success of the tourism sector.

Ultimately, RevPAR is arguably the most pivotal metric in understanding the ROI potential of any given property or market.

To make sure that we have only selected locations where there is a substantial pool of potential properties for investment, we have excluded locations with less than 10,000 listings.

Best North American cities to invest in short-term rentals from a purely RevPAR perspective

Looking first at purely the RevPAR generating capability of North American locations, the top 25 is dominated by sea front destinations.

These range from the islands of Hawaii, which has three entrants not just in the top 25, but in the top five, down to the complete other side of the US in Miami, sun and sand destinations are heavily represented in the top 25. Sixteen of the cities we have uncovered are coastal destinations and therefore these represent some of the best locations to look at investments into short-term rentals.

Outside of beachfront condos, other trends in the top 25 are for ski resorts, with Park City, Utah, and Breckenridge, Colorado in the top 25, and a surprisingly strong showing for Tennessee.

Four of the top 25 are located in the state around Nashville and in Sevierville County in the state’s east. It seems that this is driven by a relatively high density of attractions in these two locations, with the latter home to major theme parks such as Dollywood, the Island and Anakeesta.

Rounding out the top 25 are some of North America’s powerhouse locations for internal and international tourism in Las Vegas, Miami and New York.

Similar to the situation in Barcelona and Malaga in Spain, Hawaii’s short-term rentals may be on the brink of being phased out, so it is wise to proceed with caution. This development comes as the state government wrestles with a housing crisis, which was intensified by last year’s wildfires on Maui and ongoing issues of overtourism.

The all-important revenue ratio

As we covered in our comparable research into European investment locations, purely looking at RevPAR misses a huge part of the investment decision making process: asset price.

Average prices for a city center two bedroom apartment run from $17,733 per square meter in New York down to $3,062 in Las Vegas according to figures taken from Numbeo and Properstar. This nearly six-fold differential between top and bottom markets underlines that the potential time to break even on a property investment can be drastic, especially given that the differential between 1st and 25th for RevPAR is only 3x.

Therefore, what we decided to do was to gather average prices across these locations from Numbeo and Properstar and then divide that by our RevPAR figure to give a ratio that could roughly represent the potential for investment returns relative to the cost of purchasing a city center apartment.

What we end up with is a very similar spread to our European figures with the price-per-square-meter to RevPAR running from 19 in Ocean City up to 87 in New York, as compared to ratios ranging from 17 to 85 in Europe.

Another shared trend is for the major cities to be less affordable and have poorer ratios, with New York joined by Miami and San Diego at the bottom of the list.

The difference in sizes and general zoning and property usage can be stark. While New York has a population of 20 million across its metro areas, Park City and Ocean City have permanent resident numbers of less than 10,000. Both of these cities therefore have the majority of their property within city limits given over to tourism and leisure purposes.

This works out to a much faster return on investment for these destinations with low ratios.

Taking an average US two bedroom apartment, which is approximately 100 square meters and 80% loan-to-value purchase, a property in Ocean City (excluding interest on the loan) would take four years to pay off the initial loan and just over five years to recoup the complete investment. This compared to comparable numbers of nearly 19 years and 15 years in New York, respectively.

The lesson? Tourist towns with major draws have huge potential

While the bottom three cities for relative returns potential are several of North America’s most well-known and populous cities, the best performers are often smaller and tied to key major attractions and regularly host large events.

Nashville and Las Vegas are slightly different as they are major metro areas in their own right, but they do fit this profile. Key to their identities are the Strip for Las Vegas and Music Row for Nashville. Las Vegas has an enormous array of sporting and musical events, while Nashville hosts festivals such as Bonnaroo and CMA Fest.

Similarly, Ocean City, Panama Beach and Park City all revolve around their main geographic tourist attractions. This is the beachfront for the first two and a ski resort for the latter, with Ocean City also host to Oceans Calling and Country Calling festivals and Park City the home of the Sundance Film Festival.

Just outside of the top 25 for RevPAR, we found that 28th placed Myrtle Beach and Palm Springs – 29th – also fit this mold. They are both economies with high exposure to the tourism sector and home to festivals, most notably Coachella in Palm Springs. These cities have price per square meter to RevPAR ratios of 17 and 25, comparable to the best cities in the top 25.

The opposite end of the scale is dominated by major cities. Atlanta (40), Dallas (41), Houston (45), LA (65), Mexico City (52), Tampa (61), and Montreal (81) all have ratios that would place them at the bottom of our return on investment measure. Toronto is even further out with a massive ratio of price per square meter 142 times that of RevPAR!

Therefore, the clear pattern for investors in North America looking for bang for their bucks is to look outside major metro areas and to smaller cities with strong sets of local attractions and events.

These provide outsized opportunities due to lower purchasing costs, typically high year-round occupancy rates and key moments to raise rates substantially during points of elevated demand due to events.

It is worth noting that the top location, Ocean City, has one of the most tourism dependent economies and populations in North America, with the 7,000 or so residents dwarfed by peak visitor numbers of over 300,000.

If you would like more insights like these, then check out our page dedicated to dissecting data trends, follow us on LinkedIn or why not start a trial and access one of the industry’s most comprehensive datasets covering the short-term rental market?

About Lighthouse

Lighthouse (formerly OTA Insight) is the leading commercial platform for the travel & hospitality industry. We transform complexity into confidence by providing actionable market insights, business intelligence, and pricing tools that maximize revenue growth. We continually innovate to deliver the best platform for hospitality professionals to price more effectively, measure performance more efficiently, and understand the market in new ways.

Trusted by over 65,000 hotels in 185 countries, Lighthouse is the only solution that provides real-time hotel and short-term rental data in a single platform. We strive to deliver the best possible experience with unmatched customer service. We consider our clients as true partners – their success is our success.