Short-Term Rental and Its Classification: Comparison
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The rise of short-term rental (STR) platforms such as Airbnb in the past decade has brought about significant changes in the tourism industry. To be specific, these platforms have transformed the way people travel by directly connecting hosts and guests, providing individuals and property owners with the opportunity to offer their homes or spare rooms for short-term stays. This shift has offered a wide range of lodging options to travelers in terms of price and location, allowing travelers to choose accommodations that suit their preferences and budgets. This variety has resulted in increased tourism demand and has contributed to the local economy, particularly in rural areas that heavily rely on tourism as a vital source of income and employment. The accessibility and affordability of STRs have attracted tourists who seek unique experiences and a more intimate connection with the local culture and community.

  • short-term rentals
  • rural areas
  • survival analysis
  • housing affordability
  • tourism

1. Short-Term Rentals (STRs): An Evolving Landscape

Short-term rentals offer travelers a unique value proposition, combining cost benefits, residential comforts, and a more authentic local experience [18][1]. Unlike traditional accommodations, STRs frequently pop up in a variety of locations, particularly near transport hubs and tourist attractions. This geographical flexibility channels tourism revenue into areas previously overlooked by tourists [1,2,3,4][2][3][4][5]. Consequently, a more decentralized travel ecosystem is emerging as STRs grow in popularity in both core and peripheral areas, diverging from the dominance of traditional accommodations like hotels [9,10,19][6][7][8]. For hosts, STRs present both financial and experiential rewards. Hosting can supplement income, reduce personal expenses, and offer a chance to connect with a global audience. This environment fosters sharing and cultural exchange, enriching the host’s life experiences [20,21][9][10]. However, the proliferation of STRs is not without its challenges. Their growth has intensified touristification, especially in bustling city centers [22,23][11][12], and led to the gentrification of regions previously untouched by tourism [7,8][13][14]. With STRs now outpacing traditional lodgings, concerns over overtourism emerge, particularly as tourists venture deeper into traditional residential areas [9,10][6][7]. This growth in STRs affects urban dynamics, too. As residential properties transform into STRs, housing availability for local residents shrinks, exacerbating depopulation concerns [24][15]. While overtourism previously concerned mainly natural reserves, today’s urban centers are the new focal points requiring revised management strategies [25,26][16][17].

2. Economic Impacts and Challenges

The growing popularity and expansion of Short-Term Rentals (STRs) have initiated ripple effects across various economic aspects of cities around the world. A significant area of interest is their influence on local property markets. A body of research illustrates a direct link between the proliferation of STRs and the upward pressure on property prices and rents. Sheppard and Udell and Garcia-López et al. have provided evidence that in cities where STR platforms have grown rapidly, there has been a noticeable escalation in both property prices and rental values [12,13][18][19]. Another facet of the STR economic debate is the issue of housing affordability. As more properties are converted into STRs, locals often find it increasingly challenging to find affordable rental options. Concerns over the widening rental gap and potential displacement of long-term residents have been highlighted in works by Simcock, Amore et al., and Lee [27,28,29][20][21][22]. The narrative of gentrification and “touristification” becomes especially poignant when platforms like Airbnb extend their reach beyond typical tourist areas and into the heart of traditional residential neighborhoods. Sequera and Nofre underscore that this shift has sometimes resulted in tensions between locals and short-term renters, leading to calls for regulatory interventions [24][15]. On the brighter side, the rise of STR platforms is not without benefits for the local communities. Inclusive tourism, where visitors engage more authentically with local cultures and economies, can be facilitated by platforms like Airbnb. Kadi et al. discuss how community-driven initiatives, backed by STR platforms, have empowered local residents, offering them alternative sources of income and avenues for cultural exchange [30][23]. Nevertheless, it is crucial to understand that while STR platforms often market themselves as champions of the ‘sharing economy’, a significant portion of the STR market is not necessarily ‘shared’ by typical homeowners. Findings from Mermet and Wachsmuth and Weisler indicate that a dominant segment of STRs, particularly in major cities, is managed by commercial entities or hosts with multiple listings [8,31][14][24]. This commercialization underscores the need for a balanced approach in regulation to ensure that the benefits of STRs are widespread and not concentrated in the hands of a few.

3. Competiton with Traditional Lodging Industry

The relationship between Short-Term Rentals (STRs) and hotels continues to be a topic of debate and intrigue within the hospitality sector. As platforms like Airbnb have gained prominence, the traditional hotel landscape has been compelled to respond, sometimes in unexpected ways. From an economic perspective, the effects of STRs on hotel revenues and rates have been varied. Studies from Zervas et al. and McGowan and Mahon suggest that the rise of the STR market has led certain hotels, especially those in the budget category, to reevaluate and often reduce their prices [32,33][25][26]. This is likely due to an increased supply of accommodations and a shift in traveler demand towards more diverse and competitively priced lodging experiences. However, research by Choi et al. and Blal et al. posits that traditional hotels, particularly the more established ones, have remained relatively unaffected, with only minor impacts on their revenue streams [34,35][27][28]. Examining the traveler’s mindset provides further insights. Guttentag and Smith propose that the appeal of STRs is not solely based on price [36][29]. Many Airbnb users, they argue, might prefer mid-range hotels if platforms like Airbnb were not available. This suggests that travelers are not just seeking cost-effective options but also unique and localized experiences, which STRs often provide better than conventional hotels. Hoteliers’ perceptions of STRs add another layer to this complex discussion. While it might be assumed that traditional hotels would view Airbnb and similar platforms as direct competitors, findings from Koh and King, and Varma et al. indicate otherwise [37,38][30][31]. Not all hotel representatives see STRs as direct competitors. Some view them as a different segment within the broader hospitality ecosystem, catering to different traveler needs and preferences. This viewpoint suggests that while STRs might cater to travelers wanting genuine, homely experiences, traditional hotels still attract those who prioritize consistency, full-service amenities, and professional hospitality.

4. Classification of Short-Term Rentals (STRs)

The understanding and categorization of Short-Term Rentals (STRs) is crucial in effectively analyzing their impacts on various elements, predominantly the housing market. This is because the STR effects can significantly diverge based on whether a property is entirely dedicated to short-term rentals or if it serves as the host’s primary residence with a fraction rented out. Proper classification allows for a comprehensive analysis of these effects and enables the development of appropriate regulations. Previous research, such as the studies conducted by Furukawa and Onuki and Combs et al., has made attempts to classify STRs [39,44][32][33].
Furukawa and Onuki’s classification approach leaned on the host’s occupancy status and whether the rental was operated in their primary residence [44][33]. They identified the following three types:
  • Primary Hosted STRs: These rentals are operated in the primary residence of the host, with the host staying at home during the guests’ stay. Only a part of the home is offered to the guests.
  • Primary Unhosted STRs: These rentals are operated in the primary residence of the host, but the host is absent, and the entire home is rented to the guests.
  • Nonprimary STRs: These rentals take place in properties other than the host’s primary residence, including second homes and properties used for commercial purposes.
Combs et al. focused on the potential conversion of long-term housing units to STRs. Their categorization of STRs centered around occupancy rates, active status, and if the entire home was rented out [39][32]. They identified two main types:
  • Frequently Rented Entire-Home Listings (FREH): These listings were available for rent for at least 120 nights last year and rented for at least 60 nights.
  • Very Frequently Rented Entire-Home Listings (VFREH): These listings were available for rent for at least 240 nights last year and rented for at least 120 nights.
researchers employ a classification strategy similar to Combs et al. but with a distinct emphasis. Rather than focusing on performance indicators such as revenue and occupancy rate, wresearchers prioritize the active status of the listings. This decision stems from the possibility that new and rapidly emerging STRs could be inaccurately classified if assessed solely on financial performance. For example, new STR units typically require an average of four weeks to secure their initial booking, ushering in a period of revenue stabilization [15][34]. As a result, newly listed units might initially be classified as inactive STRs due to lower occupancy rates or delayed revenue generation. Moreover, this strategy is directly linked to potential implications for the housing market. The active status indicates whether the property contributes to the housing market inventory, regardless of its popularity or revenue. This focus on the active status rather than financial performance indicators provides a clear perspective on the impacts of STRs on the housing market. This focus on the active status rather than financial performance indicators provides a clear perspective on the impacts of STRs on the housing market. The proposed classifications are as follows:
  • Full-Time STRs: These are properties wholly dedicated to short-term rentals, and the entire home/apartment is rented out. They maintain an active listing status throughout the year. This full dedication to the STR market may potentially reduce housing availability for long-term rentals (LTRs), influencing housing affordability.
  • Occasional STRs: These are properties that intermittently operate as short-term rentals. Here, the entire home/apartment is rented out, but they maintain an active listing status only for a period of at least one month within a year. Property owners typically utilize these spaces for STRs when they are not personally occupying them. Although these properties do not entirely serve the STR market, their periodic use as STRs makes them unavailable for the LTR market during their active periods.
  • Partial STRs: These properties involve only a portion of the home being listed as an STR, with an active listing period of at least one month within a year. They are categorized as “Private Room” or “Shared Room” listings. While they may cause minor inconveniences to neighbors, they generally have a lesser impact on housing affordability.
Our classification of STRs that considers the active status of the listings is an important step in evaluating their multifaceted impacts, especially on the housing market. WResearchers believe this perspective, although diverging from a purely financial focus, allows for a more thorough understanding of STRs influence on housing availability and affordability that has been rarely explored. By defining STRs as Full-Time, Occasional, or Partial, weresearchers can better examine the dynamics of the STR market, considering the continuous growth of these rentals, particularly in rural areas.

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