Vacation Rental Owners

The 5 Best Cities for Airbnb in the US and Europe

Curious about which US locations are the best cities for Airbnb investment in 2022? Location plays a huge part in the amount of rental income that Airbnb hosts can make. Whether hosts are interested in Airbnb arbitrage or are ready to purchase a property of their own, knowing the best places for Airbnb investment is always a smart move. This article will discuss the best Airbnb cities for Airbnb rental income, and it’ll also cover the various factors that play into a location being profitable.

Making the Right Decision: Main Profit Factors to Consider

Determining whether a particular city will be profitable is a multifaceted undertaking. Multiple factors play into the profitability of a location. So, what makes a location one of the best cities for Airbnb?

Airbnb Occupancy Rate

The best markets for Airbnb have high occupancy rates. The Airbnb occupancy rate refers to the percentage of the time that guests are staying at a particular vacation rental property. Airbnb calculates occupancy rate by looking at Airbnb data and dividing the number of nights booked by the total nights available to be booked. For instance, a vacation rental booked 30 out of 30 days would have a 100% occupancy rate, while a rental that only has guests 15 out of 30 days would have a 50% occupancy rate.

Cities that are well-known tourist spots with booming economies generally have higher occupancy rates. Deciding to run a vacation rental in a city with a high Airbnb occupancy rate year-round, rather than a city with a clear peak season and a slower season, generally results in higher profits throughout the year.

Return on Expense

It’s always best to have a high ROI, or return on investment. Generally, a good ROI for a vacation rental is at least 10%, although above 5% is thought to be acceptable. An ROI of 20% or more is considered to be a great investment, but overall, the higher the ROI, the better. Typically, hosts find that the best cities for Airbnb have higher occupancy rates as well as higher ROIs. This is partially because hosts are able to charge higher nightly rates in cities that are in high demand.

Return on Expense

A common way to measure the ROI is to look at the cap rate, or capitalization rate, which represents the rate of return. This can be found by dividing the NOI (Net Operating Income, made up of gross income minus operating expenses) by the price of the property. Hosts can use the cap rate to compare rental properties in various markets.

Standard Daily Price

The average daily rate of a rental property varies quite a bit from city to city. Of course, with a higher daily rate comes increased revenue overall, especially if the city also has a high occupancy rate.

Local Rules and Regulations

One thing for hosts to look out for is local laws and regulations that prohibit short-term rentals. Many cities across the world have imposed rules regarding vacation rentals to protect their local housing markets. Hosts may also come across properties that are part of homeowners associations, which can also have rules regarding short-term rental properties. Before making the investment, it’s always best to do plenty of research regarding the local laws and restrictions.

5 Best Cities for Airbnb in the United States

What is the best place to buy property for Airbnb? According to Investopedia, these five US cities have the best potential for profit.

1.   Palm Springs, California

Sunny Palm Springs is an excellent choice for vacation rental hosts with an average home value of $333,000 and an annual profit potential of $62,621. It’s considered the best city for Airbnb in 2021. Winter tourists and snowbirds often flock to Palm Springs to escape the cold, snowy weather at home. Plus, Palm Springs is home to hugely popular music festivals, including Stagecoach and Coachella. There are limitless things to do in California, both expensive and budget-friendly, so it’s a popular vacation destination regardless of the time of year.

2.   Lahaina, Hawaii

Lahaina, Hawaii

One of the best cities for Airbnb, Lahaina has an average home value of $618,000 and an annual profit potential of $55,899. Hosts who can afford the initial investment of a property in Hawaii are sure to see a great return on their investment. Lahaina is on the island of Maui, and it has lovely weather throughout the entire year. Up until recently, tourists only had the option to stay at upscale resorts if they wanted to travel to Lahaina. This really opened up the market for vacation rentals to come in and offer more affordable lodging options for travelers. There are also numerous fun activities for guests to enjoy during their stay.

3.   Davenport, Florida

Davenport, Florida features an average home value of $152,667 and an annual profit potential of $45,520, truly making it worth the investment. It’s also more inexpensive to start a vacation rental in Davenport compared to some of the other top cities for Airbnb. While the city itself is small, it’s been experiencing major growth, and it’s very close to Orlando and Disney World. There are plenty of inexpensive activities for guests to engage in as well.

4.   Bend, Oregon

Bend, Oregon made it onto the list of the five best cities for Airbnb thanks to its average home value of $270,833 and annual profit potential of $42,131. Located near the gorgeous Cascade Mountains, multiple ski resorts, and the extinct volcano of Pilot Butte, this city is absolutely awe-inducing and has no trouble drawing in travelers. Those who desire to experience the beauty of Oregon on a budget can do that, too!

5.   Nashville, Tennessee

The final city making up the top five is Nashville, Tennessee. Although it may seem strange that such a large city would have so much potential, it’s been experiencing growth in group luxury travel with friends and family, thanks to bachelor and bachelorette parties. It’s also a major country music hub that brings in tons of travelers. Plus, it has an average home value of $271,368 and an annual profit potential of just over $40,000. Neighborhoods north of the downtown area are especially profitable.

5 Worst Cities for Airbnb in the United States

Next, check out the five cities where hosts should avoid starting up their vacation rental businesses.

1.   Miami Beach, Florida

Miami Beach, Florida

The problem with Miami Beach is that the home prices are extremely high (an average of $862,500), and it’s difficult for vacation rental hosts to make enough to offset their expenses. Plus, the market is very saturated in Miami Beach, meaning that there’s too much supply. This has lowered occupancy rates and average daily rates, resulting in less profitability. Clearly, this means Miami Beach is not one of the best cities for Airbnb.

2.   Venice, California

Venice, California is experiencing similar problems to Miami Beach. Its average home price is a whopping $1,583,000, and it’s nearly impossible for new hosts to turn a good profit in the oversaturated market. It’s easy to see why Venice is not one of the best cities for Airbnb investment in 2021.

3.   Berkeley, California

Berkeley also has very high real estate prices, with the average home costing nearly one million dollars. Although it’s a progressive university town with plenty of tourists, the market is extremely saturated with thousands of vacation rentals. There are also regulations in place saying hosts must be present if they want to rent their property for more than 90 days each year, so they can’t manage their vacation rental remotely.

4.   Oakland, California

Oakland is experiencing similar problems to Berkeley, although its average home costs a bit less at around $650,000. However, real estate prices continue to rise, making it a growing struggle to turn a profit.

5.   Houston, Texas

Houston has a reasonable average home cost of $212,734, but with over 9000 active vacation rentals, the market is very saturated. Real estate prices continue to rise, but it’s become harder to start a profitable Airbnb in Houston with daily rates and occupancy rates decreasing.

5 Best Cities for Airbnb in Europe

Based on their RevPAR, or revenue per available room, these are the best locations for Airbnb in Europe.

1.   Zermatt, Switzerland

Zermatt, Switzerland

Zermatt, located in southern Switzerland, is a gorgeous mountainous area known for hiking, skiing, and climbing opportunities. It’s located below the iconic Matterhorn peak and also features a main street complete with numerous boutiques and outdoor skating and curling rinks.

2.   Lège-Cap-Ferret, France

Located in southwestern France, Lège-Cap-Ferret is sometimes referred to as the “Cape Cod of France.” There are beautiful beaches, areas filled with trees, and plenty of opportunities for vacation rental hosts to take advantage of the profitable market. It’s no wonder that Lège-Cap-Ferret is considered one of the best areas for Airbnb in Europe!

3.   Bagnes, Switzerland

Some of the most iconic sights to see in Bagnes are the Val de Bagnes (a nature reserve), the Grand Combin (a high peak complete with glaciers), and Mont Fort (a snowy mountain where guests can ski). A chalet in this Swiss municipality has plenty of opportunity to succeed as a vacation rental.

4.   Sant Josep de sa Talaia, Spain

Located in Ibiza, Sant Josep de sa Talaia is known for its nightlife, as well as peaceful fishing villages and quiet coves. With deep blue water and sandy beaches, it’s a coveted tourist destination that has lots of potential for vacation rental owners as one of the best cities for Airbnb.

5.   Saint-Bon-Tarentaise, France

Saint-Bon-Tarentaise has plenty for tourists to enjoy, from skiing and snowboarding to bars, clubs, spas, churches, and cathedrals. It has less than 1000 short-term rentals with a high average daily rate, making it a good choice for hosts.

List Your Vacation Rental Property on RentalTrader

Are you tired of paying astronomical fees after listing your vacation rental on the most well-known sites? Well, RentalTrader is here to change that with its focus on cost-effectiveness for hosts and guests. It’s 100% free to sign up and list your vacation rental property, and hosts are only charged a 4.5% fee for each booking. Plus, there are no guest fees whatsoever! List your property on RentalTrader today.

Want to know more about the best cities for Airbnb in the US and Europe? Watch out this video now!

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