Airbnb Market Research: How to Analyze Any Market Before Investing

# Airbnb Market Research: How to Analyze Any Market Before Investing

The number one mistake new short-term rental investors make isn't buying the wrong property. It's buying in the wrong market.

A beautifully designed three-bedroom with professional photos and a five-star cleaning protocol will still lose money if the market fundamentals don't support short-term rentals. Oversaturated supply, weak demand, hostile regulations, or brutal seasonality can turn a dream investment into a monthly cash drain — no matter how good your hosting skills are.

The investors who consistently build profitable STR portfolios don't rely on gut feelings, podcast tips, or "my friend makes a killing in [city]" advice. They run systematic market research before committing a single dollar. They analyze data, study regulations, evaluate competition, and score markets against objective criteria.

This guide gives you the exact framework. By the end, you'll know how to evaluate any market in the country — and you'll have a scorecard to compare markets side by side before making the biggest financial decision of your STR career.

Why Market Selection Matters More Than Property Selection

Here's a truth that experienced investors understand but beginners overlook: **a mediocre property in a great market will outperform a great property in a mediocre market almost every time.**

Market-level factors determine roughly 60-70% of your revenue potential. Property-level factors — your amenities, design, [listing optimization](/blog/airbnb-listing-optimization), and [pricing strategy](/blog/airbnb-pricing-strategy) — determine the remaining 30-40%. You can optimize your way to better performance within a market, but you can't optimize your way out of a fundamentally broken one.

Consider two scenarios:

• **Investor A** buys a modest cabin in a mountain town with 65% average occupancy, $225 ADR, growing tourism, and STR-friendly regulations. Annual revenue: $53,000.
• **Investor B** buys a stunning luxury home in a suburban market with 42% occupancy, $175 ADR, flat demand, and a city council actively considering STR restrictions. Annual revenue: $26,800.

Both investors spent similar amounts on their properties. One is cash-flowing. The other is subsidizing guests' vacations with their own savings.

Market research is how you become Investor A.

The Essential Data Tools: AirDNA, Mashvisor, and AllTheRooms

You can't analyze a market without data. Fortunately, several platforms aggregate short-term rental performance data that would be impossible to collect on your own. Here's how each tool fits into your research workflow.

AirDNA: The Industry Standard

AirDNA is the most widely used STR data platform, and for good reason. It tracks performance data from Airbnb and Vrbo listings across thousands of markets worldwide.

**What you get:**

• **MarketMinder** — market-level dashboards showing ADR, occupancy, RevPAR, supply growth, and demand trends
• **Rentalizer** — property-level revenue estimates for specific addresses
• **Comp sets** — filter comparable listings by bedroom count, property type, amenities, and location
• **Seasonal trends** — month-by-month performance data revealing peak and low seasons
• **Supply and demand charts** — track how quickly new listings are entering the market vs. how fast demand is growing

**Best for:** Deep-dive market analysis, comp research, and revenue projections. If you only subscribe to one tool, make it AirDNA.

**Cost:** Free tier available with limited data. Paid plans start around $30/month for a single market.

**Pro tip:** Don't just look at averages. Use AirDNA's filters to isolate listings that match your target property type. The average ADR for "all listings" in a market is misleading if you're buying a luxury four-bedroom and the average is dragged down by studio apartments.

Mashvisor: Investment-Focused Analytics

Mashvisor is designed specifically for real estate investors comparing traditional (long-term) and short-term rental returns. It's particularly useful during the market-selection phase when you're comparing multiple cities.

**What you get:**

• **Market comparison tools** — side-by-side metrics for different cities and neighborhoods
• **Cash-on-cash return estimates** — factors in purchase price, expenses, and projected revenue
• **Neighborhood-level heatmaps** — visualize where STR performance is strongest within a city
• **Occupancy and ADR data** — sourced from Airbnb and Vrbo listings
• **Traditional vs. STR comparison** — see whether a property performs better as a long-term or short-term rental (useful context when evaluating [Airbnb vs. long-term rentals](/blog/airbnb-vs-long-term-rentals))

**Best for:** Initial market screening and investment return analysis. Great for narrowing a list of 10 markets down to 3-4 finalists.

AllTheRooms: Broad Market Coverage

AllTheRooms Analytics aggregates data from over 100 booking platforms, giving it broader coverage than tools that only track Airbnb and Vrbo.

**What you get:**

• **Cross-platform data** — captures listings from Booking.com, Tripadvisor, and niche platforms
• **Market dashboards** — occupancy, ADR, RevPAR, and listing counts
• **Custom reports** — downloadable data for offline analysis
• **Historical trends** — multi-year performance data for spotting long-term patterns

**Best for:** Markets where a significant share of bookings happen outside Airbnb/Vrbo (international markets, resort towns with Booking.com presence, etc.).

Using the Tools Together

No single tool gives you the complete picture. Here's the workflow I recommend:

1. **Mashvisor** for initial market screening — compare 8-10 potential markets on high-level metrics

2. **AirDNA** for deep analysis — once you've narrowed to 3-4 markets, dive into the details

3. **AllTheRooms** for validation — cross-reference AirDNA numbers and check for platform-specific blind spots

4. **Manual research** on Airbnb and Vrbo — always verify data tools against what you see on the actual platforms

The Key Metrics: What to Measure and What They Tell You

Raw data is useless without knowing what it means. Here are the metrics that matter — and how to interpret them.

Average Daily Rate (ADR)

**What it is:** The average nightly rate across all booked nights for listings in a market.

**How to use it:** ADR tells you the pricing power of a market. Higher ADR generally means higher revenue potential, but it must be evaluated alongside occupancy. A $400 ADR with 35% occupancy produces less revenue than a $200 ADR with 75% occupancy.

**What to look for:**

• ADR trending upward year over year (pricing power is growing)
• ADR that supports your expense structure (mortgage, cleaning, utilities, management)
• ADR by property type — don't use the market average if your target is a specific bedroom count

**Red flag:** ADR declining year over year while supply is increasing. This signals an oversaturating market where hosts are competing on price.

Occupancy Rate

**What it is:** The percentage of available nights that are booked.

**How to use it:** Occupancy reveals demand strength. But context matters — a 90% occupancy rate might mean hosts are underpricing, while a 50% rate might be perfectly healthy in a luxury market with high ADR.

**Benchmarks:**

• **65%+ occupancy** — strong market with healthy demand
• **50-65% occupancy** — moderate market, viable but requires strong [pricing optimization](/blog/airbnb-pricing-strategy)
• **Below 50% occupancy** — weak demand or oversupply, proceed with caution

**Pro tip:** Look at occupancy for the top quartile of listings (4.8+ stars, Superhost status, professional photos). These represent your realistic ceiling. Market-wide averages include poorly managed listings that drag numbers down.

Revenue Per Available Rental (RevPAR)

**What it is:** ADR × Occupancy Rate. This is the single most important metric because it captures both pricing and demand in one number.

**How to use it:** RevPAR lets you compare markets that have different ADR/occupancy profiles on an apples-to-apples basis.

**Example:**

• Market A: $250 ADR × 70% occupancy = $175 RevPAR
• Market B: $350 ADR × 45% occupancy = $157.50 RevPAR

Market A generates more revenue per available night despite lower nightly rates. RevPAR reveals this; looking at ADR alone would mislead you.

**What to look for:** RevPAR growth year over year. If RevPAR is climbing, the market is getting healthier. If it's declining, dig into whether it's an ADR problem, an occupancy problem, or both.

Seasonality Index

**What it is:** The variation in occupancy and ADR across months. A market where January occupancy is 30% and July occupancy is 90% has high seasonality. A market where every month is 60-70% has low seasonality.

**How to use it:** Seasonality affects your cash flow predictability and your ability to cover fixed costs (mortgage, insurance, utilities) during slow months.

**Considerations:**

• **Low seasonality markets** (year-round demand) — easier cash flow management, more predictable income, lower stress. Examples: urban markets, markets with diverse demand drivers.
• **High seasonality markets** — can be extremely profitable during peak months but require [seasonal pricing strategies](/blog/airbnb-seasonal-pricing) and cash reserves for shoulder/off seasons. Examples: ski towns, beach towns, college towns.
• **Dual-season markets** — the sweet spot. Places with both summer and winter appeal (mountain towns with lakes AND ski resorts) smooth out the revenue curve.

**Red flag:** Markets with a single demand driver and extreme seasonality (e.g., a beach town with no off-season attractions). You'll make great money for 3-4 months and bleed cash the rest of the year.

Supply Growth Rate

**What it is:** The rate at which new STR listings are entering the market.

**How to use it:** Supply growth above 15-20% annually is a warning sign. If listings are growing faster than demand, occupancy and ADR will decline as hosts compete for guests.

**What to look for:**

• Supply growth that's **at or below** demand growth — healthy equilibrium
• Supply growth **exceeding** demand growth — early oversaturation signal
• Sudden spikes in supply — often follows media attention ("Best places to invest in Airbnb!" articles)

Comp Analysis: Studying Your Future Competition

Market-level metrics tell you whether a market is viable. Comp analysis tells you whether *your specific property type* is viable within that market — and what it takes to compete.

How to Build a Comp Set

1. **Define your target property** — bedroom count, property type (house, condo, cabin), amenities (hot tub, pool, waterfront), and guest capacity

2. **Search Airbnb and Vrbo** in your target market using the same filters a guest would use

3. **Identify 10-15 comparable listings** — similar size, location, amenities, and quality level

4. **Record key data** for each comp:

• Nightly rate (weekday and weekend)
• Number of reviews and average rating
• Calendar availability (how booked are they?)
• Listing quality ([photos](/blog/airbnb-photography-tips), [title](/blog/airbnb-listing-title), description)
• Amenities offered
• Superhost status
• Response rate and time

What Comp Analysis Reveals

**Revenue potential:** If the top 5 comps are averaging $250/night with 70% occupancy, that's your realistic target with excellent execution.

**Competitive gaps:** Maybe every comp in your target market has 3 bedrooms and sleeps 6, but search data shows demand for larger groups. A 5-bedroom property could command premium rates with less competition.

**Quality floor:** If the bottom-tier comps still have 4.5+ stars and professional photos, the market has a high quality floor. You'll need to invest in [professional photography](/blog/airbnb-photography-tips) and [thoughtful furnishing](/blog/furnish-airbnb-on-budget) just to compete — you can't phone it in.

**Pricing intelligence:** Study how top performers price across seasons, weekdays vs. weekends, and around local events. This informs your own [dynamic pricing strategy](/blog/dynamic-pricing-deep-dive).

The "Would I Book This?" Test

After reviewing comps, ask yourself: *If I were a guest searching this market, would my property stand out? Would I book it over the competition?*

If the answer is "maybe" or "it would be similar," that's not good enough. You want markets where you can create a clearly differentiated listing. Maybe it's a [hot tub when competitors don't have one](/blog/airbnb-amenities-that-increase-bookings), a better location, or a unique design aesthetic.

Regulation Research: The Make-or-Break Factor

You can find a market with perfect metrics — strong ADR, high occupancy, growing demand — and still lose everything if the regulations don't support short-term rentals. Regulation research isn't optional. It's arguably the single most important step in market analysis.

What to Research

**Zoning laws:** Does the local zoning code allow short-term rentals in your target area? Some cities restrict STRs to commercial zones, specific neighborhoods, or only owner-occupied properties.

**Permit and licensing requirements:** Most STR-friendly markets require a business license, short-term rental permit, or both. Research the application process, fees, and timeline.

**Occupancy or cap limits:** Some markets cap the total number of STR permits or limit them to a percentage of housing units. If the cap is hit, you can't operate — regardless of everything else.

**HOA restrictions:** Even if the city allows STRs, your HOA might not. Always review CC&Rs before purchasing a condo or property in a planned community.

**Tax obligations:** Research transient occupancy tax (TOT), sales tax, and any local STR-specific taxes. These directly impact your net revenue. (See our [complete guide to Airbnb tax deductions](/blog/airbnb-tax-deductions) for more on the tax side.)

**Insurance requirements:** Some markets require specific [STR insurance](/blog/airbnb-insurance) coverage or proof of commercial liability insurance as a permit condition.

Where to Find Regulation Information

• **City/county clerk's office** — the definitive source for local ordinances
• **Planning and zoning department** — zoning maps and permitted uses
• **City council meeting minutes** — search for "short-term rental" to see if restrictions are being discussed
• **Local STR host groups on Facebook** — boots-on-the-ground intel from hosts already operating
• **Airbnb's own regulation pages** — Airbnb maintains regulation summaries for many markets (though these can lag behind actual changes)

The Regulation Risk Spectrum

**Green (low risk):** Markets with established, stable STR-friendly regulations. Permit process is straightforward, no caps, and the local government views STRs as an economic driver. Examples: many Florida beach towns, Smoky Mountains gateway communities, parts of Arizona.

**Yellow (moderate risk):** Markets where STRs are allowed but with meaningful restrictions — annual permit renewals, night caps, noise ordinance enforcement, or active regulatory discussions. Viable but requires ongoing compliance monitoring.

**Red (high risk):** Markets with hostile or rapidly changing regulations — permit moratoriums, restrictive caps that are nearly full, pending legislation that could ban non-owner-occupied STRs, or cities with a track record of increasing restrictions. Avoid unless you have very strong local knowledge.

**Pro tip:** Don't just research current regulations — research the *trajectory*. A market that's STR-friendly today but has an increasingly anti-STR city council may not be friendly in two years when you're locked into a mortgage.

Demand Drivers: What Brings Guests to a Market

Understanding *why* guests visit a market is just as important as knowing *how many* guests visit. Demand drivers determine the sustainability, seasonality, and growth potential of a market.

Types of Demand Drivers

**Leisure/tourism:** Beaches, mountains, national parks, lakes, ski resorts, wine country. These are the classic STR demand drivers and tend to create seasonal patterns.

**Business travel:** Corporate offices, conference centers, hospitals, military bases. Business travelers book during weekdays and value convenience over charm. This demand is steadier but lower-ADR.

**Events and festivals:** Markets near major venues, annual festivals, or sporting events see demand spikes that can command 2-5x normal rates. Great for revenue but can't sustain a market alone.

**Relocation and temporary housing:** Growing cities attract people relocating for jobs. They need furnished housing for 1-3 months while they find permanent homes. This demand is year-round and growing.

**Medical tourism:** Markets near major medical centers (Mayo Clinic, MD Anderson, Cleveland Clinic) see steady demand from patients and families needing extended stays.

**Universities:** College towns see demand around move-in weekends, graduations, football seasons, and parent weekends. Predictable but concentrated.

Evaluating Demand Driver Quality

The best markets have **multiple, diverse demand drivers.** Here's why:

• A beach town with *only* summer tourism is vulnerable to weather, economic downturns, and seasonal cash flow gaps
• That same beach town with a nearby military base, a growing tech employer, and a popular marathon series has layered demand that provides year-round bookings

**Score each market on demand diversity:**

• **1 demand driver** — high risk, high seasonality
• **2-3 demand drivers** — moderate stability
• **4+ demand drivers** — strong, diversified demand base

Also evaluate whether demand drivers are **growing, stable, or declining.** A market dependent on a single major employer that's laying off workers is very different from a market with a new Amazon fulfillment center, a hospital expansion, and growing tourism infrastructure.

Red Flags: When to Walk Away From a Market

Not every market deserves your capital. Here are the warning signs that experienced investors watch for — and that beginners often miss.

1. Supply Growing Faster Than Demand

When AirDNA shows listing counts increasing 20%+ year over year while demand growth is flat or single digits, you're watching oversaturation in real time. Occupancy will drop, hosts will cut prices, and revenue per listing will decline.

2. Declining RevPAR

If RevPAR has declined for two or more consecutive years, the market is losing economic viability. This is different from a one-year dip (which could be a COVID anomaly or weather event). Sustained decline means structural problems.

3. Regulatory Hostility

City council members publicly calling for STR bans. Moratoriums on new permits. Proposals to limit STRs to owner-occupied properties only. If the political winds are blowing against short-term rentals, your investment is at risk regardless of current performance.

4. Single-Employer Dependency

Markets where one company or one military base drives the majority of economic activity (and therefore housing demand) carry concentration risk. If that employer leaves or downsizes, property values and rental demand collapse simultaneously.

5. Extreme Seasonality Without Cash Flow Buffer

If a market's peak season is only 8-12 weeks and shoulder/off-season occupancy drops below 30%, you need massive peak-season rates to cover 12 months of expenses. Miscalculate by even a little and you're underwater.

6. Negative Population and Job Growth

Markets losing population and jobs are losing the economic foundation that supports both property values and rental demand. Tourism can partially offset this, but a declining local economy is a headwind you don't want.

7. Unrealistic Seller Projections

If a seller or real estate agent shows you revenue projections that assume 80%+ occupancy and top-of-market ADR year-round, run. Compare their projections against AirDNA data. If the numbers don't align, the deal is built on fantasy.

8. High Entry Cost Relative to Revenue

A market might have great occupancy and ADR, but if property prices are so high that your cash-on-cash return is 3-4%, the risk-reward ratio doesn't work for most investors. Compare entry costs across your finalist markets — sometimes the "less exciting" market with lower property prices produces better returns.

Building Your Market Scorecard

Data overload is real. After researching 5-10 markets, you'll have spreadsheets full of numbers and no clear winner. A market scorecard solves this by forcing you to evaluate each market against consistent criteria.

The Scorecard Framework

Score each market from 1 to 5 on the following criteria (1 = poor, 5 = excellent):

| Category | Weight | What You're Evaluating |

|---|---|---|

| **RevPAR** | 20% | Is RevPAR strong and growing? |

| **Occupancy** | 15% | Is demand healthy (55%+ for your property type)? |

| **ADR Trend** | 10% | Is ADR stable or growing year over year? |

| **Seasonality** | 10% | Is demand spread across the year or concentrated? |

| **Supply/Demand Balance** | 15% | Is demand growth keeping pace with new supply? |

| **Regulation Environment** | 15% | Are regulations stable, clear, and STR-friendly? |

| **Demand Driver Diversity** | 10% | How many independent demand drivers exist? |

| **Entry Cost / ROI** | 5% | Does the purchase price support strong returns? |

How to Score

**RevPAR (20% weight):**

• 5 = Top 25% nationally for your property type, growing year over year
• 3 = Market average, stable
• 1 = Below average, declining

**Occupancy (15% weight):**

• 5 = 70%+ average occupancy for comparable listings
• 3 = 50-65% occupancy
• 1 = Below 45% occupancy

**ADR Trend (10% weight):**

• 5 = ADR growing 5%+ annually
• 3 = ADR stable (±2%)
• 1 = ADR declining 5%+ annually

**Seasonality (10% weight):**

• 5 = Low seasonality, year-round demand
• 3 = Moderate seasonality with dual-season appeal
• 1 = Extreme seasonality, single short peak season

**Supply/Demand Balance (15% weight):**

• 5 = Demand growing faster than supply
• 3 = Supply and demand growing at similar rates
• 1 = Supply growing significantly faster than demand

**Regulation Environment (15% weight):**

• 5 = Established STR-friendly framework, stable political support
• 3 = STRs permitted with meaningful restrictions, neutral political environment
• 1 = Hostile or rapidly deteriorating regulatory environment

**Demand Driver Diversity (10% weight):**

• 5 = 4+ independent demand drivers
• 3 = 2-3 demand drivers
• 1 = Single demand driver

**Entry Cost / ROI (5% weight):**

• 5 = Projected cash-on-cash return above 12%
• 3 = Projected return of 8-12%
• 1 = Projected return below 6%

Calculating Your Final Score

Multiply each category score by its weight, then sum the weighted scores. The maximum possible score is 5.0.

**Example:**

| Category | Score | Weight | Weighted |

|---|---|---|---|

| RevPAR | 4 | 20% | 0.80 |

| Occupancy | 4 | 15% | 0.60 |

| ADR Trend | 3 | 10% | 0.30 |

| Seasonality | 3 | 10% | 0.30 |

| Supply/Demand | 4 | 15% | 0.60 |

| Regulation | 5 | 15% | 0.75 |

| Demand Drivers | 4 | 10% | 0.40 |

| Entry Cost / ROI | 3 | 5% | 0.15 |

| **Total** | | | **3.90** |

**Interpreting scores:**

• **4.0-5.0** — Excellent market. Strong fundamentals across the board. Move to property-level analysis.
• **3.5-3.9** — Good market with some weaknesses. Viable if you can mitigate the low-scoring areas.
• **3.0-3.4** — Average market. Proceed only if you have a specific competitive advantage or local expertise.
• **Below 3.0** — Weak market. Redirect your capital elsewhere.

Using the Scorecard

Run this scorecard for every market you're seriously considering. Compare final scores side by side. But don't be a slave to the numbers — the scorecard is a decision-support tool, not a decision-making machine.

If a market scores 3.7 overall but has a 1 in regulation environment, that's a dealbreaker regardless of the total score. Certain categories carry veto power. A market with a perfect 5.0 on every metric except regulation isn't an investment — it's a gamble.

Putting It All Together: Your Market Research Workflow

Here's the step-by-step process from initial curiosity to investment-ready analysis:

**Step 1: Generate a Long List (30 minutes)**

Start with 8-12 markets that interest you. Use Mashvisor's market comparison tools, AirDNA's market rankings, and your own knowledge of areas with tourism appeal. Don't overthink this — you're casting a wide net.

**Step 2: Quick Screen (2-3 hours)**

Pull high-level metrics for each market: RevPAR, occupancy, ADR, supply growth, and a quick regulation check. Eliminate markets with obvious disqualifiers (hostile regulations, declining RevPAR, extreme oversupply). Narrow to 3-4 finalists.

**Step 3: Deep Dive (4-6 hours per market)**

For each finalist market:

• Pull detailed AirDNA data for your target property type
• Build a comp set of 10-15 comparable listings
• Research regulations thoroughly (call the city clerk if needed)
• Identify and evaluate demand drivers
• Calculate projected revenue and returns
• Score the market on your scorecard

**Step 4: Ground Truth (1-2 days)**

Visit your top 1-2 markets in person. Stay in an Airbnb. Drive the neighborhoods. Talk to local hosts if you can. Meet with a local real estate agent who understands STRs. No amount of data replaces boots on the ground.

**Step 5: Decision**

Compare scorecard results, factor in your personal situation (proximity to the market, available capital, risk tolerance), and make your call.

The Bottom Line

Market research isn't the exciting part of short-term rental investing. Nobody posts Instagram stories of their AirDNA dashboard or their regulation research spreadsheet. But it's the work that separates investors who build wealth from investors who learn expensive lessons.

The framework in this guide — data tools, key metrics, comp analysis, regulation research, demand driver evaluation, red flag identification, and market scoring — gives you everything you need to analyze any market with confidence. Use it every time. No exceptions.

The best time to discover a market is fundamentally broken is *before* you wire $50,000 for a down payment. Do the research. Trust the process. Your future self will thank you.

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