There has been a lot of conjecture about the short-term rental market recently. Many hosts have complained about oversaturation, while increased local restrictions have led many investors to revert to regular yearly tenants or mid-term rentals.
For those committed to booking short-term rental guests, it’s clear that the landscape has shifted, and simply providing a spare room and a few towels will no longer cut it. Increasingly, guests are after luxurious experiences with resort-style residences and are willing to pay top dollar for the privilege.
While glam pads at Coachella or the Catskills are curated and managed by well-heeled, upscale management companies, that doesn’t mean everyday mom-and-pop investors have to be squeezed out of the STR luxury rental experience—or the profits it brings.
Turning Drab to Fab
According to a recent report in Forbes, everyone can get in on the luxury trend—whether you own an estate, a small multifamily building, or a condo. Upgrading it with luxury hotel-like amenities has seen a dramatic return to profitability in the STR world.
Stephen Wendell, founder and CEO of Mountain Shore Properties, told Forbes:
“The ‘easy money’ phase is over, but the asset class isn’t. Short-term rentals have matured into a true hospitality business—returns now depend on design, operations, and differentiation, not just owning the asset. Airbnbs can still be a great investment, but travelers now expect hotel-like amenities; therefore, Airbnb owners and operators have had to level up to succeed. I view this as a healthy correction that was inevitable.”
Leveling up means upgrading features such as fire pits, outdoor cooking facilities, and curating interiors accordingly. The investment—according to Rental Scale Up, a subsidiary of the revenue management and market data platform PriceLabs—results in greater revenue and insulation from the vagaries of the rest of the short-term rental arena.
“We’ve adapted our short-term rentals for wellness-focused travelers by prioritizing calm, light-filled spaces with ocean views, private outdoor areas when possible, and a clean, serene design,” Maximillian A. Kostyashkin, CEO of MAK Vacation Rentals, a Miami-based company, told BiggerPockets.
Demand Splits Between Chill and Thrill
Curated luxury stays are increasingly split between rest and relaxation with a focus on wellness and high-energy events such as concerts and sports, according to Airbnb. However, trying to have your rental fit into a one-size-fits-all category is not a good idea, Rental Scale Up advises. Picking a lane, sticking to it, and promoting your stay accordingly is the best bet to gain traction and attract guests.
Whether your short-term rental is catered to the World Cup or wellness, providing the right experience for your guests will bring dividends. As the World Cup is once every four years and wellness is a lifestyle choice without an expiration date, catering to the latter will capture the widest market.
Market researchers forecast that wellness tourism is set to grow by nearly 10% in 2030, from roughly $974.6 billion to over $1.06 trillion, as travelers seek trips geared toward stress reduction, preventive health, and mental recharge. For property owners who can fit it into their budgets, that means adding amenities such as cold plunges, saunas, yoga decks, filtered water, and sleep-optimized bedrooms.
The good news is that it’s not as expensive as it sounds and can generate sizable returns. According to Market Reports World, young professionals, expats, and city dwellers are willing to pay 4.5%–7.5% more in rent per square foot for wellness-themed stays.
“In competitive-priced apartments, the luxury comes from practical touches: spotless presentation, comfortable furnishings, personalized service, and concierge add-ons like in-suite massages, facials, private dining, and beach, spa, or fitness access (where available),” Kostyashkin said. “The goal is to make the stay feel restorative and elevated while still keeping it affordable.”
Safeguarding Your Investment
It’s a good idea to do some research before you upgrade to ensure your market can justify the added expense. AirDNA’s Best Places to Invest in Short-Term Rentals report provides segment-specific rankings that investors can filter according to budget and location.
What is interesting about the report is that home prices are affordable, and the revenue potential is considerable. “This year’s results challenge some of the usual assumptions about where short-term rental opportunities exist,” said Jamie Lane, chief economist at AirDNA, in a press release. “When revenue and growth aren’t viewed in isolation, affordability plays a much bigger role in how returns stack up across markets.”
Across the top 10 markets listed, the average home cost $296,000, and the annual revenue potential was $40,500, yielding around 14%. The markets attract year-round demand driven by workforce travel, healthcare, education, and government- or military-related activity. That doesn’t mean upgrading amenities to ensure a more well-rounded, wellness-themed stay won’t be appreciated by travel-weary guests with stressful jobs.
“2026 is one of the strongest environments we’ve seen for short-term rental investment in recent years,” said Rohit Bezewada, CEO of AirDNA, in a press release. “This report lays out the framework to identify the best opportunities, and investors can apply the same approach within AirDNA to evaluate deals at a more granular level.”
AirDNA’s Top Markets to Invest in 2026
- Port Arthur, Texas
- Abilene, Texas
- Downtown Saint Paul, Minnesota
- Charleston, West Virginia
- Springfield, Illinois
- Lake Charles, Louisiana
- Montgomery, Alabama
- Akron, Ohio
- Lebanon, Pennsylvania
- Jackson, Mississippi
Cross-referencing this report with AirDNA’s Best Places To Invest In A Short-Term Rental for $250k or Less (unsurprisingly, many of these are in the Midwest) combines affordability with ongoing year-round rental demand. With gross yields just under 20%, these offer a great way to generate revenue without the hassle of chasing rents and dealing with evictions.
With a strong property management team in place, a reliable cleaning service, and stylish, functional finishes, the need to upscale to luxury isn’t a prerequisite with less expensive residences. As the report states:
“The guests booking homes worth $100K–$250K are likely booking for practicality, not luxury. Lean into that practicality by marketing a comfortable space, parking, easy access, and flexible layouts. Aligning the home with how guests actually travel in that market, especially guests on a budget, is key.”
Final Thoughts: FHA Loans and STRs—Turbocharged Scaling
There are distinct advantages to scaling a short-term rental business rather than a regular rental, because under current FHA rules, you can use an FHA loan to buy a home and rent part of it out, provided the home is your primary residence. That is easier with a short-term rental than with a 12-month guest, because yearly tenants usually require their own kitchen and bathroom and want to bring in their own furnishings, while a short-term guest can be limited to one or two rooms that are already furnished.
You’ll have to check your local short-term rental rules to see if renting for under 30 days is permitted. If not, advertising part of your home as a mid-term rental or with a 30-day minimum stay will offer flexibility and a brand-new swath of potential guests, such as travel nurses and workforce housing.
Once you have been in the home for a year, satisfying the FHA’s owner-occupant requirement, you can refinance to a regular mortgage and rinse and repeat with a second property using an FHA loan and renting it as an STR to offset the mortgage payment while saving the 3.5% down payment for your next purchase.
Source link
