Los Angeles

Los Angeles is the top market in the nation for short-term rental penetration. According to a new report from CBRE, short-term rentals in Los Angeles are equal to 22% of the total hotel inventory in the market. By comparison, the national short-term rental market is 12.2% of the total hotel inventory in the country. L.A. also overtook New York for the top short-term rental market.

"I am not surprised that our area has remained the biggest short-term rental market last year, especially given the fact SoCal is home to a large number of entertainment and media companies as well as many attractions and amusement parks," Brandon Feighner, a director at CBRE Hotels' Consulting, tells GlobeSt.com. "Historically, this fact has contributed to demand for accommodations in our region exceeding the supply of traditional hotel rooms, which originally fueled the growth in short-term rental supply. Growth continued throughout the last decade given the desirability of the destination, especially from a leisure perspective as well as the approximately 25% discount in pricing for short-term rentals relative to traditional hotel rooms."

While L.A. is leading the market, the new supply is slowing down. According to the report, the market inventory growth is expected to total 19% in 2020. "The main reason for a slowing down is that major urban centers such as Los Angeles are moving towards a saturation point, along with local municipal regulations limiting growth, if not leading to the outright removal of noncompliant short-term rental listings from the local marketplace," says Feighner.

While short-term rentals are continuing to grow, the sector hasn't had an impact on hotel performance or demand in the Los Angeles market. The hotel industry is also continuing to experience growth. "Hotel occupancy levels have not been materially impacted by the growth in short-term rentals and remain at or near all-time highs in much of the greater Los Angeles area," says Feighner. "However, short-term rentals can curtail hoteliers' ability to raise rates, especially during peak demand periods."

In fact, Feighner expects to see both the hotel market and short-term rental market continue to grow. "Given the region's high and increasing volume of leisure travelers, plus low levels of traditional hotel supply growth, I don't expect any significant declines in the future demand for traditional hotel rooms in the local market," he says. "At the same time, short-term rentals are not going away and will likely continue to be attractive, given the relatively affordability and much wider geographic distribution, as compared with traditional hotels."