Since the start of the pandemic, the short-term rental market has seen surging demand as travelers have sought out more private, spacious alternatives to hotel stays. The market had its best year yet in 2021, with short-term rentals performing at a 62 percent occupancy rate (up 5 percent from 2020 and up 10 percent from 2019) and generating about $113 billion in annual revenues.

Low inventory and high demand in the for-sale market has also driven prices up across the board, in terms of homes for sale and properties for short-term and long-term rent. Nationally, short-term rentals are making an average of 39 percent more annually than pre-pandemic.

All those factors combined will impact where it makes the most sense for short-term rental owners to invest in 2022.

Short-term rental analytics company AirDNA has analyzed 265 destination markets across the U.S. for short-term rental investment potential to determine the top 25 markets for short-term rental investors during the next year. The company found that across rental demand, revenue growth and investability (a property’s anticipated income compared to the cost of buying it) metrics, Maui, Hawaii, is the destination market primed for the best short-term rental investment opportunity in 2022, with the company’s proprietary Airdna Investor Score hitting 90.7 in that market (out of a perfect 100).

“Investors need a clear framework for finding a great opportunity, and that’s what this report provides, whether the key to success is a particular neighborhood, bedroom count or a stand-out amenity,” Jamie Lane, AirDNA vice president of research, said in a statement. “Staying informed on trends as the travel industry begins to normalize will allow investors to make the right decisions and optimize their revenues in 2022 and beyond.”

Some key challenges remain for short-term rental investors in the upcoming year, AirDNA’s report noted. Namely, with home prices having risen about 20 percent in 2021, according to Zillow’s Home Value Index, continued home price growth could make it more challenging for owners to make a profit, if revenue growth can’t keep apace.

In addition, limited inventory could make finding homes appropriate for short-term rentals challenging too, so potential investors will need to be determined to find the right property.

In 2022, the markets with the greatest potential for investment will again be largely concentrated in small and mid-sized cities, much like in 2021, AirDNA reported. “In fact, the revenue potential of small city/rural areas in the U.S. has risen 55 percent since the start of the pandemic, followed closely by mountain/lake destinations and mid-sized cities,” the report states.

Access to national or state parks, wildlife refuges or national forests also remain popular wish-list items among short-term renters and was reflected in this year’s list of best markets to invest in.

What follows is a quick snapshot of the top 10 markets ripe for short-term rental investment in 2022. The full list of the top 25 markets can be found here.

AirDNA Investor Score: 90.7

Revenue potential of the average full-time rental property: $101,590 per year

Annual occupancy rate: 72.8 percent

Maui has some of the best beach property investment opportunities and is also attractive to travelers for eco-tourism opportunities, humpback whales and gorgeous sunsets. Lahaina and Wailuku are the hottest markets for investment in Maui, according to AirDNA’s investor score data, but the company noted most parts of the island scored high.

2. Kenai Peninsula, Alaska

AirDNA Investor Score: 89.1

Revenue potential of the average full-time rental property: $44,124 per year

Annual occupancy rate: 67.3 percent

Travelers seeking refuge from pandemic doldrums among the outdoors have been able to find it among Alaska’s national parks, fjords and wildlife. Although traffic is still typically low during winter months with little daylight hours, Seward and Soldotna, both cities on the Kenai Peninsula, saw occupancy levels exceed 80 percent in the summer of 2021, compared to occupancies of about 60 percent during peak seasons pre-pandemic.

3. Chattanooga, Tennessee

AirDNA Investor Score: 87.9

Revenue potential of the average full-time rental property: $47,376 per year

Annual occupancy rate: 70.8 percent

Nestled in the foothills of the Appalachian Mountains and beside the Tennessee River, Chattanooga is yet another top market with an abundance of natural beauty. The city’s rental demand made the second-highest of any city on AirDNA’s list, at a score of 98 in rental demand — just behind No. 16-ranked Townsend, Tennessee’s 99 rental demand score.

4. Gulfport/Biloxi, Mississippi

AirDNA Investor Score: 87.9

Revenue potential of the average full-time rental property: $44,302 per year

Annual occupancy rate: 63.9 percent

Gulfport and Biloxi’s relatively low home values, at an average of $155,479, compared to their high short-term rental revenue potential helped earn the markets high marks by AirDNA. The area’s casinos on the Gulf of Mexico paired with picturesque white beaches are a draw for travelers.

5. Slidell, Louisiana

AirDNA Investor Score: 85.2

Revenue potential of the average full-time rental property: $68,690 per year

Annual occupancy rate: 61.6 percent

Slidell’s central location in Louisiana, about 40 minutes from both New Orleans’ French Quarter and the casinos and beaches of the Mississippi Gulf Coast, help make it an attractive destination for tourists to the region. Across both AirDNA’s revenue growth and investability metrics, the market scored a perfect 100.

6. Crystal River, Florida

AirDNA Investor Score: 83.4

Revenue potential of the average full-time rental property: $51,118 per year

Annual occupancy rate: 68.8 percent

This coastal city in western Florida draws visitors because of the area’s wildlife refuges that shelter manatees year-round. At a less than a two-hour drive from Orlando, the market’s short-term rental listings have increased by about 75 percent in the last year, while still maintaining a nearly 69 percent occupancy rate.

7. Joshua Tree, California

AirDNA Investor Score: 81.5

Revenue potential of the average full-time rental property: $85,363 per year

Annual occupancy rate: 66.1 percent

It’s no surprise that Joshua Tree is an excellent tourist destination with its proximity to the famed Joshua Tree National Park and accessibility to other parts of southern California. AirDNA’s report noted that investors who opt for larger properties will reap the benefits long-term, with large homes typically tripling one’s revenue potential, despite a relatively low impact on the additional cost of acquiring such a property.

8. Charleston, South Carolina

AirDNA Investor Score: 81

Revenue potential of the average full-time rental property: $85,542 per year

Annual occupancy rate: 68 percent

Charleston’s history, quaint waterfront and easy access to neighboring beaches have long been draws for tourists. One factor that helped the city make one of the top slots on AirDNA’s 2022 list is its potential for revenue growth with demand for larger homes increasing significantly in recent years, which has also allowed property owners to increase average daily rates up to $386.

9. Galena, Illinois

AirDNA Investor Score: 79.7

Revenue potential of the average full-time rental property: $67,314 per year

Annual occupancy rate: 60.6 percent

Galena, a small town in far northwest Illinois near the borders of Iowa and Wisconsin, has attracted travelers for years because of its historic sites and architecture (it houses a former home of Ulysses S. Grant), as well as its proximity to Lake Galena and the Mississippi River. The town has become a profitable place for short-term rental investors now, AirDNA notes, as home values have largely held steady at an average of $215,000, while the average yearly revenue potential has increased.

10. Southwest Harbor, Maine

AirDNA Investor Score: 79.4

Revenue potential of the average full-time rental property: $72,772 per year

Annual occupancy rate: 76.1 percent

Southwest Harbor offers all the natural amenities of Maine, including Mount Desert Island and Acadia National Park, without the crowds of some of the state’s more touristy areas, like Bar Harbor. Southwest Harbor has benefited from an expansion of the vacation rental market’s shoulder season, according to AirDNA’s analysis, reaching average annual occupancy rates of about 76 percent.

Email Lillian Dickerson