Nashville’s real estate market is hungry for short-term rentals

By Judy J. Beasley Last updated Jan 21, 2023

Meg Epstein is CEO and founder of CA South, a Nashville-based real estate development and investment management firm.

People have strong feelings about AirBnB, VRBOand other home sharing platforms.

It’s no secret that Nashville is increasingly inundated with tourists and partygoers. Tourism recovery efforts continue post-COVID and tourism numbers only continue to increase year on year, with more than 14.4 million annual visitors who are drawn to Broadway and beyond in search of good food, live music and a nearly 24/7 party.

So what is the problem? Besides the noise and chaos, there simply aren’t enough hotel rooms to accommodate this volume of visitors. In June 2022, Nashville saw record monthly demand for hotel rooms, earning more than $184 million by hotels in the county, up 20% from 2021 figures and 11% from 2019 figures. In the downtown central business district, there are just over 19,600 hotel rooms, but there are 14.4 million annual tourists. AirBnB and Home Sharing are a solution to this problem.

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How affordable housing figures into this issue

If you look to data, AirBnB’s average daily rate has increased because people are no longer booking cheaper shared or room stays; they opt for larger homes in busy markets because they travel in groups. In simple terms: the prices are more expensive because the service is more in demand.

But there is controversy in almost every city, including Nashville, around the belief that AirBnB rentals and other homes are actually decentralized hotels, and they’re spiraling out of control. The result is higher rents, less permanent housing, and the average renter sees more competition for good locations in Nashville.

While there are certainly negatives associated with displacing tenants and landlords, the amount of economic activity and taxpayer dollars that these short-term rentals bring in seem to outweigh the negatives. The real problem is the lack of affordable housing options, which is more of a zoning issue.

Nashville, like other rapidly growing cities, needs better infrastructure, more density, and better public transportation. This would help solve the problem of housing affordability and create a more vibrant and prosperous city. But these are big problems to solve, ones that other cities like Austin have also struggled with mightily.

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Compare hotel room rates to short-term rentals

Over the past decade, downtown Nashville has seen nearly 70% population growth, and Tennessee is expected to gain a million new inhabitants by 2040. People come to our state whether we’re ready or not, and why wouldn’t we want to be ready?

Plus, you can’t ban short-term rentals when the average hotel room in Nashville already costs $223 per night (according to a 2019 study by CheapHotels.org), making Nashville one of the most expensive cities in the United States in terms of average hotel prices, ahead of New York, Chicago and San Francisco.

Imagine how high that number would be if short-term rentals weren’t allowed. It would make Nashville a place that could only be visited by the super-rich, which nobody wants either.

Investors, homebuyers, renters, and vacationers love short-term rentals, and they’re in even greater demand than before. Many of our short-term rental condominiums in Nashville, like the one we are ending soon in HYVEsold out within weeks as they are considered a “recession proof” investment.

There is also the added benefit of being able to use the short term rental whenever you want and have a third party manager take care of all the cleaning, booking and maintenance for you. Another one recent report by Forbes confirms that the demand for short-term rentals is only increasing, despite economic headwinds.

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Tennessee Tourism Volume Requires More Lodging Options

Tennessee tourism has surpassed the nation with a record $24 billion in domestic travel spending in 2021, and Tennessee read itt of states with the best cities for AirBnB investments in 2022, with Chattanooga and Townsend among the top 20.

There is no longer a peak season for travel – the patterns of high-traffic summer and winter vacations and low-traffic spring and fall vacations are long gone. We must prepare for a 24/7/365 environment where locals and tourists alike seek to enjoy Nashville in a flexible way that suits their modern lifestyles.

Short-term rentals not only provide additional income for homeowners who may be looking to rent out their homes and condos for extra cash throughout this economic downturn, but also offer a viable alternative for people who are waiting for rates. high interest rates come down before buying a property.