Investment

Investing in a Vacation Rental Gateway Market

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‘Gateway markets’ might not be a term that you are familiar with, but if you are thinking about starting a new vacation rental business, or growing your existing business, you need to learn more about this term!

Cities across North America are experiencing a property boom. Commercial, retail, and vacation rental properties are being snapped up left, right, and center. Amongst this buying surge, patterns have emerged and they’re centered in what the industry calls ‘gateway markets’.

What is a Gateway Market?

If we want to understand why gateway markets are so important for real estate investment, we first need to understand what characteristics underpin the gateway market concept. The definition of a gateway market differs according to who you ask, but the general consensus is that the term refers to a highly-investable market. Of course, there are more specific characteristics but that is simply a general definition. 

According to Sonny Kalsi, via his website, the other characteristics include:

  • These markets have a high liquidity level, which means that real estate is easily bought and sold. In other words, it means that gateway markets are always popular with investors.
  • Gateway markets are usually cities with considerable statuses, like New York and Los Angeles.
  • These markets also often have social, economic, and political influence.

Why Should I Invest in a Gateway Market? 

The characteristics of gateway markets are the very things that make them supremely investable. These markets are attractive to more than just real estate investors. They usually have very high population densities and are often very busy tourist cities too. 

In the short-term rental market, popular markets represent the opportunity to make a lot of money. Unfortunately, they also come with a particularly high level of competition. But there are things you can do to give yourself the best chance of scoring as many bookings as possible. 

Gateway markets are characterized by high levels of liquidity, but what does that mean? Market liquidity is, according to Wikipedia, “a market’s feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset’s price.” 

MillionAcres.com says the following about gateway market investing – “It takes an experienced investor to know which markets to target, what projects to develop, and how to serve the community in a profitable and successful way. If you believe a gateway city could be a worthwhile investment, speak with a local real estate agent or reach out to the area’s gateway city council to learn more about the values of real estate, neighborhood needs, and opportunities before investing.”

Airbnb investment gateway market

What Are the Main Gateway Markets in the United States?

  • Boston, Massachusetts
    Boston is a great investment for real-estate owners. There are no major restrictions on short-term renting in the city, but be aware that hosts who rent for periods under 28 days will need to register. According to our Markets page, the Average Daily Rate in Boston is $153, and the most common Length of Stay durations are 30+ nights (31%) and 2 nights (26%).
  • Chicago, Illinois
    Chicago has a slightly lower Average Daily Rate than Boston, sitting at $102. The total number of listings (at the time of writing this) in Chicago is 3,555 with 1,751 of those listings being classified as one-bedroom listings. Remember, we only consider ‘entire property’ listings. 
  • Malibu, California
    Malibu is famed for beaches, sunshine, and its iconic coastline. While most of Los Angeles has strict Airbnb restrictions, the Malibu City Council allows short-term rentals provided that hosts register their STR business. 
  • Nashville, Tennessee
    Nashville is an iconic city and attracts thousands of visitors each year. The Average Daily Rate in Nashville at the time of writing this feature is sitting at $234 with an average market occupancy rate of 55%. The most popular days are Friday and Saturday, and hosts in the area charge more for both of these nights. The average minimum night stay requirement is 2-nights, with a 49% majority. 
  • New Orleans, Louisiana
    Another iconic city, New Orleans might be more seasonal than Nashville but it still boasts some impressive investment statistics. The occupancy rate sits at 63% with an Average Daily Rate of $185. A majority of 41% of listings require a 2-night stay minimum and prices climb on Thursday, Friday, and Saturday nights as these are the most popular.
Gateway market US investment market New Orleans, Louisiana

What Are the Main Gateway Markets in Canada?

  • Whistler, British Columbia
    Whistler is one of the best-known tourist markets in Canada. It boasts one of the biggest ski resorts in North America and has been the winter destination of choice for Canadians and Americans alike for years. As an investment proposition, Whistler is a solid choice. According to our Markets page, Whistler is currently sitting with an occupancy rate of 63% and an Average Daily Rate of $403. The most popular – and most expensive days – nights are Friday and Saturday. The minimum night stay requirements in Whisler are shared reasonably evenly between 2 and 3 nights. 
  • Montréal, Québec
    The two biggest cities in Canada, Toronto and Vancouver, both have restrictions on Airbnb renting. Montréal does not. According to TheTravel.com, Montréal-Trudeau Airport saw 19 million visitors in 2018. Of course, the pandemic drastically reduced this but generally speaking, Montréal enjoys a steadily high number of visitors. We’ve tracked 4,449 active vacation rental properties in Montréal, with 2,363 of them being one-bedroom listings. The Average Daily Rate sits at $104 with an occupancy rate of 44%. The market’s minimum night stay requirements are spilt between 1, 2, and 30+ nights with 26%, 26%, and 25% respectively. 
  • Québec City, Québec
    As seen in Montréal, Québec City does not have any restrictions on short-term renting. It attracts over 4,000,000 visitors on an annual basis and the vacation rental market benefits from that steady flow of tourists. The Average Daily Rate sits at $148 with an occupancy rate of 44%. Most hosts in the area have opted not to implement a minimum night stay requirement. 
Dynamic Pricing Tool for Airbnb Hosts

How Can DPGO Help?

We will keep updating our list of gateway cities as the year goes on. In the data game, things change fast and that’s why dynamic pricing from DPGO will keep you competitive 24/7, 365. To register now for a free 30-day trial, click the banner above and get started on earning more money! All we need from you is your Airbnb listing URL so we can analyze your local market and once we’ve created our recommendations, you can review them and decide how you want your dynamic pricing system to operate!

We also have a free usage plan which gives you access to all the data that you want and need to make your business as successful as can be! You can view the details of our free usage plan, and the rest of our payment options, here.

Avatar for Charlotte Rogers

I love writing and I am seriously passionate about real estate and technology. I've been writing about both topics for nearly 10 years and there isn't a development in the world of tech without me reading about it!