Investing in vacation rentals can generate a particularly interesting return, but success depends largely on the city chosen. To optimize this investment, it is essential to base yourself on key criteria to select a promising location. According to Anthony, our agency director and YourHostHelper franchisee in Lyon, here are the most important elements to consider.
1. Tourist and professional attractiveness
Cities that host a large number of tourists or temporary business travelers have high potential for Airbnb rentals. Popular destinations, whether cultural, natural or experiencing strong economic growth, attract visitors throughout the year. For example, coastal cities and economic metropolises like Paris or Lyon captivate both tourists and business travelers, ensuring a stable occupancy rate.
Being able to rely on tourism and business travel is particularly interesting to also generate income throughout the year. When the destination is only touristic, it is often subject to a certain seasonality. Anthony, director of our concierge in Lyon explains: "In Lyon, we are fortunate to benefit from seasonal tourism but also from business travelers passing through the metropolis. This allows us to have a continuous flow of tenants, throughout the year and regardless of the season."
2. Accessibility and transport
Ease of access is crucial: good transport links, proximity to an airport or train stations, as well as local infrastructure (shops, restaurants) contribute to the attractiveness of a city for short-term rentals. Travelers prefer well-connected cities for short stays and convenient travel.
This accessibility is not a secondary criterion, far from it. Many travelers prefer to travel by plane, train or use carpooling. Thus dependent on alternative modes of transport to the individual car, it is necessary for them to find a destination well served by the means of transport that will be theirs to get there. Furthermore, even in the case where tenants choose the individual car to get to their vacation spot, the proximity of a highway or expressways will be appreciated.
3. Local supply and competition
A thorough study of the number of rentals available on Airbnb and their quality allows you to assess the level of competition. Some cities in high demand, although saturated, can still offer great opportunities if the location and type of property are well chosen. On the contrary, in less saturated but emerging areas, a seasonal rental property can stand out and quickly generate a good occupancy rate.
Generally, let's assume that competition is a good sign. If a city or its surrounding destinations have few Airbnb rentals, it is very likely that there is no market in that location. It is therefore better to turn to another destination at the risk of seeing your project fall through due to an occupancy rate that is too low, despite the qualities that your Airbnb rental may have.
4. Legislation and regulations
Airbnb rental regulations vary greatly from city to city and can impact the profitability of the investment. Some municipalities impose restrictions on the number of rental days per year or require specific permits. Learning about local rules is essential to ensure the viability of the project.
Seasonal rentals on the Airbnb model have been the subject of much discussion and today, administrations are paying close attention and closely monitoring the development of the local market and its impact on the accommodation offer in their area.
5. Profitability and price per square meter
Analyzing real estate prices in the target city as well as the potential rent for short-term rentals is crucial to determine profitability. A precise calculation of expected returns, integrating the purchase price and the average nightly income, allows you to check whether the investment is interesting.
Platforms like AirDNA or Horiz.io provide numerical data to assess the profitability of a specific city. These tools cannot of course be sufficient in themselves, but they will be able to provide concrete, numerical and supported information to allow you to design your project, at least on the points of profitability to be expected and the questions of supply and local competition mentioned above.
6. Evolution of real estate prices
Investing in a growing city where real estate prices are increasing is usually an advantage. In addition to rental income, long-term real estate appreciation can significantly increase the return on investment, especially in cities that are developing or experiencing economic transformation.
In short, we can say that investing in an Airbnb rental requires a thorough assessment of these factors. Of course, these 6 criteria are not the only ones and the stakes are often too high to answer all the questions based on these 6 points alone. However, choosing a city with high tourist potential, flexible regulations, and attractive acquisition prices can greatly contribute to the success of your investment.
