The short-term rental industry has changed sharply since the pandemic, moving from what Emir Dukic, CEO and co-founder of Rabbu, describes as a “free-for-all” into a more structured, hospitality-focused business. This shift has raised the bar for investors and operators, making the market more competitive and demanding higher standards.
From Garage Apartment to Data-Driven Platform
Dukic’s entry into short-term rentals began in Charlotte, North Carolina, where he and his wife converted a 200-square-foot room above their garage into an Airbnb. Within months, the income from that single unit covered their mortgage, revealing a lucrative opportunity.
“We found [the properties] to be extremely lucrative, generating significantly more than the liabilities we had from our mortgage and other payments,” Dukic recalls of their early listings in Charlotte and nearby vacation areas.
This early success led Dukic, after selling a tech startup to NBC Universal, to partner with James Strong and Trent Hawthorne to launch Rabbu, a data platform and marketplace for short-term rental investors. Rabbu grew from managing over 1,000 properties to serving 1.5 million unique visitors annually, positioning itself as a leading marketplace for short-term rental data and listings.
COVID’s Disruption and Market Reset
The pandemic created a sharp and unpredictable disruption in short-term rentals, reversing years of steady double-digit growth. Dukic notes that when COVID-19 hit, demand for short-term rentals collapsed almost overnight. But as travel restrictions eased a few months later, short-term rentals became the preferred option for travelers seeking isolation and social distancing.
This sudden surge in demand, combined with limited supply, created a period when nearly any property could generate strong returns. “There was a year and a half where demand was so high, and supply was so limited that you could take a one-bedroom condo in a questionable neighborhood, put in some IKEA furniture, and make really good money on it,” Dukic says.
However, as the pandemic eased and interest rates rose, supply began to outpace demand. By 2022 and 2023, the easy profits faded, and operators faced a market that required more strategy and investment to succeed.
Raising the Bar: Quality and Differentiation
The current short-term rental market demands higher quality and more differentiation. Properties now need to offer real value and experiences that set them apart from both hotels and lower-quality rentals.
“Properties actually have to be good now,” Dukic states. “Right location, right size, right amenities, right furniture. It’s really important to distinguish yourself.”
In urban markets like Charlotte, competing with hotels by offering small condos is no longer effective. “You can’t add a bunch of one or two-bedroom properties or condos because you’re really competing with hotels, and there’s a lot of supply of those,” he explains. The most successful rentals are now larger homes – three bedrooms or more – with quality furnishings and amenities that create memorable experiences for guests.
Geographic Trends: Looking Beyond Florida
Florida remains the most searched state on Rabbu’s platform, but Dukic cautions that popular markets like Kissimmee near Disney World are oversaturated. “There are whole developments with themed-out five- to ten-bedroom houses found by the dozens,” he says.
Instead, successful investors are looking beyond traditional hotspots. Dukic points to strong performance in the Carolinas, Alabama, Louisiana, Texas, Southern California, Colorado, Utah, Ohio, Pennsylvania, and Maine. The key, he stresses, is to analyze local supply and avoid areas crowded with similar properties.
“Make sure when you are buying a product that you are buying something on the lower end of supply,” Dukic advises, encouraging investors to focus on property types with less competition in their chosen markets.
Institutional Strategies: Building for Short-Term Rentals
Institutional capital has entered the short-term rental space, bringing new strategies and some missteps. Dukic sees the most successful institutional investors focusing on purpose-built developments designed specifically for short-term rentals.
“The best strategy is ground-up development on properties built solely for short-term rentals,” he says. “It allows you to create an amenitized asset with the features and locations guests want.”
A common mistake among institutional players is assembling scattered properties across a city without creating a cohesive guest experience. “If you’re doing it at scale, it’s best to keep it extremely localized to certain markets and areas,” Dukic explains. Concentration allows for better operational control and a more consistent product.
Insurance: A Critical Factor
Insurance costs have become a major concern, especially in coastal states vulnerable to natural disasters. “It’s honestly one of the most underrated KPIs or data points that a buyer can look into,” Dukic says.
Many investors underestimate both the cost and complexity of insuring a short-term rental. Standard homeowners’ insurance is not sufficient for business operations, and specialized policies can be expensive and hard to obtain, particularly in hurricane-prone areas like Florida.
Rising insurance costs are pushing some investors to seek opportunities in less risky states. “We’ve definitely seen people move into new states and opportunities because of insurance costs and other natural disaster dangers that can drive more risk for the asset,” Dukic observes.
Regulation: Realities vs. Perception
While regulatory risk is often cited as a top concern, Dukic believes it is overstated. New York’s ban on short-term rentals, for example, led to record hotel prices and rising long-term rents, but did not increase affordable housing availability.
“It’s become obvious that short-term rentals, while they may have been a contributing factor, aren’t the real and biggest contributing factor to affordable housing issues,” Dukic says. He notes that the groups benefiting most from these bans are hotels and hotel unions, not local residents.
Dukic reports that regulatory discussions have quieted in many cities, with less appetite for sweeping restrictions as evidence mounts that bans do not meaningfully address housing affordability.
Industry Misconceptions
Two misconceptions persist about the short-term rental market. The first is that the sector is in decline. Dukic points out that Airbnb’s recent earnings show double-digit growth in revenue, supply, and demand, indicating continued strength at the top end of the market.
“The asset class isn’t in decline. It’s becoming professionalized, and you’re seeing good operators step up and bad ones fall away, but demand isn’t going anywhere,” he says.
The second misconception involves cleaning fees. While guests may see high cleaning fees as profit for hosts, Dukic notes that most professional operators lose money on cleaning. “Even if they charge $250 to clean a house, their actual costs are probably closer to $300 when you factor in quality cleaners and supplies,” he explains.
Looking Ahead: Professionalization and Opportunity
The future of short-term rentals is defined by higher operational standards and greater professionalism. The rapid expansion during the pandemic, fueled by low barriers to entry, has given way to a market where only well-run operations thrive.
“To be successful, you have to become a really good operator and provide an experience that people are going to come back for,” Dukic emphasizes. “We’re moving toward professionalization of the asset class, so it becomes more consistent whether you’re staying in Charlotte, Tampa, New Orleans, or Paris.”
This shift benefits both operators and guests, creating more reliable experiences and rewarding those who invest in quality and service. For investors, understanding local supply, offering genuine value, and operating at a professional level are now essential for success.
The evolution of the short-term rental industry from pandemic-era opportunism to a mature segment of the hospitality sector is separating serious operators from casual participants. Those who adapt to higher standards and invest in quality are best positioned to achieve sustainable returns in this more demanding market.
