The path to growing alternative revenue for short-term rentals

Operational best practices of short-term rental (STR) businesses, whether from small hosts or larger property management firms, are still unfolding as more tools and resources enter the market according to Phocuswright’s United States-focused research report U.S. Short-Term Rentals 2025: B2B Technology and Distribution Landscape.

For companies that serve STRs, it is critical to understand what type of technological and ancillary tools operators are turning to and who is more likely to outsource expert services or take a more do-it-yourself approach. 

Since the COVID pandemic and the subsequent boom in rental stays, operators have funneled more resources into their direct booking channels, played with their mix of insourced versus outsourced support services and embraced artificial intelligence experiments for both back-end and front-end functions.

Most technological adoption has taken place among hosts who have done so at the urging or requirement of a property manager or those who have grown their portfolio beyond a small set of properties and can no longer juggle their operations with manual processes. 

A major opportunity may still lie in the development of alternative revenue streams for STRs. Hotels have long established that room revenue alone is not always sufficient to maintain a thriving business and have introduced myriad upsells or ancillary purchases to boost their margins. STRs are still hammering out their fundamental offerings and learning how to execute consistently.

With many changes in the market over recent years, operators have not had the bandwidth or given priority to developing additional revenue streams. However, with current market conditions of inventory saturation, higher guest standards and increased operational expenses, more operators may be forced to investigate other revenue options to keep their businesses thriving.

While operators work to refine their operations and market themselves better, there has been restrained investment in many opportunities for alternative revenue streams. This has become more important given shrinking margins and struggles with rising costs. But operator attention may currently be too focused on improving their core service offerings to devote considerable time to revenue outside of room bookings.

Guest behavior in other lodging categories suggests they are open to ancillary purchases but may view STRs as a type of lodging that offers stricter hospitality products with limited opportunity to purchase extras. This may nudge them towards lodging options like hotels for trips where they expect to need more hand-holding or consultation around ancillary purchases. 

Needs for additional tools and money-making opportunities notwithstanding, operators are working to overcome their challenges one hurdle at a time. More time and money may be required to build out operational best practices. In the meantime, market forces may weed out the operators who fail to establish the right mix of insourcing and outsourcing services in a way that maximizes earnings and provides guests and homeowner clients with the best experience.