If you are a vacation rental host or considering starting Airbnb in Australia, keeping up with market trends is essential for your success. In this blog post, we'll share insights into the Melbourne short-term rental market to help you stay ahead in this ever-changing environment and make informed business decisions.
Melbourne Rental Market: Key Facts about Short-Term Rentals
Melbourne is the capital city of Victoria and Australia's fastest-growing city. It is Australia's second-largest tourist destination, attracting visitors from around the globe. No wonder Melbourne is one of the country's most significant short-term rental markets and is among the top cities globally for Airbnb rentals.
Melbourne can be a profitable market for Airbnb investment, offering promising returns due to growing tourism and demand for alternative accommodation. With the right property and effective management, you can expect to be successful in your Airbnb venture.
It's also essential to achieve operational efficiency, so tech-savvy hosts use vacation rental software like Hospitable to automate repetitive tasks and put their short-term rental business on autopilot.
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According to the data from Airbtics, from July 2023 to May 2024, 21,000 active Airbnb listings in Melbourne were available for bookings for more than 90 days, showcasing an increase of 24.03 % compared to the previous year.
Still, only 24% of active listings this year are the same properties that were active last year, which means that a considerable portion of listings become inactive, and an even bigger number of new ones enter the market.
Individual hosts and small hosts dominate the Melbourne short-term rental market. The vast majority of Airbnb hosts in Melbourne (92.78 %) manage 1-5 listings, 5.18 % of hosts list 6-20 properties, and only 2.04 % of hosts have 20+ listings. With the Victorian government recently announcing upcoming changes to local laws, it is important that 'Mum and Dad' investors stay in tune with market data and any new regulations that could impact their investments.
The average occupancy rate for STR properties in the city is 68% throughout the year, and the average daily rate (ADR) is $ 132. A typical host income (annual revenue) is $33,797.
According to the data provided on the City of Melbourne local government website, there were 4,100 active short-term rental listings in the City of Melbourne in 2023. 84 % of these properties were in the CBD, Southbank, Docklands, and Carlton. 46 % of properties were rented out for 90 days or more, while 25 % were rented out for 180 days or more.
Melbourne Short-Term Rental Market Performance in 2022 – 2024
Now, let's look at the key performance metrics that show the dynamics of the Melbourne short-stay rental market in 2022, 2023, and the first five months of 2024.
Average occupancy rate
The Melbourne vacation rental market experiences fluctuations influenced by seasonality, major Australian holidays, and events, although the impact of seasonality is much lower than in other Australian markets.
Melbourne's high season (roughly December through February) coincides with its summer months when the occupancy rates are the highest. The low season is between June to August, during the winter months. Still, the spikes in Airbnb occupancy in Melbourne can also be attributed to the increase in popular sports and cultural events during the summer.
Despite seasonal fluctuations, the average Airbnb occupancy rate in Melbourne remains rather stable. Comparing 2024 to 2023 and 2022, we see only marginal differences—a de-growth of 1.45 % over two years.
Average daily rate (ADR)
Melbourne had lower average daily rates in 2023 than in 2022, and from January to April 2024, the rates were lower than in 2023. But in May 2024, the daily rate was higher ($132) compared to May 2023 ($130). Still, ADRs generally saw a notable decrease of 9.59 % over two years.
Revenue
The 2023 monthly revenue was lower each month than that of Airbnb hosts in Melbourne in 2022 due to decreased ADR. From January to April 2024, hosts earned less each month than during the same month in 2023.
In general, the Melbourne vacation rental market saw a decrease of 13.5 % in annual revenue over two years. However, in May 2024, monthly revenue ($2,491) was higher than in May 2023 ($ 2,046), although it was still significantly lower than in May 2022 ($2,880).
Bottom Line
These data show that short-term rental numbers in the Melbourne market haven't returned to pre-pandemic levels despite the global travel rebound. Still, investing in Airbnb properties in Melbourne offers enormous potential benefits.
The holiday rental industry in Australia relies heavily on domestic tourism. According to the tourism forecast published by the Australian Trade and Investment Commission, domestic tourism spending now exceeds pre-pandemic levels and will continue to rise. International travel to Australia is expected to exceed its pre-pandemic level in 2025.
Since travelers prefer unique and immersive experiences, and Airbnb and its alternatives in Australia give travelers a chance to stay in local neighborhoods and live like locals, the demand for short-term rentals in popular tourist destinations like Melbourne is growing.
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