Emerging Short-Term Rental Markets: Best ROI Investment Locations

The days of easily breaking into famous Short-Term Rental (STR) destinations like Scottsdale or Gatlinburg with guaranteed returns are over. These saturated markets now offer diminishing returns and fierce competition, leaving investors wondering where the real opportunities are. The answer lies in identifying emerging short-term rental markets, areas with strong growth fundamentals that haven't reached peak saturation, offering a prime investment window.

At STR Search, we've built our reputation on using advanced data analytics to uncover hidden gem markets before they become mainstream. While many investors rely on gut feelings or follow the crowd, our proprietary methodology identifies markets with growing demand, manageable supply, and favorable regulations: the three pillars of a successful high ROI STR investment.

In this guide, we reveal the criteria for finding the best STR investment locations and share our current top contenders for the upcoming year. By the end, you'll know where and how to look, and if you're ready for real data on a live property, our team is here to help.

What Defines an "Emerging" vs. a "Saturated" STR Market?

Understanding the difference between emerging and saturated markets is fundamental to smart investment decisions. An emerging market is a market with a compelling growth story backed by data.

Emerging markets typically show key characteristics identified in our short-term rental market analysis. These characteristics include demand growth outpacing supply, significant year-over-year Revenue Per Available Room (RevPAR) growth, and new economic drivers creating visitor interest, like infrastructure improvements, new corporate headquarters, expanding universities, or growing tourism niches (e.g., wine regions, outdoor recreation). They also feature more favorable regulatory environments, avoiding the backlash of oversaturated destinations.

Saturated markets show warning signs: stagnant or declining RevPAR growth, high property acquisition costs, and intense competition for bookings. These markets struggle with growing inventory outpacing demand growth, creating pricing pressure. They also face restrictive regulations as local governments respond to housing concerns and resident complaints.

When weighing risk versus reward:

Emerging Markets:

• Reward: Higher potential for property appreciation, stronger cash-on-cash returns, less competition for guests
• Risk: Growth projections may not materialize as expected, and regulations could change unpredictably as the market develops.

Saturated Markets:

• Reward: Proven, stable demand patterns; more predictable (lower) returns
• Risk: High buy-in costs limit cash flow, intense competition requires premium properties/management, vulnerability to regulatory changes

How STR Search Pinpoints High-Potential Markets

At STR Search, we've moved beyond simplistic "hot market" lists online. Our data-driven real estate investing relies on a sophisticated analysis framework that evaluates market health and growth potential. In STR investing, gut feelings and anecdotal evidence are unreliable investing; only comprehensive data analysis can identify the next opportunity for your vacation rental investment.

Here are the key metrics we analyze when evaluating an emerging market's potential:

1. Revenue Per Available Room (RevPAR) Growth: RevPAR combines Average Daily Rate (ADR) and occupancy rate to show the average revenue generated per available rental night. A high static RevPAR is good, and we look for consistent year-over-year growth in this metric, seeking markets with 15%+ annual increases. This indicates improving profitability and growing guest demand, not just seasonal spikes.
2. Rental Demand Score: This proprietary metric evaluates the intensity and consistency of booking activity year-round. We analyze search volume trends, booking lead times, and seasonal demand patterns to identify markets with strong, year-round guest interest rather than those with extreme seasonality that create cash flow challenges during off-periods.
3. Investability Score: Not all high-demand markets are good investments. Our Investability Score combines median home prices, expected gross revenue, and estimated operating costs to determine market viability for returns. This answers the question: "Can I make money here?" We target markets where property acquisition costs haven't caught up to rising rental rates.
4. Supply vs. Demand Growth: The relationship between these metrics is critical. We seek markets where demand growth outpaces new supply by at least 2:1. You want to be one of the first food trucks at a new festival, not the 50th when customer spending is stretched thin.
5. Regulatory Climate: The most crucial qualitative metric we assess. Our team analyzes local zoning laws, permit requirements, community sentiment, and legislative trends for long-term operational viability. A market with perfect numbers becomes worthless if new regulations prohibit or restrict STR operations. We favor areas with clear, stable regulations or those creating balanced frameworks that protect community interests and property rights.

Top 5 Emerging Short-Term Rental Markets

Our data analysis has identified key emerging short-term rental markets. These locations show signs of high-growth potential, and every investment requires property-specific due diligence. Here are five to watch:

The Poconos, Pennsylvania

The Poconos, once a classic honeymoon destination, are experiencing a renaissance as a year-round, drive-to destination for East Coast metros. The pandemic accelerated a shift toward outdoor vacations, and the region's combination of skiing, hiking, water activities, and growing culinary scene appeals to travelers seeking nature without sacrificing amenities. With New Yorkers and Philadelphians interested in convenient getaways, demand has surged while supply hasn't caught up.

Data Snapshot:

• Avg. Daily Rate (ADR): $287
• Occupancy Rate: 58%
• RevPAR: $166
• Median Home Price: $275,000

Regulation in the Poconos varies by township, making local knowledge essential. Many areas remain STR-friendly, but some townships have implemented permit systems with annual fees ranging from $250-$500. Paradise and Tobyhanna Townships have the most comprehensive ordinances, while others have minimal restrictions. The patchwork of regulations creates opportunities for investors who research specific sub-markets.

Gulf Shores/Orange Beach, Alabama

This Gulf Coast area is gaining popularity as travelers discover its comparable beaches without the overcrowding and high prices of Destin or Panama City, once overshadowed by Florida Panhandle destinations. The area has seen significant infrastructure investment, including the Gulf State Park Enhancement Project and downtown revitalization. Post-pandemic travel patterns show visitors choosing this region for its value while enjoying pristine beaches and expanding amenities.

Data Snapshot:

• Avg. Daily Rate (ADR): $245
• Occupancy Rate: 63%
• RevPAR: $154
• Median Home Price: $399,000

Gulf Shores and Orange Beach have balanced STR regulation. They have implemented business license requirements ($148 annually) and lodging taxes (13%) without severe restrictions. Unlike nearby Florida communities with moratoriums, these areas maintain a pro-tourism stance while ensuring basic standards. The regulatory environment is stable, with no major restrictive changes on the horizon.

Bend, Oregon

Bend is ideal for outdoor recreation, craft beer culture, and remote work. Its proximity to Mt. Bachelor for skiing, the Deschutes River for water sports, and numerous hiking and biking trails makes it a year-round destination. As remote work becomes permanent for many West Coast professionals, Bend has evolved from a weekend getaway to a workation hub where visitors stay longer and spend more, driving up occupancy and ADRs.

Data Snapshot:

• Avg. Daily Rate (ADR): $321
• Occupancy Rate: 72%
• RevPAR: $231
• Median Home Price: $695,000

In 2015, Bend implemented a STR ordinance that capped non-owner occupied rentals in residential zones. However, the city has grandfathered existing permits and allows unlimited STRs in mixed-use and commercial areas. The clarity of these regulations, while restrictive, creates opportunity for investors who navigate the system and focus on properties in the right zones.

The Ozarks, Missouri/Arkansas

The Netflix show "Ozark" put this region on the map, and the accessibility to 43 million Americans within a day's drive makes it a compelling investment. Branson, Missouri is a long-standing tourist destination, but surrounding areas are seeing spillover growth as travelers seek more authentic, less commercialized experiences. The combination of lake activities, hiking, growing culinary scenes in small towns, and affordable property prices creates one of the best cash-on-cash return opportunities on our list.

Data Snapshot:

• Avg. Daily Rate (ADR): $198
• Occupancy Rate: 54%
• RevPAR: $107
• Median Home Price: $225,000

The regulatory environment varies in the Ozarks. Branson has established STR regulations with straightforward permitting. Surrounding areas in Missouri and Arkansas typically have minimal restrictions, especially for lakefront properties where vacation rentals have been common for decades. This creates a favorable environment for investors. Verify local county and township rules as some areas are implementing basic registration requirements.

Columbus, Ohio

Unlike the vacation destinations above, Columbus represents an emerging urban STR market driven by business travel, university activities, and major events. The city's diversified economy includes Nationwide Insurance, L Brands, and Cardinal Health, generating steady corporate demand. Meanwhile, Ohio State University creates cyclical demand around academic and sporting events. The city's growing reputation as a food destination and expanding convention business drive visitors seeking alternatives to traditional hotels.

Data Snapshot:

• Avg. Daily Rate (ADR): $176
• Occupancy Rate: 78%
• RevPAR: $137
• Median Home Price: $265,000

The Regulatory Lowdown: In 2019, Columbus implemented new STR regulations requiring hosts to obtain a $75annual license and pay hotel taxes. The regulations are straightforward and less restrictive than many major cities, with no rental day caps. The city's approach focuses on creating a level playing field with hotels rather than severely limiting operations, making it a stable regulatory environment for investors.

Your Strategy for Investing in an Emerging Market

Identifying a top STR investment location is the first step. Success depends on executing the right strategy after choosing your target market. Even in a stellar growth area, a poorly selected property or ineffective operational approach can lead to disappointing results.

We've learned that micro-level analysis is crucial for helping investors deploy over $90 million in STR assets. Two similar properties in the same zip code can have different performance profiles based on subtle factors: proximity to attractions, appealing property features, or visual elements for better listing performance.

That's why we developed our proven 4-step process to eliminate guesswork in acquisition:

1. Step 1: Data-Driven Market Identification. We leverage our proprietary market analysis framework to identify areas with the ideal growth metrics, regulatory stability, and return potential aligned with your investment goals.
2. Step 2: Hyper-Local Property Sourcing. We don't just point you to a city or region. We identify specific neighborhoods, streets, and property types that outperform market averages. Our analysis includes walkability scores to key attractions, view premiums, and amenity clustering that drives booking decisions.
3. Step 3: Rigorous Financial Underwriting. Every property undergoes comprehensive financial modeling that projects realistic revenue (based on comparable properties, not optimistic estimates), accurate expenses (including often-overlooked costs like maintenance reserves), and stress-testing for occupancy fluctuations to ensure resilience.
4. Step 4: Acquisition & Onboarding Support. Our team guides you through the closing process, connects you with our trusted network of property managers, designers, and service providers, and helps implement the operational strategy to maximize your property's performance from day one.

Conclusion

Emerging short-term rental markets offer opportunities but are complex and constantly changing. Analyzing data, understanding regulations, and finding the right property is a full-time job fraught with risk. Even small mistakes in market selection or property acquisition can impact your returns.

STR Search was founded to solve this problem. Our data-first methodology, proven process, and personalized support have led to a 100% success rate across over $90 million in real estate transactions.We do the heavy lifting so you can invest confidently, leveraging our expertise and proprietary data systems to identify missed opportunities.

While amateurs chase last year's hot markets, our clients position themselves ahead of the curve. They acquire properties in emerging markets before prices surge. Stop guessing where to invest. Let our data show you the way.

‍