The US vacation rental market is pulling ahead of the traditional hotel sector.

While much of the travel sector contended with shorter booking windows and uneven demand in Q2, vacation rentals have proved resilient, a new report suggests.

According to the Q2 2025 Vacation Rental Market Index by Key Data, STRs outperformed hotels in every region across the US, with an average RevPAR (revenue per available rental) advantage of 9 percentage points¹.

Key Data is a major provider of real-time market intelligence and benchmarking for the global short-term rental industry.

The data covers 13 million listings, and signals the STR sector is evolving.

Still, its performance isn’t evenly distributed. While many operators are thriving, others are feeling the strain.

Key Data’s analysis reveals a widening divide between high-performing and under-pressure regions, and between operators actively adapting to change and those falling behind.

Several regions posted impressive year-over-year growth in RevPAR, including:

Mid-Atlantic: +11% RevPAR YoY, driven by a +10% increase in occupancy

New England: +10% RevPAR, bolstered by seasonal demand and premium pricing

Rocky Mountains: +9% RevPAR, sustained by consistent traveler interest

Hawaiian Islands: +6% RevPAR, maintaining strong rate integrity in a competitive climate

In contrast, the Southwest saw the steepest drop, with RevPAR falling -4% YoY and new supply hindering rate growth.

The report suggests that even the strongest markets aren’t immune to emerging pressures.

Forward occupancy for September is down 11% year over year, it finds, and booking windows have shortened across key summer months.

While RevPAR remains strong in several regions, the landscape is becoming more fragmented.

Melanie Brown, VP of Data Insights at Key Data, said: “Performance is no longer just about location or seasonality. We’re seeing the STR sector evolve. Operators who succeed in this next phase won’t be the biggest, they’ll be the most responsive.”

The ability to track booking behavior, adjust pricing dynamically, and execute quickly is now what separates growth from stagnation.”

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Airbnb blew past Wall Street expectations, reporting Q2 revenue of $3.1 billion—up 13% year-over-year—and adjusted earnings of $1.03 per share. Net income reached $642 million, and the company booked 134 million “nights and experiences,” a 7% annual increase. The accelerated demand extended globally, with Latin America and Asia Pacific leading growth, even as North America growth softened.

Investors seemed more attuned to Airbnb’s cautious guidance for the second half of 2025 as execs expect slower revenue and softer margins due to tough year-over-year comparisons and stepped-up investments in technology and regulatory compliance. Chesky called out increased competition from hotels and mounting regulatory pressure on short-term rentals as ongoing headwinds, forecasting Q3 revenue between $4.02 billion and $4.1 billion while confirming heavy investments in new initiatives might compress margins in the near term.

Investors responded by sending Airbnb’s stock down over 6% following the call, with the stock down more than 7% since earnings as of press time.

And about those hotels: Chesky said Airbnb will be competing more directly head-to-head with that segment of the travel sector.

“We’re going to be going significantly more aggressively into hotels,” Chesky said toward the end of the call. He added that Airbnb has spoken with hotels around the world, especially independent, boutique and bed-and-breakfast locations. “We’ve spent a lot of time looking at hotels as a business. We think it’s really compelling, and we think that there’s going to be a lot more to do with hotels on Airbnb.”

Crucially, Airbnb’s call centered around its expansion “beyond the core”—including hotels. Chesky referred to it as an “and, not a or” strategy: Airbnb will maintain its iconic homes product while ramping up hotel supply, especially internationally where it’s still seeing opportunity for growth. “A huge percent of hotels in Europe are independents,” Chesky said.

It’s an open debate for some communities on Reddit whether a hotel or an Airbnb is the better choice. One thread, r/TravelHacks, features a discussion of whether there’s even a difference at this point. A commenter wrote the general consensus seemed to be that Airbnbs are better for large groups and hotels for solo trips, albeit dependent on the location. Surely, this is a gap that Chesky and Airbnb would like to see close.

Tech-powered hospitality and lifestyle expansion

Hotels are only part of Airbnb’s ambitious remake. Chesky also described efforts under way to turn Airbnb into what he described as an “AI-first application.” The company is betting on its AI-powered customer service agent to drive efficiency and personalization.

He said this agent, leveraging 13 specialized models trained on tens of thousands of customer interactions, has already managed to reduce the necessity for human intervention by 15%.

Chesky told analysts he believes “AI apps” will quickly become dominant—and Airbnb, as a “non-AI-native application,” needs to transform in that direction.

“We’re starting with customer service. We’re bringing into travel planning,” he said.

Then he described that what could look like.

“It will not only tell you how to cancel your reservation, it will know which reservation you want to cancel,” Chesky said. “It can cancel it for you and it can be agentic, as in it can start to search and help you plan and book your next trip.”

The CEO outlined future plans for deeper AI integration ranging from expanding language support to building toward a platform that can serve as an “everything app” for travel and experiences.

Chesky concluded the call by reinforcing Airbnb’s commitment to innovation and stressing what the company will not become: a commodity. “I don’t think we’re going to be the kind of thing where you just have an agent or operator book your Airbnb for you because we’re not a commodity. But I do think it could potentially be a very interesting lead generation for Airbnb.”

Earlier in the call, Chesky said Airbnb is probably the biggest travel brand in the U.S. and that the company’s current moves are about growing beyond that.

“What we’re trying to do is build a platform, a platform that has homes, services, experiences, hotels, of course, and much more. And we’re going to try to be expanding this platform and continue to [launch] new businesses over and over again.”

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.