Key Takeaways
- National STR supply growth hit roughly 4.6% in 2026, down from 20% during the post-pandemic peak. But the average hides enormous variation: some markets have near-zero supply growth due to geographic or regulatory barriers.
- Supply-constrained markets like Jackson Hole ($589 ADR, 6.4% revenue growth) consistently outperform overbuilt markets like Panama City Beach, where average monthly revenue per listing dropped 37% as supply surged 78%.
- Three types of supply constraints create durable investor moats: geographic barriers (islands, mountain valleys), regulatory caps (permit limits, ownership restrictions), and markets that combine both.
- Markets with the strongest constraint profiles generate $79,000 to $143,000 in annual STR revenue while maintaining pricing power that open-supply markets cannot match.
- Checking a market’s supply trajectory before buying is one of the most reliable ways to protect long-term yield in STR investing. StaySTRA’s analyzer tool shows active listing counts and historical trends for any U.S. market.
Jackson Hole, Wyoming has 349 active short-term rental listings and a $589 average daily rate that grew 6.4% last year. Panama City Beach, Florida has 10,196 active listings, a $315 ADR, and a revenue problem. Between 2021 and 2024, Panama City Beach added 4,388 new STR listings (a 78% jump) and watched average monthly revenue per listing drop from $5,585 to $3,536.
The difference is not about beaches versus mountains. It is about supply.
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Panama City Beach let supply flood in unchecked. Jackson Hole could not add supply even if it wanted to. When new listings can pour into a market without limit, your nightly rate becomes a negotiation with every competitor who appears on Airbnb. When supply cannot grow, your pricing power stays intact.
I have spent 40 years looking at data sets, first in government statistics and now in market research, and if there is one pattern that repeats across every asset class I have studied, it is this: scarcity protects returns. That applies to bonds, to farmland, and (as StaySTRA data now clearly shows) to vacation rental markets in 2026.
Why Supply Constraints Should Be the First Thing You Check
National STR supply growth has slowed considerably. The industry-wide figure sits at roughly 4.6% for 2026, down from the 20% peak during the post-pandemic gold rush of 2021 and 2022. That deceleration sounds like good news for existing operators. But the average hides enormous variation.
Some markets absorbed massive new supply. Panama City Beach grew 78%. Myrtle Beach now has 8,308 listings competing for a $213 average daily rate and 27% occupancy. Other markets barely moved at all. Palm Springs went from 6,036 active listings in Q2 2024 to 6,018 in Q2 2025. That is not growth. That is a wall.
Think of it like a parking garage. In an open lot with unlimited spaces, nobody pays a premium to park. But when the garage has a fixed number of spots and the concert across the street just sold out, the last spot is worth whatever someone will pay. Supply-constrained STR markets are the fixed-capacity garages of vacation rental investing.
The question for investors is straightforward: which markets have a wall around their supply, and what kind of wall is it?
The Three Types of Supply Constraints
Not all supply barriers work the same way. After analyzing STR revenue benchmarks across dozens of U.S. markets, I see three distinct categories of supply constraint, each with different durability and different implications for investors.
Geographic Constraints: The Land Itself Says No
Some markets cannot add supply because there is physically nowhere to build. Islands, narrow mountain valleys, and corridors hemmed in by conservation land create natural ceilings on listing counts.
Key West, Florida is the textbook case. An island 4 miles long and 1 mile wide, Key West has 1,172 active STR listings and charges the highest ADR of any coastal market in our database at $903. Annual revenue averages $143,412 per listing, nearly triple Hilton Head’s $55,440 despite a lower occupancy rate (49% versus 69%). There simply is not enough buildable land to dilute that pricing power.
Jackson Hole, Wyoming sits in a valley where 97% of the surrounding county is federal land: Grand Teton National Park, Bridger-Teton National Forest, and the National Elk Refuge. The total active listing count is 349. Compare that to Breckenridge, Colorado, which has 5,008 listings in a similarly positioned ski market. Jackson Hole’s geographic bottleneck keeps supply pinned, and the data shows a median annual STR revenue of $78,821 that reflects that constraint directly.
Sedona, Arizona occupies a red rock corridor almost entirely enclosed by Coconino National Forest. With 1,805 active listings and a $440 ADR, Sedona charges a premium that the surrounding geography protects. The desert does not subdivide.
Do not let the high entry prices on these markets scare you right away. Geographic scarcity works in both directions. It limits supply, but it also limits resale inventory, which tends to support property values during downturns.
Regulatory Constraints: The Permit Cap as an Investor Moat
Regulatory barriers come in several forms: permit caps, ownership limits, rental day limits, and zone restrictions. The growing trend of cities using permit caps and ownership limits is creating a new kind of supply wall. The strongest regulatory constraints share an important quality: they are hard to reverse.
Provincetown, Massachusetts recently capped how many STRs a single person can own. With 1,150 active listings in a town of 2,454 residents, the density is already extreme. StaySTRA data shows a $429 ADR and 63.2% occupancy, with revenue growth running roughly 12% year over year. The ownership cap prevents portfolio investors from consolidating supply, which keeps pricing power distributed across existing operators.
Palm Springs, California limits each property to 26 rental contracts per year. Combined with a 12.5% transient occupancy tax and seasonal demand that concentrates in January through April (when the desert blooms and the temperatures cooperate), this regulatory structure effectively prevents any single property from operating at hotel-like volume. The result: 6,018 listings that barely change year to year, and a $463 LTM average daily rate that holds firm.
Aspen, Colorado caps STR-C permits at 75% of available properties in 8 of its 14 zones and imposes a 22.35% aggregate tax burden on commercial STR operators. Aspen’s STR market data shows ADRs ranging from $640 to over $1,000 depending on property type, with RevPAR growing 5.7% year over year. That tax load would crush margins in a lower-ADR market, but in Aspen it functions as a moat. Operators who can absorb it face less competition from those who cannot.
Stay with me here, because this is where it gets interesting for investors thinking about financing. Markets with regulatory constraints that protect pricing power also tend to produce the kind of consistent cash flow that DSCR lenders want to see. A property in a permit-capped market with stable ADR is a very different underwriting conversation than one in an overbuilt beach market where revenue is trending down.
The Double Moat: Markets with Both Types of Constraints
The most durable supply constraints combine geography and regulation. These are the markets where supply growth is not just slow. It is structurally blocked.
Jackson Hole is the standout. The Teton valley geography limits physical development. On top of that, the Town of Jackson restricts most residential properties to three short-term rentals per calendar year and a maximum of 60 days. Teton County (outside the town) effectively prohibits STRs in residential zones. The result: 349 listings in a market that draws millions of visitors annually. The $589 ADR is not an accident. It is what scarcity looks like on a spreadsheet.
Aspen combines its mountain valley with permit zone caps and a 22% tax load. Key West pairs its island geography with strict regulatory controls on new STR permits.
When I see a market with both types of constraints, the data almost always tells the same story: higher ADRs, more resilient occupancy during shoulder seasons, and revenue growth that outpaces the category average. These are not guaranteed outcomes (no market comes with guarantees), but the pattern is consistent enough that I trust the numbers.
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Supply Constraint Scorecard: How the Markets Stack Up
Here is how seven supply-constrained markets compare against two open-supply markets. I have ranked them by the combined strength of their geographic and regulatory barriers.
| Market | Geographic Barrier | Regulatory Barrier | Active Listings | ADR | Est. Annual Revenue |
|---|---|---|---|---|---|
| Jackson Hole, WY | Strong | Strong | 349 | $589 | $78,821 |
| Key West, FL | Strong | Moderate | 1,172 | $903 | $143,412 |
| Aspen, CO | Strong | Strong | ~900 | $640+ | $85,000+ |
| Provincetown, MA | Moderate | Strong | 1,150 | $429 | $56,808 |
| Sedona, AZ | Moderate | Moderate | 1,805 | $440 | $71,208 |
| Palm Springs, CA | Low | Strong | 6,018 | $463 | $63,360 |
| Hilton Head, SC | Moderate | Low | 10,084 | $307 | $55,440 |
| Comparison: Open-Supply Markets | |||||
| Panama City Beach, FL | None | None | 10,196 | $315 | ~$51,000 |
| Myrtle Beach, SC | None | None | 8,308 | $213 | $19,248 |
Source: StaySTRA data. Annual revenue figures represent LTM averages across all listing types. Comparison markets included to illustrate the contrast between constrained and open-supply environments.
The pattern in this table is hard to miss. The constrained markets at the top charge more per night and generate stronger per-listing revenue. The open-supply markets at the bottom have the most listings and the lowest returns. Hilton Head sits in the middle as an instructive case: moderate geographic constraint (island with bridge access) but minimal regulatory protection, resulting in 10,084 listings and an ADR that trails every other constrained market on this list.
How to Spot Supply Constraints Before You Buy
Not every constrained market wears a sign. Here is what I look for when evaluating whether a market’s supply is genuinely limited.
Listing count trajectory. Pull three to five years of active listing data. If the number barely changes (Palm Springs: 6,036 to 6,018 in one year), something is capping growth. If it is climbing steeply (Panama City Beach: 5,808 to 10,196 in four years), supply is responding to demand without resistance, which means your future competitors are already on their way.
Land availability. Open a satellite map. If the market is surrounded by water, national forest, national park, or protected desert, the geographic constraint is visible from space. Jackson Hole, Key West, and Sedona all pass this test in under 30 seconds.
Permit and zoning rules. Check the city or county short-term rental ordinance. Look for annual permit caps, zone-based STR density limits, ownership caps, rental-day limits, and primary-residence requirements. If you see two or more of these, the regulatory barrier is real.
ADR resilience. In a healthy constrained market, ADR holds steady or rises even when national ADR growth is flat. If a market has 300 listings and a $200 ADR, it is small but not necessarily constrained. If it has 349 listings and a $589 ADR, something is keeping supply from catching up to demand.
Revenue direction. Are per-listing revenues trending up, flat, or down? Constrained markets tend to show flat-to-rising revenue per listing because new supply cannot dilute existing operators. Overbuilt markets show the opposite: Panama City Beach’s 37% per-listing revenue decline between 2021 and 2024 is a textbook example of what unchecked supply growth does to your bottom line.
We do our best to keep our data accurate and up to date, but markets move fast and we are only human. Always verify current figures directly with local sources before making investment decisions.
Frequently Asked Questions
Are supply-constrained STR markets more expensive to enter?
Generally, yes. Jackson Hole’s typical home value is $1.85 million, and Aspen’s median single-family home runs $13.2 million. But the premium reflects the same scarcity that protects your revenue. Entry costs are higher, and gross yields as a percentage may look lower (Jackson Hole runs roughly 4.3%), but the absolute dollar returns and long-term revenue stability often compensate. Investors focused on cash flow above all else may find better entry points in moderately constrained markets like Provincetown or Palm Springs, where home values are considerably lower and regulatory protection is still strong.
Will supply ever increase in permit-capped markets?
It depends on the type of cap. Ownership limits (like Provincetown’s) can be revised by town vote. Zone-based density caps (like Aspen’s 75% rule) require zoning amendments that face significant political headwinds. Geographic constraints are permanent. No regulation can make Key West bigger or move the national forest boundary around Sedona. The strongest investor thesis combines both types of barriers, because even if the regulatory side loosens, the geographic side holds.
How do I check supply trends in a specific market?
Start with StaySTRA’s analyzer tool, which displays active listing counts, historical trends, ADR, occupancy, and revenue data for U.S. STR markets. Compare the current listing count to where it was one, two, and three years ago. If the number is flat or declining while ADR is rising, you are likely looking at a supply-constrained market. Pair that with a check of the local STR ordinance for permit caps or density limits.
What happens to supply-constrained markets during a recession?
Constrained markets tend to hold pricing better during downturns because the limited supply base means fewer operators compete for reduced demand. During the 2023 travel softening, markets like Jackson Hole and Key West experienced smaller ADR drops than high-supply beach markets and recovered faster. That resilience is part of the supply constraint thesis, though luxury-priced constrained markets may still see booking volume decline when discretionary travel budgets tighten.
Sponsored — Beeline
Finance Your Next STR With a DSCR Loan
Qualify on property cash flow, not W-2 income. Beeline specializes in fast DSCR closings for STR investors. No personal income verification required.
Check Your DSCR Eligibility →Affiliate disclosure: StaySTRA may earn a referral fee.
What This Means for Your Next STR Investment
The era of easy STR returns from riding a wave of post-pandemic demand is over. National supply growth has moderated, but the damage in overbuilt markets is already done. Panama City Beach operators who entered in 2022 are earning less per listing today than they were three years ago. Myrtle Beach’s $19,248 average annual revenue makes it difficult to cover operating costs on most properties, let alone generate meaningful returns.
The markets that avoided this pattern are the ones where supply could not respond. Jackson Hole’s 349 listings and $589 ADR. Key West’s $143,412 in annual revenue on an island that cannot add a single acre. Provincetown’s 12% revenue growth behind an ownership cap that prevents concentration.
These are not the cheapest markets to enter. But the data is consistent: supply constraints protect the thing that matters most to investors, which is yield durability.
If you are evaluating a new market, start with supply. Check the StaySTRA analyzer for listing trends, pull the local STR ordinance, and look at a map. If you see rising ADR behind flat or declining supply, you have found something worth underwriting.
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