Hot Springs National, Arkansas

Hot Springs National Park is renowned for its natural thermal springs, historical significance, and as a designated National Park since 1921. Situated in Garland County, Arkansas, this area attracts millions of visitors each year looking for adventure, relaxation, and rich cultural experiences. The short-term rental market has gained momentum with the rise of platforms like Airbnb and VRBO, providing diverse lodging options for guests exploring the natural beauty and unique offerings of the park.

The short-term rental market in Hot Springs benefits from a steady flow of visitors year-round, although there are distinct seasonal fluctuations. Factors such as tourism trends, economic conditions, and local attractions significantly influence market dynamics. Understanding the nuances of the short-term rental landscape here is critical for potential investors aiming for success in this market.

As of early 2023, notable Key Performance Indicators (KPIs) for the Hot Springs short-term rental market include:

• Average Daily Rate (ADR): $198.87
• Occupancy Rate: Historical occupancy rates for short-term rentals in the area hover around 70%. This percentage can increase during major holiday periods or local events.
• Revenue per Available Room (RevPAR): Approximately $139.22, derived from OS occupancy and ADR.
• Length of Stay: Typically around 2.5 to 3 days, indicating a preference for weekend getaways and brief vacations among visitors.
• Number of Listings: There are around 1,200 active short-term rental listings, with offerings ranging from single-room accommodations to entire homes.

These key metrics provide a solid foundation for investors, enabling an informed decision-making process concerning future investments.

Over the last decade, the short-term rental market in Hot Springs has evolved, reflecting broader trends in tourism and hospitality. In pre-2015, the market was relatively niche, primarily consisting of local bed-and-breakfast establishments. However, as platforms like Airbnb and VRBO gained popularity, the market began finding a wider audience.

Between 2015 and 2023, key growth trends have emerged, including:

• Increase in Supply: The number of short-term rental listings has grown significantly, with a more than 300% increase observed since 2015.
• Visitor Trends: The number of annual visitors to Hot Springs has risen consistently, from approximately 1.5 million in 2015 to an estimated 2.2 million in 2023.
• Investment Spike: More investors and homeowners are turning to short-term rentals as a lucrative alternative to traditional leasing. This has been particularly beneficial as property values have increased alongside occupancy rates.

This consistent growth trajectory indicates a positive outlook for both existing and new short-term rental investors.

With the current ADR of $198.87 and a solid occupancy rate averaging around 70%, investors can expect promising returns on their investments in Hot Springs.

• Estimated Gross Annual Revenue: Investors can anticipate an average gross revenue of approximately $50,000 per unit annually, calculated based on the effective occupancy (70%) and ADR.
• Operational Expenses: Typical expenses, including property management fees, utilities, maintenance, and insurance, can account for around 30-40% of revenue.
• Net Profit Margins: Following the expense deductions, net profits could range from $30,000 to $35,000, resulting in an ROI of approximately 8-12%, depending on the acquisition price of the property.

Investors should analyze the financial context of their potential purchases, including property value appreciation, local market trends, and individual property performance to make well-informed investment decisions.

The Hot Springs short-term rental market experiences seasonal peaks and troughs, largely influenced by weather patterns, holidays, and local events.

• Peak Season: The summer months (June to August) are the busiest, coinciding with school vacations and outdoor activities, attracting families and tourists from nearby states.
• Shoulder Seasons: Spring (April to May) and early fall (September to October) witness increased bookings driven by mild weather and events such as Hot Springs Music Festival.
• Off-Peak: Winter months, particularly January and February, see a dip in occupancy due to colder weather, although holiday bookings during December can mitigate losses.

Understanding these fluctuations is vital for rental pricing strategies and optimizing occupancy rates year-round.

In Hot Springs, the performance of short-term rentals varies by property type. The following insights provide a clearer picture:

• Single-family Homes: These make up the majority of the market (approximately 70% of listings) and generally achieve higher occupancy and rental rates, appealing to families looking for more extensive accommodations.
• Condos and Apartments: These units attract couples and solo travelers, particularly near downtown areas, often experiencing less stable occupancy but still profitable.
• Unique Stays: Properties offering unique experiences, such as cabins or historic homes, can generate premium ADRs and often see higher demand during peak tourist seasons.

Investors should consider property types that align with their target guest demographics, local competition, and specific market demands.

Understanding guest preferences can greatly impact short-term rental success. In Hot Springs, guests typically seek:

• Proximity to Attractions: Rentals near Hot Springs National Park and the historic bathhouses are highly desirable.
• Outdoor Access: Features such as decks, gardens, or direct access to hiking trails are particularly attractive to guests.
• Unique Amenities: Offerings like hot tubs, game rooms, or pet-friendly accommodations can set listings apart and justify higher ADRs.
• Technology Features: Amenities such as high-speed Wi-Fi, smart TVs, and keyless entry have become essential for many travelers.

Incorporating amenities that cater to these preferences can improve guest experiences and rental performance.

The regulatory landscape for short-term rentals in Hot Springs is relatively relaxed compared to larger urban centers. However, property owners need to be aware of specific regulations, including:

• Permit Requirements: Property owners must apply for a short-term rental license, ensuring compliance with local zoning regulations.
• Tax Obligations: Owners are responsible for collecting and remitting local hotel occupancy taxes, which are currently set at 2% in addition to state taxes, ultimately affecting rental profitability.
• Neighborhood Restrictions: Certain residential areas may have specific HOA rules or ordinances that impact short-term rental operations.

Staying informed regarding regulations is crucial for adhering to local guidelines and maintaining operational integrity.

Hot Springs offers a diverse range of neighborhoods, each with unique characteristics that appeal to various guest segments:

• Downtown: Characterized by historical architecture, downtown Hot Springs attracts many visitors looking for convenience and access to restaurants, attractions, and events. Properties here typically maintain higher occupancy rates and ADRs.
• Lake Hamilton: This area appeals to families and groups seeking recreational activities near the water, offering waterfront properties that can command premium pricing.
• Hot Springs Village: A gated community offering a mix of single-family homes and condos, appealing to retirees and longer-stay visitors. However, occupancy rates here can fluctuate due to its more residential character.

Investors should assess neighborhood demographics, competition, and market demand to identify investment opportunities.

Looking ahead, the short-term rental market in Hot Springs is positioned for continued growth with several key trends:

• Demand for Unique Stays: Utilization of distinctive properties, such as treehouses or cabins, is rising as travelers seek unforgettable experiences.
• Increased Focus on Sustainability: Eco-friendly practices, such as solar power setups and recycling programs, are becoming popular among guests, potentially enhancing property appeal.
• Technological Integration: The rise of intelligent home technology, focusing on guest convenience and security, is expected to gain traction, with more properties investing in smart technologies.

Potential investors should remain adaptable and capitalize on these emerging trends for sustained profitability.

Q: How can I maximize my short-term rental investment in Hot Springs?
A: Focus on understanding seasonal patterns, pricing strategies, guest preferences, and optimized marketing techniques. Unique amenities that enhance guest experience can also improve performance

Q: What neighborhood would be best for a short-term rental investment?
A: Downtown and Lake Hamilton show strong performance due to their attraction and recreational options, while Hot Springs Village suits a different demographic looking for extended stays.

Q: Are there any restrictions on property types for short-term rentals?
A: Residential properties may have HOA restrictions and require permits for short-term rentals, which can vary by neighborhood. It’s essential to research local regulations before investing.

Q: What is the potential return on investment in Hot Springs?
A: Given the current market trends, investors can expect an ROI in the range of 8-12%, depending on property purchase price and management strategies.

In summary, the short-term rental market in Hot Springs National Park presents solid investment opportunities for those willing to navigate its unique landscape. By understanding local dynamics, preferences, and regulations, investors can well-position themselves for success.