Australia’s holiday rental market in 2025 remains resilient, but profitability is no longer guaranteed. While travel demand stays strong across major cities and lifestyle destinations, rising regulation, higher operating costs, and growing competition mean hands-off hosting increasingly underperforms. The era of “list it and forget it” is over. This report shows why owners who professionalise operations, pricing, and guest targeting in 2025 are positioned to outperform in 2026.
Executive Summary: Australia Holiday Rental Market Trends in 2025
Australia’s travel and accommodation sector reached an estimated AUD 18.59 billion in 2025, reflecting a full post-pandemic recovery and sustained tourism demand (Source: Expert Market Research). Within this broader market, short-term rentals are growing at nearly twice the pace of traditional hotels, with global projections placing Australian STR revenue at USD 4.07 billion by 2030 (Source: Grand View Research).
Occupancy remains healthy across capital cities and lifestyle markets such as Sydney, Melbourne, and coastal Queensland. However, returns are diverging sharply between professional operators and self-managed listings.
Several forces are compressing owner margins. Regulatory caps in states like NSW and Victoria limit annual letting days. Cost inflation – especially for cleaning, utilities, insurance, and maintenance – continues to rise. Most critically, amateur pricing strategies leave 10 – 25% of potential revenue unrealised, even in high-demand locations.
In 2026, professional management consistently outperforms self-hosting, not because demand is weak, but because operational precision now determines success.
Australia Travel & Accommodation Market Overview (2025 Market Size & Growth)
Market Definition & Scope
The Australian travel accommodation market includes hotels, resorts, hostels, serviced apartments, and short-term accommodation. Holiday rentals and short-term vacation rentals typically refer to fully furnished residential properties rented for stays under 90 days, often listed on platforms such as Airbnb and Stayz. Unlike hotels, STRs compete on space, privacy, flexibility, and local experience. Serviced apartments sit between these models, offering hotel-like services within residential formats. Together, these segments increasingly overlap, intensifying competition while also expanding consumer choice.
Market Size & Growth Trajectory
In 2025, national STR listings increased by approximately 5.6% year-on-year, yet demand continues to outpace supply in prime urban and lifestyle locations. National occupancy remains steady at around 62 – 64%, indicating a mature but stable market.
Top-performing owners are not winning by adding more listings. Instead, they outperform through pricing precision, reduced vacancy gaps, and premium guest targeting – particularly longer stays, corporate bookings, and high-value leisure travellers.
Key Demand Drivers & Travel Trends Shaping Holiday Rentals in 2025
Tourism Recovery & Visitor Demand
Domestic tourism remains the backbone of Australia’s holiday rental market, supported by flexible work arrangements and cost-of-living-driven “closer-to-home” travel. International arrivals continue to recover, particularly from New Zealand, Southeast Asia, and North America.
Tourism spending has increased alongside longer average lengths of stay, favouring well-equipped homes over traditional hotel rooms and supporting stronger RevPAR outcomes for STR operators.
Changing Traveller Preferences
Traveller expectations continue to evolve. Demand is rising for family-friendly homes, work-from-anywhere setups, and corporate accommodation outside CBD cores. Regional destinations and lifestyle suburbs outperform dense inner-city areas where regulations are tighter.
Booking behaviour has also shifted. Guests increasingly expect instant responses, transparent pricing, and frictionless digital experiences – raising the operational bar for hosts.
Where Owners Are Earning the Best Returns in 2025
Despite regulatory and cost pressures, several Australian markets continue to deliver strong holiday rental returns when managed professionally.
Holiday Rentals in Sydney
Sydney remains the most rate-sensitive and supply-constrained market in premium locations. With 12,592 listings, average occupancy sits at 78%, supported by a $258 ADR and approximately $75,205 in annual revenue. Performance hinges on pricing accuracy and compliance management.
Short-term Rentals in Melbourne
Melbourne, Australia’s largest STR market with 20,704 listings, records 67% occupancy and a $224 ADR, translating to $56,563 annually. Accounting for roughly 15.9% of national STR supply, Melbourne benefits from relatively lenient regulations and is expected to see full price recovery by year-end.
Vacation Rentals in Gold Coats
The Gold Coast continues to outperform, driven by lifestyle demand and Olympic-linked infrastructure investment. With 79% occupancy, a $320 ADR, and $94,118 in annual revenue, it remains one of Australia’s strongest leisure markets.
Holiday Rentals in Perth
Perth stands out with the highest occupancy nationally at 85%, despite strict regulations. Listings average $212 ADR and $67,325 annually, supported by corporate travel and resource-sector demand.
Short-term Rentals in Melbourne
Brisbane is currently Australia’s fastest-growing capital city for STRs. 81% occupancy, $211 ADR, and $63,966 annual revenue position it ahead of both Sydney and Melbourne on efficiency metrics.
Flexible Letting in Adelaide
Smaller but high-yield markets also stand out. Adelaide records 70% occupancy, $238 ADR, and $62,450 annually, with property values forecast to grow 10 – 14% into 2026. The Sunshine Coast supports premium pricing year-round, delivering $355 ADR and $96,509 in annual revenue.
Across Australia, approximately 2 – 3% of rental properties change tenants each month, a figure that has remained consistent for five years – highlighting the importance of minimising vacancy gaps through professional management, regarding Expert Market Research & ABS.
Technology, AI & Automation in Australia’s Holiday Rental Industry
Current Technology Adoption
The Business Research Company shows that AI adoption across Australia’s holiday rental sector accelerated sharply in 2025, shifting from experimentation to operational necessity. Around 42% of small-to-medium hospitality operators now use AI for booking management, staff scheduling, or guest communication. Importantly, 74% of guests are comfortable with AI-driven reservations, and 28% of travellers already book via AI-powered platforms.
Technology amplifies yield in premium markets. Noosa Heads achieves an average $624 ADR and $152,000 in annual revenue, while Byron Bay leads nationally with a $649 ADR. Surfers Paradise maintains 71% occupancy and approximately $98,000 annually, demonstrating how automation supports scale and pricing discipline (Source: Made Comfy).
Key AI Use Cases in 2025
In practice, AI delivers value through dynamic pricing and demand forecasting, automated guest messaging, real-time revenue and cost tracking, and multi-platform calendar synchronisation. These tools reduce human error while enabling faster, data-driven decisions.
AI Outlook for 2026 – 2029
Research suggests the global hospitality AI market could grow from USD 0.15 – 0.23 billion in 2024 to approximately USD 1.44 billion by 2029, representing 50 – 60% annual growth. AI will increasingly function as a digital trip planner for guests, while supporting hosts behind the scenes.
L’Abode Accommodation demonstrates how AI-enabled pricing and operational systems improve yield while preserving personalised, locally informed hospitality.
Strategic Recommendations for Holiday Rental Owners in 2026
AI Adoption for Holiday Rental Hosts & Managers
According by Key Data Dashboard, technology is no longer a constraint in 2026. Only 8% of operators view tech as a limiting factor, confirming that automation and data are now baseline tools rather than competitive advantages.
Top-performing owners adopt AI incrementally, prioritising revenue impact over complexity. They use data to optimise pricing, occupancy, and length of stay while preserving human-led guest experiences. Automation handles volume; hosts focus on quality, brand, and strategic oversight.
Practical Strategic Steps for Holiday Rental Owners in 2026
- Get the Asset Right (Property Type & Size)
Define your core guests such as families, couples, corporate travellers, or luxury segments – and align property type accordingly. Use market data to validate high-performing locations and formats. Optimise layouts, amenities, and furnishings to justify higher nightly rates, and model income across peak and off-peak seasons before committing capital. - Control the Economics (Upfront & Ongoing Costs)
Budget comprehensively for purchase, furnishing, and launch. Track recurring expenses including management fees, utilities, cleaning, insurance, and maintenance. Evaluate management costs based on net performance uplift, not headline percentages, and maintain buffers for vacancies and unexpected repairs. - Protect Your Time (Management Strategy)
Be realistic about the workload of self-management. Many owners discover that DIY hosting caps revenue while increasing stress. Professional STR managers reduce friction, protect compliance, and enable scale – allowing owners to focus on strategy rather than daily operations.
L’Abode Accommodation: Holiday Rental Management Built for ROI in 2026
L’Abode Accommodation is one of Australia’s leading holiday rental and corporate accommodation specialists, designed for owners who want higher returns without hands-on management. Operating across key metropolitan and lifestyle markets, L’Abode Accommodation bridges the gap between profitability and peace of mind.
L’Abode Accommodation delivers end-to-end property management, covering marketing, guest communication, cleaning, inspections, and maintenance. Our team manages upgrades and furnishing to ensure homes meet holiday and executive standards, while tenant screening prioritises trusted corporate partners and vetted professionals.
Listings benefit from professional photography, SEO-driven visibility, and dynamic pricing strategies aligned with market demand. Over time, owners see less downtime between bookings, stronger asset condition, and higher ROI from premium tenants. For owners seeking expert airbnb management in Sydney or full-service holiday rental management across Australia, L’Abode Accommodation provides a proven, data-driven solution.
Ready to scale? List your home and let L’Abode Accommodation manage the rest.
Frequently Asked Questions (FAQs)
1. Is the Australia holiday rental market still profitable in 2025?
Yes, the Australia holiday rental market remains profitable in 2025, but returns are no longer automatic. Strong travel demand continues across capital cities and lifestyle destinations; however, rising operating costs, tighter regulations, and increased competition mean profitability now depends on professional pricing, efficient operations, and targeted guest acquisition rather than simple listing volume.
2. What are the average occupancy rates for holiday rentals in Australia?
National holiday rental occupancy rates in Australia average 62 – 64% in 2025, with higher performance in cities such as Perth (85%), Brisbane (81%), and Sydney (78%). Well-managed properties in premium locations consistently outperform the national average through dynamic pricing and reduced vacancy gaps.
3. How do short-term rentals compare to hotels in Australia?
Short-term rentals are growing at nearly twice the rate of hotels in Australia, driven by demand for larger spaces, flexible stays, and work-from-anywhere accommodation. While hotels dominate short stays, holiday rentals perform better for families, corporate travellers, and longer bookings, particularly in regional and lifestyle markets.
4. How is AI changing the holiday rental industry in Australia?
AI is transforming Australia’s holiday rental industry through dynamic pricing, automated guest communication, and demand forecasting. In 2025, over 40% of hospitality operators already use AI tools, enabling faster responses, higher occupancy, and improved revenue management. By 2026, AI adoption is expected to become a baseline requirement rather than a competitive advantage.
5. Should I self-manage or use professional holiday rental management in 2026?
For most owners, professional holiday rental management outperforms self-management in 2026. Experienced managers optimise pricing, ensure regulatory compliance, reduce vacancy periods, and handle day-to-day operations. This approach typically delivers higher net returns while protecting owners’ time and reducing operational risk – especially in regulated or high-demand markets.
