Chattanooga, Tennessee, known for its stunning scenery and vibrant culture, is quickly becoming a hotspot for short-term rentals (STRs). If you're considering investing in this booming market, understanding local regulations, competition, and market dynamics is crucial for making informed decisions.

Regulations on Short-Term Vacation Rentals (STRs)

Before diving into the investment, familiarize yourself with the local regulations governing STRs. In Chattanooga, as well as Hamilton County, the following key points should be noted:

1. Registration: All short-term rentals must be registered with the City of Chattanooga. Property owners must obtain a Short-Term Rental Certificate, which requires proof of liability insurance and compliance with local codes.

2. Zoning: STRs are permitted in residential zones if owner occupied in most cases, but specific restrictions may apply. Ensure that your property complies with zoning laws to avoid potential fines. You may be able to purchase a currently ran STVR in Chattanooga and the permit MAY transfer! However this is not a 100% guarantee but is likely to get approved if it's in good standing. The new regulations for Non-Owner Occupied STVRs in Chattanooga are in commercially zoned areas which greatly limits new STVRs, but not impossible. Working with someone knowledgeable as myself (Travis) or contacting the City will put you ahead of others. 

3. Transient Occupancy Tax: STR owners must collect and remit a 8% total occupancy tax on rental income. Staying on top of this can help you maintain compliance and avoid penalties. Currently in 2024 the taxes total around 17.25% (Seek a CPA for help, not financial advice).

4. Owner Occupancy: The regulations stipulate that hosts must be present in the property for at least 270 days per year if the property is owner-occupied. If Non Owner occupied, you cannot live in the property unless doing *maintenance* (not legal advice). 

5. Noise and Nuisance Regulations: STRs must adhere to noise ordinances and cannot disturb the peace of the neighborhood. Violations can lead to fines or revocation of the rental license. Airbnb and VRBO do not tolerate partying, neither do most neighbors or the city! Make sure to put in your rules and remind them that no parties are allowed! I personally use Minut noise monitors in my STVR to prevent any party or noise violation.

Competition: Hotels vs. STRs

Chattanooga's hospitality landscape is competitive, with several hotels vying for visitors' attention. Recent trends indicate that STRs are increasingly popular among travelers seeking unique experiences and localized stays.

• Hotel Supply: As of recent statistics, there are approximately 5,000 hotel rooms in Chattanooga, with a growing number of boutique hotels entering the market. While hotels offer consistent services, STRs can provide more personalized experiences and unique accommodations that appeal to a diverse range of guests.

• Market Saturation: With the rise of platforms like Airbnb and VRBO, the STR market has expanded significantly. As of now, there are about 800 to 1,200 active STR listings in Chattanooga, contributing to a competitive atmosphere.

Calculating Occupancy Rates

Understanding occupancy rates is critical for gauging the performance of your STR investment. You can use tools like AirDNA or Airbnb's own calendar features to analyze competition and market trends.

Using AirDNA

AirDNA provides comprehensive analytics for STRs, including occupancy rates, average daily rates (ADRs), and revenue potential. Here’s how to leverage it:

1. Occupancy Rate: Look for the occupancy rates of similar properties in your area. This will give you an idea of what to expect and help you set competitive pricing.

2. Seasonality Trends: Analyze seasonal trends in the area to identify peak and off-peak times, allowing you to optimize your pricing strategy.

3. Market Insights: Utilize the data to benchmark your property against competitors. This information can be invaluable for making informed decisions about property management and marketing strategies.

Checking Airbnb Calendars

You can also manually check the calendars of competing listings on Airbnb. Here’s how:

1. Identify Competitors: Search for properties similar to yours in terms of size, location, and amenities.

2. Availability: Observe how frequently these properties are booked. A property that is consistently booked may indicate high demand.

3. Reviews and Ratings: Pay attention to reviews and ratings to understand what guests appreciate about these listings, which can guide improvements for your own property.

Why Larger STRs Will Outperform Smaller Ones Long Term

Investing in larger STRs (three bedrooms or more) can yield better returns in Chattanooga for several reasons:

1. Occupancy Rates: Larger properties can accommodate more guests, appealing to families and groups who prefer to stay together. This can separate you from smaller STRs very easily and lead to longer stays. 

2. Competitive Edge: With more guests, larger STRs can often offer more competitive pricing per person, making them attractive options for group travel. Also hotels cannot compete with you!

3. Revenue Potential: Larger properties can command higher nightly rates due to their capacity and amenities, ultimately leading to increased revenue.

4. Diverse Guest Profile: Larger STRs can attract a wider range of guests, including vacationing families, business groups, and wedding parties, enhancing your market reach. Know your guests and why they are visiting!

Conclusion

Investing in short-term rentals in Chattanooga can be a lucrative opportunity, provided you understand the local regulations, competitive landscape, and occupancy dynamics. By leveraging tools like AirDNA and analyzing competitor listings, you can position your property for success. With the growing popularity of STRs and the benefits of larger properties, Chattanooga offers a promising market for savvy investors ready to capitalize on this trend. Chattanooga is a heavily growing market and has an immense amount of tourism for it's size! 

Contact Me Today!

Get to know the details on the Chattanooga market for Short Term Rental regulations, laws, management, cleaners, amenities, what to buy, how to furnish, and much more by contacting me!

Travis Jacobs, Realtor
702-506-5007
Real Broker
TN License 375237
(844) 591-7325

[email protected]