The 2025 Caribbean Hospitality Showdown: Airbnb’s Momentum vs the Hotel Sector’s Resilience

In 2025, Caribbean tourism is not simply “back”. It is bigger, more diversified, and more contested than it was before the pandemic. International air arrivals to the region in 2024 surpassed 2019 levels by about 13 percent in the first half of the year, and were still growing at roughly 8 percent year on year through September 2024. This surge in demand has supported steady gains in hotel occupancy and pricing, with regional revenue per available room, or RevPAR, growing at a compounded annual rate of about 5.9 percent over the last six trailing twelve month periods to September 2024.

At the same time, short term rentals such as those on Airbnb and similar platforms have taken a firm place in the region’s accommodation mix. Investors, home owners and workers looking for side income see opportunity. Hotel associations, planners and housing advocates see both benefits and risks. The central question for 2025 is no longer whether Airbnb is present in the Caribbean. The question is whether its growth is eroding hotel performance or simply reshaping where, and with whom, visitors stay.

1. Hotels in the Caribbean: a comeback with pricing power

Hotel numbers across the Caribbean show a sector that is recovering in volume and gaining in yield. Analytics sources report that through 2023, hotel performance reflected a 9.4 percent increase in occupancy and an 11.1 percent increase in average daily rate compared to the previous year, as arrivals approached and then passed pre pandemic levels.

The momentum carried into 2024 and early 2025. Regional analysis indicates that in the first half of 2024, hotel occupancy was up about 3.9 percent compared to the same period in 2023. Average daily rates increased by around 8.3 percent, while gross revenue rose by roughly 12.5 percent, supported by both higher prices and more room nights sold.

By January 2025, data for the Caribbean hotel sector showed occupancy at 72.9 percent, 2.2 percent higher than in January 2024. Average daily rate for that month reached about 404 United States dollars, an increase of 3.8 percent year on year.

These numbers suggest several points that matter for the Airbnb debate. First, hotels are not in free fall. On average, they are filling more rooms at higher prices than a year ago. Second, the region still has pricing power at the upper end, especially in luxury and all inclusive properties that short term rentals do not easily replicate. Third, strong hotel metrics do not necessarily mean that every local market is healthy. Competition with short term rentals is often felt most sharply in specific niches, such as urban business travel, small islands with limited housing, or destinations without a dominant all inclusive product.

2. Airbnb and short term rentals: where the Caribbean is hottest

While hotel operators focus on occupancy and RevPAR, short term rental platforms track markets in terms of listings, occupancy, nightly rates and annual host revenue. Data from mid 2024 to mid 2025 highlights how significant the short term rental footprint has become in some Caribbean destinations.

For example, Aruba is listed as the largest Caribbean Airbnb market in a June 2025 update, with around 4,148 active listings, an average occupancy rate of 76 percent, an average daily rate of 178 dollars, and estimated annual revenue of about 50,127 dollars per listing. Regulations there are described as relatively lenient and the estimated short term rental yield is roughly 12.3 percent.

Across the wider Caribbean, a ranking of top markets for Airbnb investment and arbitrage features destinations such as San Juan in Puerto Rico, Punta Cana and Santo Domingo in the Dominican Republic, Trinidad and Tobago, St Kitts and Nevis and again Aruba. In these markets, average occupancy rates in the last year range from about 41 percent in Trinidad and Tobago to nearly 78 percent in Aruba, while nightly rates can exceed 190 dollars in some smaller high end islands.

On a broader regional scale, analysis for Latin America and the Caribbean estimated that in 2021, guest spending associated with stays booked through Airbnb supported about 8.9 billion dollars in GDP, 416,000 jobs and 4.5 billion dollars in wages and other labor income. That study also suggested that for each 1,000 guest check ins in the region, spending supported approximately 15 jobs.

These numbers do not isolate the Caribbean island economies, and they lag the very latest tourism boom, but they illustrate that short term rentals have moved from “side business” to a meaningful slice of the tourism economy. In some individual markets, academic work has already found measurable revenue effects. A study on Belize, for example, examined the spatial relationship between Airbnb listings and hotels and concluded that the growth of Airbnb supply had a statistically significant impact on hotel revenue, although the effect size in that case was relatively modest.

In St. Maarten Independent vacation rentals (IVRs) have become a dominant force in St. Maarten’s lodging market, with recent data suggesting they may now rival or even surpass traditional hotels, timeshares, and guesthouses. An analysis conducted by the St. Maarten Hospitality and Trade Association (SHTA), in partnership with Lighthouse, estimates that IVRs generated US $319 million in annual revenue in 2024.

The report counted more than 5,100 active short-term rental units across the island listed on Airbnb, VRBO, and Booking.com, compared to the roughly 3,568 hotel, timeshare, and guesthouse rooms on the Dutch side alone. Occupancy rates averaged 35% on the Dutch side and 40% on the French side, with guests paying $389 per night in Dutch St. Maarten compared to $488 on the French side. In total, IVRs hosted around 202,000 annual occupants, producing more than 156,000 room nights per month.

3. Hotels versus short term rentals: substitution, segmentation, or both

The headline debate often presents Airbnb and hotels as a zero sum contest. For every percentage point of market share one gains, the other must lose. Some global studies suggest that a 10 percent increase in Airbnb supply can reduce hotel room revenue by around 0.35 percent, a figure that has become widely quoted in policy circles.

The Caribbean picture is more nuanced.

On one hand, the strength of hotel RevPAR growth and the increase in both occupancy and ADR across 2023 and 2024 imply that hotels have managed to grow revenue even as short term rentals expanded. A region that is adding air arrivals at an 8 to 13 percent pace can, at least in the short term, support both hotel growth and a growing short term rental sector.

On the other hand, the distribution of that growth matters. Short term rentals tend to be stronger in certain segments:

• urban and peri urban neighborhoods that attract digital nomads or long stay visitors
• small islands and resort zones where villa and condo stock can be converted to visitor use
• “visiting friends and relatives” markets, where guests want kitchens, multiple bedrooms and neighborhood settings rather than resort compounds

Hotels, particularly large branded and all inclusive properties, remain dominant for packaged leisure, group travel, conferences and some family segments. They also provide employment at larger scale and often contribute to structured training pipelines that smaller hosts cannot match.

In practice, many destinations are experiencing a mix of substitution and segmentation. Some budget and mid range hotels in urban centers do feel direct pressure from Airbnb type listings that undercut them on price for similar locations. At the same time, entirely new demand categories have emerged, including remote workers staying for several weeks or months and travelers who would not have chosen the destination without the availability of apartments or villas.

For policy makers and industry leaders, the key is to understand which dynamic is dominant in each island or city. A destination such as Aruba, with several thousand active listings, high occupancy and strong yields for hosts, will experience very different pressures compared to a smaller island where the short term rental stock is still limited.

4. Regulation and the politics of housing, tax and fairness

The Caribbean has been discussing the “sharing economy” for almost a decade. A resource guide published by the Caribbean Hotel and Tourism Association in partnership with regional bodies outlined as far back as 2017 the main policy questions around short term rentals: consumer protection, fair taxation, safety standards and the impact on traditional accommodations.

Since then, some Caribbean governments have introduced or proposed measures such as registration requirements for hosts, tourism levies on short term rentals, and zoning or condominium rules that limit where tourist rentals are allowed. Others have taken a lighter touch and focused on ensuring that platforms collect hotel occupancy style taxes.

Global developments are also shaping Caribbean debates. Across Europe and North America, governments are considering stricter caps, higher taxes or outright bans in some neighborhoods. Spain, for instance, is considering a 21 percent value added tax on short term tourism rentals, double the rate applied to hotels, largely to address housing shortages in tourist heavy regions. Greek lawmakers have debated bans on windowless basement rentals and temporary freezes on new short term rental registrations in central districts, in response to local residents’ concerns and rising rents.

These examples do not automatically translate to a Caribbean context, where housing markets, tourism dependence and fiscal structures differ. They do however show that the politics of short term rentals have moved from novelty to core public policy. Caribbean ministers and parliamentarians can see that once locals perceive a link between holiday rentals and housing affordability, pressure for regulation can rise quickly.

The policy challenge is to regularize and tax the sector without suffocating a form of tourism that can spread income to smaller property owners and rural or under visited communities. Transparent registration, safety standards and platform cooperation on tax collection are likely to be the baseline asks. Beyond that, each country will need to assess whether particular neighborhoods or islands are facing genuine displacement or infrastructure strain that warrants caps or higher levies.

5. What 2025 and beyond could look like

Given the current data, three broad scenarios emerge for the Caribbean hospitality landscape over the next few years.

Scenario one: parallel growth with mild friction
Tourist arrivals continue to rise, hotel RevPAR keeps tracking upward at roughly mid single digit annual growth, and short term rentals expand but at a slower pace as some markets become saturated. In this scenario, the main policy focus is fair tax collection and basic regulation, not aggressive caps. The “showdown” remains mostly a narrative rather than a structural crisis, although specific city centers may experience stronger competition and occasional protests.

Scenario two: localized housing and infrastructure backlash
In high demand islands and neighborhoods where Airbnb style listings already represent a large share of the housing stock, local concern about rent levels and neighborhood change could push governments to introduce stricter rules. That could include caps on the number of nights, tighter condo bylaws, or higher levies on non resident owners. Hotels would likely welcome such moves, while hosts and some tourism businesses would warn of reduced flexibility and innovation. The global trend toward stronger regulation would provide political cover.

Scenario three: macro slowdown exposes vulnerabilities
If global economic conditions or climate related shocks slow demand, the combined hotel and short term rental capacity that has grown in the boom years could become excess supply. In that environment, competition becomes harsher. Some marginal hotels and many small hosts would likely exit or cut prices sharply, putting pressure on wages and tax revenues. For tourism dependent islands, this scenario would underline the need for careful capacity planning, diversification and climate resilience, not just headline arrival growth.

6. Takeaways for Caribbean stakeholders

For tourism boards, hotel associations, governments and host groups, a few practical steps stand out.

Treat Airbnb and hotels as part of one accommodation ecosystem. Planning, marketing and infrastructure decisions should be based on total bed capacity and visitor nights, not hotels alone.

Invest in better data. Platforms and private analytics firms provide valuable signals, but governments need their own consistent data on short term rental numbers, occupancy and location. That will reduce guesswork and ideological debates.

Align tax policy across accommodation types. Visitors rarely care whether they pay 10 or 12 percent in a tourism levy. They do notice inconsistent enforcement or contentious headlines.

Protect housing and communities where real pressure exists. If particular towns or neighborhoods show clear evidence of resident displacement or severe rent spikes linked to tourist rentals, targeted rules can be justified. Blanket bans in low pressure areas are harder to defend.

Keep the long term visitor experience in focus. Hotels still anchor airlift, marketing campaigns and large events. Short term rentals often provide authenticity, flexibility and support for community based tourism. A healthy mix can strengthen the region’s appeal in a travel market that is increasingly diverse.

The 2025 Caribbean hospitality showdown is therefore not a simple fight between an old guard and a disruptor. It is a negotiation over how a small, tourism dependent region shares a growing pie among hotels, hosts, workers, residents and governments. The data to date suggests that both hotels and Airbnb style rentals are gaining from the current boom. The question for the region is whether policy can keep pace so that the benefits remain broad, the housing consequences manageable, and Caribbean destinations continue to feel like places to live, not only places to stay.

‍