7 hidden-gem cities and towns to buy an Airbnb in this year

• Short-term rental analytics site AirDNA compiled a list of cities with untapped potential.
• They were picked for their high rate of bookings, growing revenue, affordability, and regulations.

There are more short-term rentals in America — 1.3 million listings— than ever before.

As hosts in some hot spots from Phoenix to Palm Springs worry about an "Airbnbust" marked by slowing bookings amid too much competition from other rentals, analytics site AirDNA put together a list of under-the-radar spots to buy an investment property that still have untapped potential for profit.

The list of 25 cities and towns captures destinations with "momentum," said AirDNA economist Jamie Lane.

In these places, hosts were the most booked nationwide over the past 12 months. Hosts in these spots also saw growing revenue year-over-year. The team then factored in "investability," dividing the hosts' typical revenue by the area's average home price to reveal the yield for the investment.

This year, the team also responded to the growing wave of regulations cities and towns are putting on short-term rentals. Partnering with underwriting platform Revedy, they factored in a score of 1 to 10 for how hard it is for a new investor to enter a given market with restrictions.

Locations like Burlington, Vermont and Madison, Wisconsin, for example, were removed because of new rules that limit who can own short-term rentals or require month-long stays.

Nabbing the top spot is Fairbanks, Alaska, which Lane said benefited from travelers returning to farther-away destinations after staying closer to home during the pandemic. Lane added that the state's second largest-city, located about 350 miles north of Anchorage, is also home to oil and gas projects that attract workers who need spots for mid-term seasonal stays.

The list, however, is mostly dominated by midsized cities in the Midwest, where home prices are cheaper than in more expensive coastal cities.

Insider breaks down the top seven destinations.

7. New Haven, Connecticut

New Haven, Connecticut is home to Yale University.      DenisTangneyJr/Getty Images

Average monthly occupancy in 2022: 62.5%

Average annual revenue for short-term rental owners: $48,561

Median home price: $261,407

6. Williamstown, Kentucky

The population of Williamstown, Kentucky is 4,000 people.      Bob Weston/Getty Images

Average monthly occupancy in 2022: 69.3%

Average annual revenue for short-term rental owners: $56,185

Median home price: $179,403

5. Burdett, New York

Seneca Lake, one of the Finger Lakes in upstate New York, is just a mile from Burdett.      John Greim/LightRocket via Getty Images

Average monthly occupancy in 2022: 55.9%

Average annual revenue for short-term rental owners: $76,940

Median home price: $244,060

4. Springfield, Illinois

Springfield is the state capital of Illinois.      DenisTangneyJr/Getty Images

Average monthly occupancy in 2022: 61.5%

Average annual revenue for short-term rental owners: $28,773

Median home price: $118,339

3. Rockford, Illinois

Rockford, Illinois is the third-largest city in the state.      DenisTangneyJr/Getty Images

Average monthly occupancy in 2022: 60.9%

Average annual revenue for short-term rental owners: $38,721

Median home price: $116,845

2. Evansville, Indiana

Evansville, Indiana is located one hour south of St. Louis.      larrybraunphotography.com/Getty Images

Average monthly occupancy in 2022: 60.7%

Average annual revenue for short-term rental owners: $26,938

Median home price: $115,882

1. Fairbanks, Alaska

Fairbanks, Alaska topped AirDNA's list.      Joel W. Rogers/Getty Images

Average monthly occupancy in 2022: 65.3%

Average annual revenue for short-term rental owners: $49,389

Median home price: $147,597