Big Events, High Rents

Homeowners are picking up where hotels leave off

South by Southwest--the music, film and interactive festival that attracts nearly 300,000 people to Austin every March--presents a big logistical problem: Where do you put that many people in a city with only 30,000 hotel rooms? For enterprising locals, the bed shortage is an opportunity to rent their homes for tidy profits. In Austin and other places that host large annual events, homeowners can capitalize on a favorable supply-to-demand ratio to charge hefty rates for short-term rentals.

"There's definitely a ton of demand," says Sharon Walker, a real estate agent whose three-bedroom home rented for $1,200 a night during last year's...

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