You should report this rental income on schedule C as a business.
If you have an average rental period of less than 7 days, the IRS will automatically assume you are running a business, and that income will be reported on Schedule C.
Rental properties use Schedule E to report income and expenses. Businesses use Schedule C.
Generally, Schedule C is used when you provide substantial services (such as a hotel or a Bed and Breakfast) in conjunction with the property or the rental is part of a trade or business as a real estate dealer.
Regarding Schedule C versus Schedule E:
IRS Pub 527 states "If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040). Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc."
This is interpreted as running a hotel-like business, with tenant services. If you rent a furnished condo (with kitchen items and linen, for instance), you are not necessarily running a hotel. But if you change the linen and/or provide maid services during the tenant's stay, then this could be considered running a hotel, and the activity should be reported on Schedule C.
