The ongoing coronavirus pandemic has had a particularly stark effect on the short-term rental market, given its reliance on travel, business, holidays, city breaks and staycations.
But the industry – still relatively young in comparison to the traditional long-let market – is trying to combat the worst ramifications of the crisis in various ways.
Short-term rental platform Lavanda, for example, has released case study data illustrating ‘the cold hard truth’ for property managers in the wake of the Covid-19 pandemic. The study is accompanied by a practical ‘survival guide’ to help property managers make the bold decisions required to successfully navigate what is clearly the industry’s greatest ever challenge. The whitepaper is available as a free download here.
Lavanda highlights the brutal impact of coronavirus upon the economics of a short-term rental manager operating a 300-unit portfolio. The research reveals that, whilst some very small pockets of demand are still prevailing, new bookings are being secured at significantly lower rates.
The number of nights booked this month are down by 90% year-on-year, while cancellations as a percentage of bookings have soared by 118% year-on-year. ADRs (average daily rates) have fallen by 30% year-on-year, while total booking revenue for April 2020 is currently down by 84%.
“As the world battles Covid-19, the reality on the ground for short-term rental operators makes grim reading, with many great businesses now facing an existential threat,” Frederik Lerche-Lerchenborg, chief executive of Lavanda, said. “This reality should not be dressed up, however it’s equally important that we remind ourselves that there’s light at the end of this tunnel.”
“As global travel restrictions and social distancing measures are eased, demand to travel will bounce back fast, and it will be stronger than ever before,” he said. “The problem is that nobody knows exactly when demand will return, or what shape it will take; it is this uncertainty that makes the current context so challenging.”
He argued that, in these unprecedented times, business owners and leaders must act fast and take tough decisions if their businesses are to survive. “There will be no second chances; nobody wants to look back wishing they’d done more or acted differently. Our role at Lavanda is to arm property managers with the tools, insight and guidance needed to survive Covid-19 with confidence, whilst laying the critical foundations that will enable them to emerge on the other side as winners.”
He said we should all take heart in the fact that some of the greatest businesses were built during times of crisis. “Right now, however, the smartest business leaders are planning for the worst, whilst hoping for the best - as evidenced by Airbnb’s $2bn fundraise over the last few weeks mooted to be at a 40%+ discount to its previous valuation.”
Lerche-Lerchenborg insisted now is the time for the short-term rental industry to come together and work collaboratively in order to weather the current storm and reignite growth. “Though the industry that rises from the ashes of Covid-19 will be stronger than ever, it will also be very different,” he commented.
“We must connect, unite, learn from best practices and keep informed as we collectively reset and launch version 2.0. Through our partnership with the Professional Host Alliance, we are proud to play an active role in nurturing and growing a better-connected global community of short-term rental operators committed to informing and shaping this next chapter for our industry. We’re all in this together, and together we will now set about building the brightest possible future.”
Market-level insights to understand the impact of Covid-19
Elsewhere, short-lets data provider AirDNA has added new features to its flagship tool MarketMinder, which is designed to empower users to understand the impact of Covid-19 on Airbnb and the short-term rental industry worldwide.
The company aims to provide users with insights into when, and where, the short-term rental market might start its road to recovery.
Unsurprisingly, given its global scope, the speed at which it has spread, and the lockdown measures taken by many nations to contain it, the coronavirus crisis has caused unprecedented shockwaves across the travel industry.
As a result, short-term rental hosts, property managers, hotels and destinations across the world have been scrambling to understand the true impact of coronavirus and when the tourism and hospitality sector might get back on its feet.
“With such unparalleled slumps in short-term rental demand, historical analysis does not provide industry professionals with enough context, or the comparable data to put together a complete picture of the crisis in real-time,” AirDNA says.
The firm says that the key to understanding the full impact of Covid-19 - and the industry’s road to recovery - is looking forward, to bookings and demand in the future.
“With the Pacing tab, MarketMinder users can begin to take action to mitigate the negative impact of coronavirus, by utilising new features that provide market-level insights into booking behaviour and pricing for specific dates in the future,” the company states.
Booking Trends, for example, shows the number of bookings for each day for the next six months that were made in the last 60, 30 and 7 days. AirDNA says the Booking Trends chart will empower users to: see what dates guests start booking for in bigger numbers for specific markets. Despite a drop in bookings now, are guests planning holidays in the future? In addition, it will enable users to track how far in advance guests are making these reservations, allowing hosts to understand when they can be confident of a recovery in the short-term rental market in their location.
Rate Analysis, on the other hand, uses AirDNA’s pricing and reservation information to display the difference between the average available rate versus the average booked rate for up to 6 months in the future. This will empower users to: monitor how hosts are pricing for future dates in response to coronavirus, and the rates that guests are actually booking at. How will hosts price for specific events when the recovery begins?
Equally, it will enable users to spot pricing trends ahead of time. Are hosts still using inflated pricing for busy holiday weekends, for instance? Or, are guests making large numbers of new bookings before hosts have removed coronavirus discounts?
Lastly, Rate Analysis aims to enable users to discern the long-term impact of the coronavirus. How do rates compare to last year, prior to the coronavirus crisis, for example?
You can visit https://www.airdna.co/resources/blog for more data-driven holiday rental analyses from the AirDNA team.
Will the market bounce back?
Last week, Property Investor Today interviewed Merilee Karr – Chair of the UK Short Term Accommodation Association – for her thoughts on how the market will bounce back, while we also looked at how property owners are increasingly moving from short to long-term lettings in reaction to the crisis.
The market’s biggest player, Airbnb, recently received a funding injection of $1 billion from private equity firm Silver Lake (owners of Zoopla Property Group) and investment business Sixth Business Partners as it tries to remain afloat during the pandemic.
It recently temporarily restricted its bookings to coronavirus key workers and essential stays only – with the measures set to last until at least April 18 – as it fought back against criticism that some of its hosts were offering Covid-19 retreats on the platform.
It’s been suggested that Airbnb is now rejigging its business model to focus on longer-term stays in light of the current pandemic, but it has also been hit by news that Amsterdam – typically one of the most popular destinations on its site – is to ban tourist rentals in the heart of the old city and part of the canal area, and will bring in special permits for the rest of the city from July 1.
“Local residents should be able to enjoy living in their own neighbourhood,” said housing alderman Laurens Ivens. “They are already having to deal with the consequences of tourism on the street, so it is important that they do not experience problems in their own areas as well.”
Some 80% of people living in the city centre have had to deal with problems caused by tourism, Ivens claimed.
This Telegraph article (behind a paywall for some) meanwhile looks at how coronavirus has brought Airbnb – one of the major success stories to be born out of the global financial crisis of 2007/8 – to its knees, and asks whether it will ever recover.