The coronavirus pandemic has put all aspects of normal life on hold for the time being, and has affected each and every one of us in some way. In the property industry, the short-lets sector – given its reliance on travel, business and tourism to function – has been harder hit than most.
Airbnb, comfortably the biggest name in the sector, revealed yesterday that it has temporarily restricted UK bookings to key workers and ‘essential stays’ because of the coronavirus crisis, with the measure lasting until at least April 18. Meanwhile, most other firms in the market have seen their bookings fall and their income slashed by more than 70%.
Here, we speak with Merilee Karr – Chair of trade body the UK Short Term Accommodation Association – for her thoughts on how the sector can bounce back post-coronavirus.
How can the short-let sector successfully come out the other side of the crisis?
The heart of our sector is people who own second homes or people renting out their primary residences when they they’re away. I don’t think that will change. They will continue to want to do short-term rentals when they’re empty in the future. Actually, in many cases, we’ll see even more supply.
The industry, remember, came out of the last financial crisis. Airbnb, onefinestay and others were born out of the last financial crisis and have grown rapidly since. People’s behaviours change whenever there are big external shocks. We recognise that the current crisis is an economic shock as well as a health scare, and people will need income from short-term rentals moving forward.
Is it inevitable that some companies will go the same way as Hostmaker?
What we’ve been arguing for is government support to avoid that happening. Companies that are in any way solid companies are likely to still be around at the end of this. Hostmaker went under before this and had their own issues.
I think what we will see is less VC investment into the sector, which means there is a risk that if companies didn’t have a solid and sustainable business model already, they may struggle in this new world.
Any company that had a solid business model and a long track record of delivering is likely to come out the other side, with the support the government has pledged. But it’s not going to be easy, either. Every company is thinking about how they make cuts.
Things like the Job Retention Scheme are incredibly helpful, but it all depends on what happens after May 31. If they shut it off after 31 May, and people still aren’t travelling again, it’s going to be difficult for companies to keep all the staff they have, and the cost base they have, and still turn a profit.
There’s a lot more to work out, but a tonne of really good companies are in this sector who probably will survive. I think we may also see some consolidation. Companies getting bought out and coming together, because when costs need to be cut, consolidation is one way to achieve that.
The STAA has called on the government to introduce measures to help firms through the crisis – have you received any response so far?
Quite a lot of response. Not only that, we’ve been in dialogue with government directly on this. We’ve been working with DCMS, in particular. When government announced the Employee Retention Scheme, that followed conversations we’ve had. We weren’t the only people calling for it, but we were one of them.
If companies are supporting the NHS Homes programme, they need the staff who are furloughed to do that. There’s been clarification if staff are volunteering for schemes like NHS Homes, that’s absolutely permitted under furlough.
Secondly, on the refund versus credit note or vouchers angle. Following conversations we’ve had with DCMS, they’ve been speaking to the Department for Transport, which owns the legislation in that regard. We’ve heard rumours of movement to ensure that companies are able to offer credit notes or vouchers instead of refunds, keeping liquidity in the market.
We also talked about providing grants rather than loans. There are the £25,000 grants for small businesses in the sector. That was extremely positive, because what we keep saying to the government is if a night isn’t sold because of shutdown, you can’t then sell that night in the future. Loans are difficult, because you’re burdening the sector with debt, and so grants are always preferable.
Finally, we’ve had lots of discussion with the government about shutting the sector, like they’ve done with hotels. They’ve held off from doing that primarily because of some of the discussions we’ve had with them.
It’s the responsibility for everyone in our sector hosting guests to do so for essential reasons – there have been examples of families who can’t travel back to Iran, for obvious reasons, some people self-isolating, cases where people need a place to live to avoid domestic violence, etc.
Across the industry we’ve asked everyone to take only essential bookings so we can continue to operate responsibly.
The NHS Homes scheme is a great gesture – how did it come about?
I run (short-let platform) UnderTheDoormat and we saw that NHS workers needed homes and we had empty homes. On the Thursday, we made a decision to try and do it, on the Friday we launched it, and by Monday we were already hosting NHS workers. In my STAA role, I spoke to other companies and we recognised that there was no reason why each company should do its own thing – it should be industry-wide.
The NHS said it would only provide funding for and work with industry-wide initiatives, so we immediately turned it into a STAA programme, where any company could get involved. It allows us to have one place where any NHS workers can come and then we can allocate them to different companies based on where the supply sits.
The short-lets market has witnessed incredible growth, but has faced criticism for a lack of regulation and for swallowing up supply. Is now the time to reflect on some of these criticisms?
It’s a difficult one. There are a number of industries which don’t like the disruption that our industry creates, particularly the hotel market. But the majority of all the activity in the industry is something that government supports, that people want to see.
I come back to what I said at the beginning. These are owners who have empty properties for long periods of time or short periods of time. Every time a property sits empty, that’s an opportunity lost.
But our industry is not about changing housing from long-term housing to short-term rentals. The majority of people in our industry are not doing that. It’s unfortunate that the small minority of people who are maybe looking to do this for the wrong reasons are the ones who are often talked about in the press.
My hope is through the crisis, we get that rebalancing, where those people who are not doing it for the right reasons return to long-lets instead.
The other thing is, we’ve been incredibly good in the industry at making sure that regulations are clear and being followed. I get upset when people say it’s an unregulated industry, because it’s simply not true. It is a regulated industry, but regulated in a proportionate way.
We also launched a year ago our accreditation scheme, where people get inspected by third parties on things like cleanliness. Companies and individual hosts can get the accreditation, bringing credibility to the industry.
Additionally, we’ve been working in partnership with Locale on a buildings policy to address the issues people talk about with community, parties, etc, giving visibility and transparency to who is doing short-term rentals in a building and making sure they do so responsibly.
How can the short-lets market recover after the crisis?
Hard to say. What I think we’ll see is domestic travel will recover first. The idea of staycations and all these kinds of things.
I also think, given the type of crisis this is, with social distancing and everything else, we’re very likely to see people wanting to stay in homes rather than hotels. I think that the short-term rental market may bounce back a little bit quicker than the hotel market, simply because people can still have that private space.
More traditional hospitality providers, by the nature of what they do, simply can’t provide that same level of private space.
As the short-let market bounces back, the professional operators are more likely to bounce back quicker as people want to know they have the right cleanliness standards, that it’s professionally delivered. We’ll also see consumer demand for things like the STAA accreditation.
Have you found the short-lets industry to be male-dominated?
I came from the energy world and spent 13 years in Shell, so for me it’s no different! I think there’s definitely a mix. I see us as property companies but also hospitality companies, and in the hospitality world it’s a very mixed bag.
For me, what is great is that we have several female leaders who are on the board of the industry association. It really shouldn’t matter – and I don’t think it does matter – whether you’re male or female.
My hope is that our industry can be an example of how gender doesn’t matter and that we’ve got a real mix of leadership.
Tell us about your background in property. Are you a property investor yourself?
I’m more of an accidental property investor. I bought my first property, lived in it for 13 years and then my husband and I moved into a property that I’d originally bought to have as a rental home.
I do have my own long-term let and I also allow my tenants to do short-term rentals when they’re away on holiday. They’re actually away at the moment and have opened up the property for NHS workers – a great example of how these two things can go hand-in-hand.
Working at Shell, I spent my last four years there in property, managing the maintenance of all the petrol sites around the world – about 12,000 sites across 43 countries.
Ultimately, short-term rentals are a distributed network of properties, and having managed a distributed network of properties, knowing how to build the processes, the systems and the technology to actually do that at scale, is what I brought to my company.
Interestingly, when I met Shomik, the director-general for STAA, I think the experience that I had in a highly-regulated sector was hugely valuable to look at what we needed to do, the standards we need to set, and how we think about health and safety.
For my company UnderTheDoormat, that’s been fundamental to who we are from the beginning – seeing the opportunity in short-term rentals but knowing that people want something professional. They want insurance for their property, they want to know that it’s professionally managed. All of these things are important for both the homeowners and the guests.
Do you believe it's now easier for women to be involved in property, or does much more still need to be done to level the playing field?
I think it’s easier than it’s ever been. There are dedicated events and networks for women in property.
One thing I’ve learned is that the property world is very much network-driven. There is the danger that there is the old boys’ network, so I think it’s important that there are groups of women that are breaking down those barriers and helping to enable women to really thrive.
That being said, I’ve got some incredible investors from the property world in my business that are men, but they don’t see any barriers to the fact that I’m a female CEO, and they’ve been incredibly helpful at making those introductions into other players in the property world that help my business grow.
I’m really a believer that it’s all about finding the right people who don’t think of gender as an issue. A lot of investors and people in the property world just want to work with the best people, and those are the people I want to work with.
So, once you find those people it’s a self-reinforcing positive loop.
How did you come to be the chairperson of STAA? What is its main purpose and ultimate goal?
STAA was founded three years ago and I’ve just been elected for my third term. Shomik and I worked together initially, and he did a lot to bring companies on board.
From the beginning I saw the value of this and had a lot of ideas about how we could make the association meaningful.
I find it incredibly important that we speak with one voice and set benchmarks about what responsible looks like. That’s why things like accreditation and buildings policy become really crucial because it shows we’re serious about doing things the right way, and while it’s a new and disruptive industry, that doesn’t mean that we can’t do things professionally.
Before this crisis, the short-term sector was projected to be valued at $330m by 2025 across Europe. Is there any way it can still reach that level of growth?
Absolutely. We’re talking about a potential recession, generally, across the economy, and often a recession sets back growth by a year or two.
I think those numbers are definitely achievable. It might take a year or two longer as a result of this, but I don’t see that changing.
In fact, coming out the other side we may see an acceleration of that change of behaviour, because whenever people have a financial constraint, they tend to look for opportunities.
Your assets, or your home, is a great way for people to make an extra income, so for better or for worse, a recession is likely to mean that there is some acceleration of people wanting to rent out their assets.
*The NHS Homes scheme is currently providing around 800 homes to NHS workers for free and is set to increase capacity to over 2,500 homes for free use as more short-let companies pledge their support.