That once in a lifetime event people were dreading about actually happened. It wasn’t World War III, it wasn’t a meteor, it wasn’t a supervolcano. Turns out it was a tiny little bugger called Coronavirus.
Scientifically called SAR-VoV-2, it causes a disease called COVID-19 and has claimed the lives of more than 50,000 people worldwide and growing at a rate of more than 5,000 new deaths a day. No one knows where the apex is, or when this will end. What everyone now sees clearly, is that behind this pandemic lurks another, more sinister creature: A global economic crisis.
Although all industries and markets are affected, travel and hospitality have been hit the hardest. Nationwide lock-downs all over the world are shutting down hotels, grounding airlines, and causing millions of layoffs in these industries. This is not only unprecedented, but it was also unforeseen and shocking. The ripple effects of these shutdowns will be felt for many months (maybe even up to 2 years) after all this is over.
The vacation rental industry does not have immunity. Even though most STRs are still open, bookings have dropped dramatically. The only reason most governments did not shut them down completely is that most are urban leases and necessary for many people that don’t have another option. Even more now, we see dozens of thousands of homes in hundreds of cities offered by their owners for free to first responders and health professionals that need a place to stay because they have elderly people back home in high risk of contracting the virus from their loved ones. Besides professionals, many people are looking for temporary shelters to quarantine themselves after a trip, or after getting in close contact with a known carrier. Families running away from urban centers and looking for a quiet place in the countryside to spend the next weeks of lockdowns. Government officials that travel around their country to coordinate government measures and attend to essential business. The list goes on.
Our internal data from thousands of properties in 87 countries show that new bookings in March have dropped by 50%, while stays during April have dropped more than 80% globally. Another important statistic is that average duration of stays has doubled for April’20, showing that most stays are not leisure or work-related but something else: in this case, quarantines and home avoidance for health reasons.
What’s in store for the near future
There are a few changes that seem inevitable, at least for the near future. Reports and data show a shift to mid-term renting, with almost half of current active stays on Airbnb being 30+ day stays (listen to Brian Chesky, CEO of Airbnb, announce this at 10:53 in his host community address a few days ago). This is, of course, an outlier because current lockdowns have minimized short term stays and many Airbnbs are hosting medical professionals, but it is a sign of things to come. Another important shift will be from international travel to domestic travel. Countries that are currently in lockdown will start relaxing internal measures but borders will remain closed for months to come to avoid incoming virus carriers. These countries will see a gradual rebirth of domestic travel – in some cases, it might be even higher than in previous years because holiday-goers will not have any international options, only domestic. This could be an opportunity for Short Term Rental hosts to see a surge in bookings, as well as an opportunity for unused holiday homes to enter the STR market since new hotels are not likely to be built.
Business travel is expected to take a hit, too. With the rise of remote work and companies setting up their systems and processes to support it, it’s likely that non-essential business travel will decrease, and only very important trips will take place, at least for the next few years. This will mainly affect hotels since they were the accommodation of choice for business travel, but short term rentals will also be affected to an extent.
The result of all this will be the migration of a large portion of short term rentals to the long term rental market. We are already seeing reports from cities like Dublin and Berlin, but also tourism-heavy cities like Nashville, Honolulu, New Orleans, and Savannah that the long term rental market has suddenly been flooded by new homes that were previously rented short term. It’s important to note that most of the homes that will convert to long term will stay there for at least 2-3 years because renters will have long term contracts. The good news is, that when the crisis is over, there will be much less supply in the STR market for an increasing demand, which will lead to increased rates and occupancies for those left in the market.
Until that happens though, vacation rental owners and managers will keep looking for ways to increase their occupancy and revenues. Confronting the sudden and still significant income loss, some hosts are working to accommodate the changing face of travel during coronavirus. Even as more states issue stay-at-home orders, they’re tweaking listing titles and descriptions to include text like “COVID-19 FREE”, “Disinfected after every stay“, or even “Escape from the boring and change up your environment to have the best quarantine experience of your life,” as a host in California wrote in his listing description. However, Airbnb has since forbidden certain coronavirus related keywords in the listing titles.
Additionally, we expect niche and local vacation rental sites to see a surge in traffic since homeowners will want to be listed on as many channels as possible. Software and automations will also play an important role, since managers, small and large, will be looking for ways to reduce their costs. In order to stand out of the crowd, they will start offering more amenities and facilities like faster wifi, private transport, gaming consoles, Netflix and more – all in the interest of keeping guests that are wary of the virus entertained and safe.
Further down the road
The world is expected to begin its journey to normality after a COVID-19 vaccine is available. Some reports say the return will be gradual, some say it will be sudden. Either way, any glance at history reveals that crises and disasters have continually set the stage for change, often for the better. We will be better prepared for the next pandemic – and there will be other ones, rest assured. The short term rental market has every reason to be around in every version of the future we can think of. There will always be a need for short term stays in homes, apartments, condos, B&Bs, beach houses and villas. The recession everyone is expecting in the next years will make STRs an even more sensible option for travelers because hotels cannot lower their prices easily due to the extra services they offer. Moreover, tens of thousands of hotels all over the world are expected to shut down due to the crisis which means less accommodation supply, which in turn means increased demand for STRs. The great unknown in this equation is time. How long before the vaccine is out? How long before borders open up again? How long before people’s psychology improves? These are the factors that will define the future of travel, and consequently the future of vacation rentals and short term rentals.