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How Do Short-Term Rental Platform Accommodation Hosts Adapt To The post-COVID-19 World?

Published 24 days ago.

Will there be a mass exodus of short-term rentals to the traditional renting market? Are guests still going to be keen on short-term stays? Should hosts pivot towards longer-term stay durations; or is supply just going to contract in the face of heightened perceived risks? What about a ‘mid-term’ rental compromise? Will Airbnb survive; what’s their strategy? Or is there a move away from platforms like Airbnb, Stayz and Booking.com altogether?

The list of questions, and corresponding speculation, goes on... COVID-19 may well create big, long-lasting changes in the short-term rental accommodation sector in Australia, but I’m going to try to steer clear of prophesying, and instead stick to what current evidence already shows, emergent trends, and what we know from past experience.

So - how can hosts understand, get by, and thrive in, the world after COVID-19?

The ‘new normal’: a global story

Over the past week news has surfaced all Australia - from the Townsville Bulletin (Airbnb Back From The Brink And Firing On All Cylinders), to Perth Now (West Aussies driving domestic tourism boost with huge rise in Airbnb bookings), to The Australian (Airbnb 'rebounding from COVID') - heralding a short-term rental accommodation comeback.

And this isn’t just an Aussie story. On June 11 Airbnb’s Co-founder and Chief Strategy Officer Nathan Blecharczyk announced a couple of big-hitting global trends:

  • While international travel plunged with the coronavirus outbreak, demand for self-catering Airbnb accommodations for domestic vacations has increased (globally, year-on-year); and
  • In addition to a rise in short-term stays, demand for longer-term lodging is also rising starting to pick up.

The growth in demand for domestic bookings - across platforms like Airbnb, VRBO and Booking.com - is a clear trend across many countries: from Germany, Portugal, and South Korea to New Zealand, Japan and the US. Different markets are experiencing this upsurge to different levels - for example, data from the last month shows that Japan Airbnb reservations or domestic travel doubled year-on-year, while in the U.S. bookings were just marginally higher than the same period a year ago. To demonstrate the sharp upward trend on a more recent basis, Airbnb figures for New Zealand showed domestic bookings increased 15 times compared with the same week in April.

In Australia there has been divergence across the country, given staggered approaches by states to lifting travel restrictions. As I wrote in my last article, Queenslanders were the first to be able to holiday within their own state as well as to NSW, VIC and the ACT, and since then West Australians have also joined the charge to drive the COVID-19 travel recovery. The latest regulations allow internal and interstate travel to many parts of Australia, though 14-day quarantine is required in some states and territories (and no one is allowed to go to Queensland, still).

Within the resurgence of domestic vacations globally, a growing proportion of trips are close to home. More than half of Airbnb bookings in the US in May were by people travelling no more than 320 kilometers (200 miles). Such trips rose from being about one-third of all bookings in February, a change which Airbnb has reflected in a website and app update emphasising the discovery of local travel. In Japan, half of recent domestic reservations were for accommodations within 80 km of the point of origin, and reachable in about 90 minutes. Furthermore, about half of people in an Airbnb-commissioned survey in the US indicated a preference to stay within a day's drive of home when vacationing once restrictions on movement are lifted.

The other key trend within the domestic travel boom is a shift to travel in regional or rural locations as opposed to cities. In Australia the week before last, 80% of domestic bookings were for stays in regional areas, outside of capital cities. In New Zealand, popular tourist destinations such as Taupo and Northland recorded an increase in domestic bookings compared to the same week from 2019.

Domestic bookings appear as though they’ll carry the industry in the near future. In Australia approximately three-quarters of short-term rental accommodation guests were domestic travellers even before COVID-19, meaning the relative increase in their share due to international travel bans will only see this proportion increase.

Given these trends, it may be beneficial for hosts to focus on domestic guests across the board, in how they’re presenting their property and who they’re marketing to. Furthermore, regional hosts may want to directly appeal to domestic travellers in nearby urban centres looking for a getaway. And urban hosts might benefit from incorporating local-knowledge or remote-working based features in their listings, to incentivise more sustained, safe trips.

"Work from home is becoming working from any home" is the astute quote from Airbnb CEO Brian Chesky. And while it does sound like a quote from a wanderlust blog, Chesky’s on the money again when he says post-COVID travel is shifting "from airplane to car, big city to small location, hotel to home".

Is there a mass-exodus to traditional long-term rental markets?

The onset of the virus brought a whole bunch of folks saying that Airbnb, Booking.com, Stayz, VRBO and other platforms were essentially being drained of listings, as hosts retreated to traditional long-term tenancy rental markets. However, a lot of these comments confused correlation with causation...

Property portal Rightmove noted that the number of new rentals coming onto the UK market in the week the lockdown started increased by 45% in London, up 55% in Brighton, 62% in Edinburgh and 78% in Bath. Similarly, a 64% rise in long-term rental property listings in Dublin was reported in March. An estate agent in Edinburgh made a particularly sensationalist argument by citing the listings figures of Airbnb and one long-term rental platform operating in the city. The article used a 27% drop in Airbnb home listings (over the three months to April) and a 50% increase (in long-term lets, this year, in one and two-bedroom properties, advertised for long-term rental, on the Citylets platform...) to support the claim of its title “Covid-19 forcing landlords to switch from Airbnb to long-term lets, says Rettie”. Aside from the different time periods and property-specifications behind each statistic, and the fact they’re for discrete platforms, it's a clear example of deliberately conflating correlation with causation to suit the ‘end of Airbnb’ narrative.

Comparable claims have emerged in Australia regarding increases in the number of furnished properties listed as long-term rentals. An economist for Domain, Trent Wiltshire, offered a more nuanced account, asserting that while new rental listings nationally were up 14 per cent compared to the previous four weeks, we should be cautious about attributing this all to a shift from short-term to long-term renting, given the significance of employment and health-related changes. The Australian Financial Review also made the point that across the country in April, the number of new rental listings jumped by 19 per cent both year on year and from the previous four weeks - but again, under a title “Holiday home owners look to long-term renters to ease pain”, without a solid linking argument.

Against these claims, real estate economists in the US confirmed at the end of March that there was no evidence for a surge of short-term rental listings to the long-term rental market. Further, Airbnb country manager for Australia and New Zealand Susan Wheeldon confirmed they haven’t seen a material drop in the overall number of listings.

At a more general level, it’s important to note that while the stability of longer leases may be appealing to property owners, the capacity for hosts to make this switch is highly variable. As per the quotes from hosts of Airbnbs other B&Bs in an article for the ABC, for many, long-term renting is 'not a solution'. Converting furnished listings to traditional annual leases can be costly and time-consuming. Furthermore, in many vacation rental destinations, there isn’t enough full-time demand to fill vacancies. And as it is, over half of the world’s Airbnbs are not full-time rentals, so there’s a big portion of income that is largely supplemental. The ease of making the switch to longer-term renting may vary depending on legislation too - for instance hosts in Portland are required to register their properties under different programs for short-term and long-term renting (though the outlook for Australia doesn’t look too finicky in this regard).

While migration away from short-term rental platforms has been discussed - either because of hosts’ resentment for the platform’s handling of COVID-related refunds, or a collapse in near-term travel demand - the bottom-line is that there are more listings now (over 7 million) than there were at the start of the year. Perhaps even more resoundingly, in a recent survey 94 percent of hosts said they intended to remain on the platform. So it doesn’t quite look like the end of all non-traditional forms of renting.

Is there a pivot towards medium-term stays on Airbnb and other platforms?

One of the other industry narratives that’s been circulating in the COVID-19 swirl is that ‘mid-term’ stays may rescue short-term rentals. This comes in part off the back of data showing that the length of stays has been increasing: from February to April the average global length of stay has increased from 3.3 days to 7.7 days — an increase of 133%. For a different period the Financial Times quoted that the average length of holiday lets jumped from 4.5 to nine days, according to data from Guesty, which provides software to short-term rental owners in 80 countries. Further, AirDNA found that 50 per cent of new short-term rental bookings in recent weeks had been for two weeks or more.

Under the pressure of international travel bans, Airbnb made a strategic pivot towards longer-term stays. Their head of global policy Chris Lehane says they’re addressing a market need for stays ‘shorter than a year-long lease but longer than a vacation’. This rethink of their product offering resulted in a new site design - centred around ‘online experiences, monthly stays & “frontline” (subsidised accommodation for key workers)’ - as well as new tools, alerts and marketing to help hosts organise mid-term guests. The platform is attempting to highlight the longer-term options they have available, whilst also marketing to new demographics like medical workers, students and remote workers. And while critics point out that in aiming to provide access to longer-term rentals, Airbnb is essentially claiming to solve a problem it helped create - it remains true that demand for longer-term stays is on the up. Plus, driving an expansion in longer-term options on the platform could also be a great way for Airbnb to address legislative and media concerns about short-term rentals’ effects on housing supply and prices.

But it's not just Airbnb who are capitalising on new customer behaviour in-market: San Francisco-based month-to-month rental listing service Kopa and Austin-based full-home medium-term rental platform Homads saw site visits increase by 5 and 10-fold respectively from February to March. Perhaps unsurprisingly, Kopa CEO and co-founder Jack Forbes has called it “an eye opening-moment of the tremendous value of medium-term housing” - and with less time spent managing the property and higher occupancy rates, he’s got a point. Further, there’s growing US host interest in corporate housing sites such as Second Address, which specializes in stays of 30 days or more, and month-to-month rental platform HomeAds. "In Europe, we're seeing this push toward midterm rentals, which are around the three-month range, and I think we'll be seeing similar in the U.S.," said Alex Nigg, founder and CEO of Properly. Such mid-term rentals may suit nurses and doctors who are relocating, people moving out of their homes temporarily to have a safer place to stay or people renting an additional flat to use as work-from-home space

But the question of mid-term holidaying may actually present a problem on the supply-side rather than in demand. During an interview with investigative journalist Ginger Gorman on the Seriously Social podcast by Academy of The Social Sciences in Australia, Sara Dolnicar says that the problem may be people willing and able to provide listings, given the uncertain environment and the increased costs to business. Dolnicar argued that investors and owners would be looking at the post-COVID world and saying “...hang on. There’s a lot more risk involved in this business than I knew... So I don’t think that this whole sector has a demand problem. It’s going to have a supply problem…”.

With this in mind it’s interesting to note that companies already focused on ensuring high standards of cleanliness for listings have seen an uptick in business, as they began to put in place or enhance existing sanitation policies. SafeStay Australia, a short-term rental safety audit company based out of Sydney, has noted that owners have turned to outside agencies as a way to stay competitive - in order to clarify what their requirements are, not only from a safety and security perceptive but also a cleanliness perspective. Most owners felt that the information provided in the marketplace was misleading or contained no substance with advice. For the Airbnb hosts out there reading this it’s worth noting that Airbnb has officially released its 38-page handbook advising hosts how to specifically clean and sanitise their properties, as part of the company’s Enhanced Cleaning Protocol initiatives, which launched in April.

But it’s unclear whether we’ll see a post-COVID contraction in supply of short-term rental accommodation over the coming months, and/or growth in mid-term and longer-term alternatives. Large-scale switches to long-term rentals aren’t unprecedented in Airbnb markets: jurisdictions where running non-owner occupied short-term rentals became illegal - such as Las Vegas, Boston, and Chicago in the US - saw hosts shift in this direction. Furthermore, hosts have been innovating independently by building their own booking engines, forming new host-friendly services and listing across additional platforms like Vrbo, HomeAway, Zillow, Apartments.com and even Facebook Marketplace and Craigslist. In the US, hosts have reportedly been adding long-term listings on sites like Craigslist or Furnished Finder, a website popular with traveling nurses and interns.

As such, it’s clear that the new normal for short-term rental stay durations remains in flux. And with dynamic stay durations, and the expansion of listings across different platforms, it may be more important than ever for hosts to consider insurance to protect their property. Lockdown has been an instructive experience - being able to get a pay-per-night policy, rather than for a fixed period, means you’re not exposing yourself to downside risk and your cover can be as flexible as your bookings. ShareCover is one such insurance provider.

Where to for travel? And the ‘short-term’ rental accommodation market?

As Airbnb’s Australian country manager Susan Wheeldon told the ABC, “...we know that travel is resilient in the long-term and will ultimately recover". But the question is when, and what the ‘new normal’ will look like?

Will Airbnb survive? In March Airbnb’s CEO Brian Chesky made the fair point that “Airbnb was born during a global crisis” (the GFC), and have still managed to go from strength to strength. A more critical view of Airbnb’s response to the pandemic points out some vague communications and policy U-turns impacting both guests and hosts - but, again, the vital signs still look good.

Airbnb are banking on a post-pandemic travel boom, of course. And again, they may have made a good bet - already, according to an article in Forbes magazine, forward reservations are up in countries much harder hit by COVID-19 than Australia. CEO Chesky told the Financial Times there’s been a spike in domestic bookings in countries such as Denmark, Netherlands, Norway, Austria, Sweden and Switzerland.

And when we think about travel accommodation options in an uncertain post-COVID environment, it’s got to be said that Airbnb has some potentially decisive advantages over hotels and other options. This is because of the privacy, autonomy and seclusion Airbnb’s can offer - with some saying this means “Airbnb will thrive”. While hotels may introduce measures to avoid crowded lifts, the bottom line is that it’s hard to imagine people electing to go to more densely populated accommodations when they have the option of choosing private residence.

A whitepaper titled ‘COVID-19 vs. Australian Property’ by Ripehouse Advisory found real estate industry experts and executives are ‘cautiously optimistic’ about the mid-to-long term. Most said the greatest effects would be felt within 3-12 months, and that while short-stays may be hit hard, impacts will be short-lived. President of the Real Estate Institute of WA (REIWA) Damian Collins made the point that as “92 per cent of people still have their jobs, we’ll start to see a recovery”. The report also notes that areas with a bias towards accommodating workers in health industries, agriculture or resources may remain relatively unscathed.

Renting has become the “new normal” for a growing proportion of the population due to property market volatility, however, it is expected to become more expensive during the next two years, an expert panel has discussed. A greater range of regulated and safe short-term, mid-term and longer-term rental options could thus have benefits for the growing numbers of Australians in rental housing for much of their lives.

The COVID-19 imperative means hosts are advertising their space across more platforms than ever (from Facebook to Craigslist and personal booking sites, as well as more familiar platforms like Stayz and Airbnb). Not all of these platforms offer any kind of insurance to hosts to protect them from cancellations, damage or other potential financial risks. Furthermore, hosts are having to be prepared for variations in trip length (as both health and economic factors contribute to people pre-booking longer stays or making extensions). And finally hosts are being exposed to new demographics - nurses and healthcare staff, students, and other ‘frontline’ or ‘key sector’ workers - they have to be ready to rent to whoever.

Hosts are renting through different platforms, for different and variable trip lengths, and to different cohorts of guests - this means usage-based, third-party short-term stay insurance comes into its own.

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