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The (Imminent) Return of Short-Term Stays: Regional & Interstate Travel

Published a month ago.

It’s official: Covid-19’s grip on short-term rental accommodation in Australia is easing up. This weekend should be interesting! Holidaying restrictions have now been lifted in most states, spelling a return to short-stay regional travel, and in some cases interstate trips (think: ‘Everyone go to New South Wales!’; and ‘Noone come to Queensland.’). This means, among other things, that:

  • there’s now a big divergence between international and domestic travel possibilities;
  • we’re likely to see variation between rural and urban travel;
  • different types of travel will recover at different rates; and
  • that all of this will have knock-on effects.

The federal government is maintaining its commitment to a hard border (for non-citizens). Meanwhile many of Australia’s state and territory-based coronavirus policy changes came into effect on Monday June 1st, and it wouldn’t be surprising to learn that cross-country and down-the-coast trips began last weekend... Furthermore, travel deals in places like regional NSW are being offered left right and centre, as competitors scramble to cater to their re-legalised market.

Queenslanders seem to be the luckiest travellers for now - they can holiday in their own state, NSW, Victoria, or the ACT without the need to quarantine - but Australia as a whole is certainly better off than places like the UK, where domestic holiday travel restrictions remain in place.

The Trans-Tasman Bubble

At a national level, both Australia and New Zealand’s governments have said there are no plans to loosen worldwide travel restrictions in the near future. In Australia our Chief Medical Officer has said restrictions on international travel will stay in place for at least three months. The new three-step plan released in early May allows for the states to open-up regional and interstate travel at their own pace, but is clear that international travel will be one of the last coronavirus restrictions that gets lifted.

Yet, talk continues around organising a Covid-safe 'trans-tasman bubble', which would enable exclusive travel - a kind of ‘air bridge’ - between Australia and New Zealand. It’s still speculation for the moment, but our extensive trade and travel links mean an exclusive bubble doesn’t seem too far fetched. Scomo did say that significant domestic travel would need to be under way – ‘such as between Melbourne to Cairns’ – before New Zealand was welcomed into the fold - but again, Kiwis make up approximately 15% of all our international visitors, so I imagine it won’t be too long before some kind of agreement is reached. Back in March the federal government pledged $1 billion of direct support and relief for tourism businesses as part of their Covid-19 emergency package - and it’s hard not to see some kind of trans-tasman arrangement as a means of expanding this support.

Travel: back with a vengeance?

In an interview with tourism professor Sara Dolnicar of QUT, investigative journalist Ginger Gorman posed the question - ‘what will happen to travel once the restrictions are lifted?’ She argued the travel industry’s survival will be based on a serious reset, with a focus on sustainability and the domestic market. Further, she added pretty emphatically:

“As soon as we’re allowed to travel between states again or between New Zealand and Australia, there will be immediately demand. Why? Because we have been locked up for two months now.”

Gabby Walters, Associate Professor, also at QUT echoed this sentiment: “Tourism won’t fundamentally change. There will be some who will be psychologically scarred by this but the majority will be champing at the bit to travel as soon as it’s over.”

The announcement that restrictions would be eased saw a booking bump for regional destinations along the NSW coast and into Victoria, showing comforting signs that the domestic sector could be heading back to pre-virus levels.

Travel specialists across the board are expecting an uptick in staycations, as at least initially most travel will be predominantly domestic. This has been confirmed elsewhere, with anecdotal evidence of holiday makers electing for in-country as opposed to international plans, and booking Airbnbs to do so. Airbnb themselves are expecting travellers will want options that are closer to home and more affordable, which isn’t unreasonable given current restrictions and the massive impacts on employment in economies globally.

While China may not be the most appropriate example, it’s starting to show signs of market stabilization with about 87% of the hotels now open, up from a 40% low. But it’s important to note that there the return of tourism is skewed towards domesticc, not international, trips.

Furthermore, Tourism Australia have said they’ll be looking to further incentivise domestic travel to aid the recovery.

Travel: rural vs. urban

While there are obvious differences between how domestic and international travel are recovering, there are also important divergences between rural and urban destinations.

An AirDNA report noted that listings in more remote areas tended to experience less disruption in terms of booking rates, potentially owing to the greater appeal and sense of security in visiting quieter, more secluded locations. These issues were echoed by Head of Commercial Research for Savills U.K. Marie Hickey, who thinks that short-term rentals in more isolated rural areas are likely to be resilient, with the domestic leisure market bouncing back before overseas travel.

Guesty found something comparable in their research: while bookings for Airbnb, Booking.com and Vrbo-listed properties had dropped about 50 per cent in urban areas in the US, in rural locations and suburbs booking were down only 10-20 per cent. Regional getaways to escape the lockdown saw rural Airbnbs in the US do really well, and while in some senses the lockdown has been lifted in Australia, we may see the same trend here in the near-term.

This is significant because in 2018-19 51% of domestic overnight travel spend (or $39.6 billion) was recorded in regional areas. What happens ‘out in the sticks’ matters in short-term rental accommodation terms.

While debates over inter-state travel (especially between NSW and Queensland) remain quite heated, within-state holidaying is now a reality! And while ‘isolation’ in the strict sense we’ve come to understand it is now less universal - people are still taking the moment to advertise secluded getaway experiences, which if I’m honest always sounds pretty good.

Another period of change in the Covid-19 saga is underway, one that will surely see the beginning of upward trends in short-term rental sector indicators. And it’s important to ask, beyond holiday makers and their hosts, how are business travellers and related industries going to come into the picture?

Business travel, events, hotels: where to?

As of August last year, tourism employed 1 in 13 Australians in the workforce. Short-term renting is part of a broader, growing industry, with interesting connections, co-dependencies and externalities. Short-term stays have created their own services sectorfor cleaning, property maintenance, management and more, which employs tens of thousands. While economic activity in these servicing markets may have been dampened, the effect on demand for travel insurance was unsurprisingly very positive, with people worrying about potential impacts on overseas trips.

Business travel and business events are no small deal when it comes to short-term stays. The Tokyo Olympics has been postponed until 2021 - thus delaying thousands of trips. South By Southwest got cancelled (last year hosts in Austin raked in $16.1 million in rentals, and this year they’re projected to earn 40% less over the same 10-day period).

In Australia, 96% of business events scheduled for 2020 have been cancelled or postponed. The projected loss of AU$35.7bn in direct expenditure for the year has massive implications for short-term rental accommodation in major cities, not least for hotels. Hotels across Asia Pacific have registered drastic declines in occupancy rates since January.

However, it’s also important to keep in mind that travel for jobs (beyond just essential workers) is coming back, too. Hospitality business journalist Katherine Doggrell argues that, after the most significant crisis in the history of travel in Australia, the order of the comeback will be: domestic leisure travel first; business cautiously following; followed by international leisure and business.

Furthermore, Doggrell believes that in the business travel space, there isn’t likely to be a marked difference between nervous travellers’ reuptake of hotels as opposed to platform-based short-term rentals, given that the greater perceived regulation of the former is offset by it’s greater guest (I know I’d rather take my chances on a private apartment than brave the full-lobby of a hotel, however well it’s been cleaned). Hickey also acknowledges that there are pros and cons to both short-term rentals and hotels in terms of health and safety, and speculates that serviced apartments may get more attention. In a US-based guest survey, research firm Decode_M found that between Airbnb and hotel brands like Hilton and Marriott, levels of trust were about equal.

As domestic leisure, and then domestic business, travel resumes, related sectors should see a big upturn and help compound the positive impact of the return to travel. And regardless of how this plays out, cost usage-based insurance may well be part of the journey to getting things back on track in a safe way, both for hosts and other sharing economy participants

All we can do this weekend is sit tight (or hop in the car…) and see how the situation unfolds for short-term retinal accommodation in Australia. Whatever happens, I’m looking forward to sharing my third piece of analysis with you - focussing on hosts, how they pivot and the ‘new normal’.

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