How COVID-19 changes the short term rental industry
Posted by Sedgwick’s temporary housing division on
The coronavirus pandemic has affected nearly every industry on earth. The hospitality industry was perhaps the hardest hit as unnecessary travel was the very first thing to go, and is still highly discouraged in an attempt to contain the outbreak. Guest numbers dropped fast for property managers and a complete lack of room occupation ensued, causing hospitality companies to let go of a huge percentage of their staff. However, hospitality goes beyond just the hotel industry these days as many travelers prefer the comforts and privacy of short-term rentals.
The short-term rental industry was dramatically affected by the outbreak, but the long-term damage will have a different appearance. In some cases, hotels and short-term property managers were able to offset part of their losses by opening their doors to first responders and health care professionals. Unlike hotels, however, short-term landlords typically do not have large staff or services to cut. Hospitality work of any kind is still lower than normal, but as Spring ends and Summer begins, forty-four US states have begun reopening.
How are property managers handling the pandemic?
While the drop-in business has been catastrophic for short-term landlords, properties who listed with popular travel sites received small cancellation refunds in some instances. More often than not, short-term landlords are being forced to cover the cancellation costs brought on by the pandemic out of pocket. The issue is two-fold. They are dealing with a huge deficit in business and they are also unlikely to see their business pick up soon. In the meantime, they are covering both the cost of upkeep of their additional properties including rent or mortgage payments, as well as making potential modifications to their check-in and property viewing procedures to respect social distancing guidelines and make potential guests comfortable.
However, not every host is struggling. According to AirDNA, there was a major influx of city residents moving to short-term rentals outside of the city when the pandemic started to pick up. They were hoping to avoid the major hotbeds of infection. Their stays also tended to be longer, and some are still being extended. These properties were already being viewed and booked online by residents in places like New York City in February when coronavirus was still new in the United States. The map below shows the decreases and increases in vacation rental occupancy during the month of March.
Short-term rentals in the most populated areas of the city saw a sharp decline in occupancy, while short-term rentals in more rural areas outside the city actually saw an increase in occupancy. However, in spite of the major growth in demand for rural rentals outside of metropolitan areas, that has nowhere near covered the losses of the short-term rental industry. Living in a world where virtual bookings are now the predominant option coronavirus caused a surge of phone calls to helplines of under-prepared travel companies to cancel their stays or ask for a refund. This caused frustration for travelers and property managers. The majority of property managers are still struggling, and most are not projected to see relief for several months.
What should property managers do to make travelers confident in choosing their unit?
Deep-clean your property. Future customers will be concerned about how clean your property is now more than ever. Make sure they have no doubt that your rental is clean and disinfected.
Evaluate your cleaning protocol. Every rental should be cleaned and disinfected between stays to make sure that every guest feels safe. Publish your protocol and make it easily accessible to your potential guests.
If you’re stepping up your cleaning between stays, great! If you already had the cleaning process down-pat, even better! But, if you have a furnished rental you should also leave cleaning products in the unit for guests to use themselves, near the remote, door handles, or any high-touch areas.
Take advantage of clear, reassuring virtual communication. Travelers will appreciate more social distance, so adapt to a virtual viewing and check-in procedure.
How short-term landlords can adapt to a post COVID-19 world
When travel resumes it may not come roaring back to life. Air travel is expected to see the slowest return of business. “Staycations” or short stays at driving-distance destinations are becoming increasingly popular plans for Summer 2020. Advertising to local or even in-town travelers is one-way short-term landlords can capitalize on the trend. Residents of heavily populated areas or coronavirus hotspots may be more likely to travel to rural destinations for short-term stays. To prepare for a return of travelers in the post-pandemic world landlords and property managers should ask what steps they can take to make guests more confident in their decision to choose a short-term rental.
When will vacation travel return to normal?
The return to vacation travel is likely to be slow. Some areas of the country are experiencing stay-at-home orders, others are on curfews. Many travelers believe the social distancing efforts they’ve made in the spring and early summer will allow them to travel in the late summer. This timeline puts coastal rentals in a very sticky spot. Hurricane season normally peaks in September, which is exactly when demand for travel could finally have returned to normal. This means that renters who choose not to travel to the coast because of an impending storm may be the renters critical to keeping property management companies alive after the impacts of COVID-19.
Demand for short-term rentals could still rise this summer depending on public health concerns about coronavirus. Even an event as dramatic as this pandemic is unlikely to completely obliterate the short-term rental market. However, whether or not short-term landlords will be able to wait out the crisis remains to be seen. Property managers in urban areas will want to appeal to local travelers in search of a “staycation” destination. Short-term rental landlords with properties in rural areas are likely to have the easiest and quickest recovery. Some units will likely change hands from independent landlords and small businesses to larger property investors and corporations. The result for the short-term rental industry could be more consolidation and less competition in the short-term rental market. An analysis by AirDNA projected a continued decrease in revenue over the next six months for both urban and suburban markets, but a mid-summer rebound in revenue for rural rentals.
How will the rental housing industry look after coronavirus?
The effects of coronavirus are being felt by almost all short-term rental property managers. The short-term rental industry was threatened in parts of the country before the pandemic had even started. In 2019, some states began introducing new rules on how short of term landlords and property managers can rent out their properties. In states with extreme shortages of affordable housing, like California and Oregon, vacation rentals are viewed as a contributing factor to their state’s homelessness issue. Proposed legislation may limit year-round short-term rental properties in these states to no more than thirty days unless the landlord is present. This is an effort to mitigate the rising cost of housing for state residents.
Maine and Georgia, however, proposed legislation that would protect short-term rentals from being regulated in 2019, before the coronavirus pandemic. The landscape of the short-term rental industry has been changing, the new public health concern will likely make those changes happen even faster. Property managers who can adapt to new health concerns and find ways to remain compliant with evolving industry regulations will survive this pandemic and be a part of the new normal for future guests.