State of the nation: short-term rentals after 8 months of pandemic

by | Oct 24, 2020 | Featured, Short-term rental news, Trends & forecast

Industry expert, Simon Lehmann, takes stock of the industry as it stands after the seismic shocks of 2020. ‘Staying home away from home’ has emerged as a valuable trend for short-term rentals and has fuelled the domestic markets, but if businesses are to grow in 2021 Simon argues that they need to be both sustainable and profitable. 

Post-pandemic or learning to adapt?

In my opinion, I think the travel and hospitality industry needs to come to terms with the reality that there will be no such thing as ‘post-pandemic travel’. Covid-19, or mutations of it, will be with us for some time to come and we need to learn to live with it as individuals and as businesses. 

The current situation only has the potential to change once a vaccine is widely available and even then it will take time to rebuild and reboot. So what does this mean for the short-term rental industry? 

The team at AJL Atelier has always predicted that the vacation rental sector will be the first travel vertical to recover – this has played out in many markets and will continue to do so as the travel market remains domestic. If we can stay flexible and adaptable to guest needs then we can continue to steal a march on hotels. 

Leisure vs Urban

To analyse the short-term rental industry’s potential recovery further we need to differentiate between leisure and urban. The two sections of the market have had conflicting experiences of the pandemic – urban has obviously been hit a lot harder than leisure and will have to ride out that low for some time to come. Recovery for the urban market will be slower as hotel prices dive and the two verticals have to compete directly against each other.

 

The leisure market, on the other hand, will continue to grow and prove itself to be a strong player in the lodging industry. Guest preference for vacation rentals outside of urban areas will be a trend which sustains as people prefer to exit their town/city homes. 

‘Stay home away from home’

The traditionally strong domestic markets have recovered more quickly as travellers have opted to stay within their own borders, respect restrictions and travel shorter distances.

‘Staying home away from home’ is a compelling value proposition during these uncertain times and it’s one which will continue to play out as the news remains unpredictable. 

In Europe there has been a marked difference between countries such as France, UK, Germany and Italy, which have performed reasonably as a result of their domestic market, and strongly dependent on inbound markets like Croatia, Spain and Portugal, which have struggled to match their reservations performance of 2019. This split in recovery is likely to carry on into 2021.

Seasonality and flexibility

The winter season is almost upon us in Europe and the trend of strong domestic markets will continue with countries such as Austria, Germany, Spain and France benefiting from their mountain resorts. Our AJL customers are reporting that the winter season is not yet looking as good as they wished, an indication that customers are being cautious and waiting to book. 

One obvious consequence of nervous guests is that booking partners are changing and stays are becoming shorter. In addition, customers are expecting flexibility during this period when it comes to refunds, cancellations and rebooking.  

Lifting up the industry – quality control

If the short-term rental industry is to convince customers to press the ‘book’ button (pre Covid-19, 70% of customers didn’t book vacation rentals when travelling), then the sector needs to raise its game.

In a climate where quality assurance and safety are paramount, property managers will need to work hard to communicate to guests the value proposition of their industry.

Standards and professionalism are not just buzzwords but need to be actioned in every facet of the market. This is one of the reasons why AJL is working alongside Hotel.School in Switzerland to develop an expert-led course in vacation rental management. We are convinced that better education is part of the solution to raise the professional bar in our industry. 

Tech adoption and tech consolidation

A lot has been written about the increase in the speed of tech adoption across the travel industry as a result of Covid-19. This surge will not wane: contactless check-in, automated operational services related to safety and security are here to stay. 

Guests’ baseline expectations of the industry have risen and they now want hotel-like services and amenities. The short-term rental industry is still a way off meeting these expectations since the product is individually owned at large.  

There will be a consolidation of the tech landscape.

Whilst property managers become more cost conscious and the pressure on tech suppliers increases, the current fragmentation of the value chain is just not sustainable. Margin compression will automatically result in a consolidation of tech providers as they aim to expand their offerings across the value chain. This will continue to be a challenging and fast-paced sector of the industry and it will be interesting to see how it evolves throughout 2021. 

Profitability and sustainability

One thing that every company in this industry has learned is how vulnerable it is when demand suddenly stops and there is no income coming in. As a result, property management businesses need to be sharply focused on profitability and sustainability going forward as well as being smart about how cost is allocated across the board. At AJL, we advise that companies reduce fixed costs to a minimum and increase flexibility when it comes to third party services, like cleaning and others. (Check out the AJL profitability hub.)

Now is the time to buckle up, to streamline your business and to concentrate on how to make your company sustainable.

That is all that matters. The aggressive growth phase of the industry – with millions of capital rolling in – is over. 

Hyper local, hyper fragmented

The goal to keep in sight is to build a profitable business, ready to take on the future. Therefore, the industry will remain hyper local and hyper fragmented for quite some time to come. The big consolidation play is over, but not on the tech side, the tech is where it’s at right now. 

In order to thrive in this continued, restricted environment businesses need to be sustainable and profitable. This should be the focus for the coming year so as to future proof against further disruption and changes in guest demand.

Related Post: How to Scale a Short Term Rental Business? Detailed Guide

Looking to grow your short term rental business to new heights? AJL Atelier is your go-to partner for helping you scale your vacation rental business. Get in touch

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