For many U.S. vacation rental operators, this past month has been nothing short of a nightmare. The unprecedented Coronavirus has caused record-low bookings, sweeping cancellations, and a travel sector that’s essentially been brought to a standstill.
Much like a well-built investment portfolio, however, the short-term rental industry is extremely diversified. Destination types run the gamut from lavish downtown penthouses to rustic cabins, age-old castles, chic ski resorts, and beachfront hideaways. In light of the Coronavirus, each market and property type is responding extremely uniquely.
Given the gravity of the situation, our team at AirDNA has set out to provide tools and insights to help hosts understand and navigate this new chapter of the industry. Yes — many markets are down — but which markets specifically? And by how much? How long can we expect things to last? Which spots are actually benefiting from this new dynamic? (Hint: there are more than a few).
In this post, we’re diving into how the U.S. vacation rental market is responding to the growing Coronavirus. Stay tuned for similar reports on the impact in Europe and Australia.
Let’s first examine how markets within individual states have responded to Covid-19. Displayed on the map below are the year-over-year revenue differences between March of 2020 and March of 2019.
There’s a clear geographic theme here — northern, Midwest states are seemingly far less vulnerable than their southern and coastal counterparts. Whereas Massachusettes, New York, Pennsylvania, and Louisiana all showing negative year-on-year returns, states like Wyoming, Michigan, and Minnesota are performing surprisingly well. So much for an offseason in a region that’s otherwise quite unforgiving.
It is important to put these numbers in context. Airbnb supply has grown over 20% in the past year. Given that our analysis is based on raw revenue numbers, returns are slightly inflated from 2019. Additionally, the impact of Covid-19 on US vacation markets didn’t truly take hold until mid-month.
This shouldn’t be viewed as evidence of a great northern migration, but rather as a testament to the region’s characteristics.
These states have fewer (and less populous) urban centers, and they boast quicker access to off-the-beaten-path destinations. It’s also a region that has been hit less hard by Covid-19 than those on the coasts.
Rural Markets Faring Far Better than Urban
Alongside the advent of social distancing, we’ve noticed a similar trend in U.S. vacation rental markets: travelers fleeing urban centers and heading towards homes just outside the city.
When segmenting cities into three buckets — rural, suburban, and urban — the rural category is the only one reporting significant year-on-year gains. Suburban is about on par with last year, and urban is negative.
In fact, we’ve noted a pretty stark inverse relationship between population density and the health of its short-term rental market. The more crowded the city, the worse its vacation rental market.
The chart below shows how population density seems to be directly related to revenue.
Plus, it’s worth pointing out that there are far more rural and suburban hosts than urban hosts scattered throughout the country. Roughly 73% of March Airbnb revenue was made outside of large urban centers.
Methodology: Urban locations are defined by those with a population density above 3,000 per square mile. Suburban are defined by those between 1,000 and 3,000, and rural locations are those with less than 1,000
Case Studies Show Mass Exodus Away From Urban Centers
The rural vs. urban trend becomes even more telling when we zoom into individual cities and conduct a neighborhood-level analysis.
Here are three case studies showing how vacation rentals seem to find a certain immunity beyond a given radius from the city center. The peripheral parts of these cities are not only more immune, but many are reporting more offseason bookings than they’ve ever seen before.
New York, NY
As one of the most notoriously congested cities in the country, New York has been dealt a tough blow. Most of Manhattan and parts of bordering New Jersey are collectively down 66% from the same month last year.
That said, it’s easy to see where travelers are flocking to: affluent, coastal locations that are just far enough beyond the city’s perimeters. Riverhead and Westhampton Beach are notable standouts on Long Island while Connecticut’s Fairfield and New Jersey’s Rumson have also benefited from the spillover.
The story in Boston is even more pronounced. Provincetown, Hyannis, and Nantucket — places that usually don’t start receiving guests by the droves until May — are now struggling to keep up with bookings. Interviews with property managers in the region confirm that offseason bookings haven’t been this high in recent memory.
Finally, the area around Chicago displays this rural/urban trend even further. The city itself is down 11% while many of the lakeside getaways are well into the green.
Outlook for the Future
Up until this point, our analysis has been limited to the current month of March. What about a few months down the line?
Again, there appears to be a clear distinction between rural locations and the others. Whereas urban and suburban neighborhoods are projected to be decreasing for the next 6 months, rural destinations are reporting a mid-summer turnaround.
Cities Seeing the most Positive Growth
Below is a table showing U.S. destinations that have witnessed the most significant upticks in reservations in the past week. As you can see, the large majority of these can be fairly categorized as non-urban. These are mostly “destination” style locations that are within driving distance of prominent urban hubs.
|City||State||March 9th-15th||March 16th-22nd||Growth||Growth %|
|South Lake Tahoe||California||1,150||2,269||1,119||97.3%|
With the United States still several weeks behind China, Italy, and Spain on their respective Coronavirus timelines, it’s safe to say we’ve yet to see the full extent of its impact.
For now, we’re seeing a very fragmented set of responses with some locations clearly more vulnerable than others.
Here’s the good news: despite record losses in the last few weeks, vacation rentals are providing safe havens for an entirely new demographic. Whether it’s retirees looking for refuge in remote hideaways, professionals looking for an interim workspace, or stranded travelers in need of a quick plan B — vacation rentals are becoming an extremely reliable fallback plan. Ironically, “vacation” rentals may have officially outgrown their original name and purpose.
Our team at AirDNA is working hard to provide data and insights during these difficult times. For information on how your market is coping with the Coronavirus (and what other hosts are doing to stay ahead), dive into MarketMinder.