Over the last 30 days, there have been 2 major jolts to global short-term rental markets — one obvious, and one not so obvious.
The first is COVID-19. With the unprecedented deluge of cancellations and refund requests, this month-long period marks the worst in industry history. That much is clear.
The second, not-so-obvious change is amounting to be a bit of an industry-wide identity crisis. Indeed, the business that built itself on pricy 4-night stays is now catering to a longer-term crowd. The dynamics of demand have changed so much that the concept to which the industry owes its name — “short-term” rentals — doesn’t seem quite fit.
As the data below will show, relying on solely short-term revenue in 2020 is a surefire way to fall behind. In this update, we dive into what has happened, where things may be headed, and what hosts can do to stay competitive.
A Recap: One Month on the Front Lines of Short-Term Rentals
Since the Coronavirus truly took hold of the global travel industry in early March, vacation rental managers have struggled to stay afloat. New bookings have plummeted, and cancellations have become all too common. Here is AirDNA’s updated global report card on where things stand.
- New Bookings: The number of new bookings currently being made is a far cry from the pre-Coronavirus era.
There’s an important distinction to be made here between “number of bookings” and “number of days booked,” which is also referred to as “listing nights.”
The mid-March spikes show an increase in the number of bookings, but a more significant spike in the number of days associated with each booking. This is likely attributed to the surge of travelers fleeing urban destinations and heading to rural getaways and booking mid-term stays.
- Cancellations: It comes as little surprise to see a cancellation chart with a similar story.
This chart shows the percentage of bookings being canceled by check-in date. Those with a check-in date during April are seeing cancellation rates upwards of 80%. That said, it seems that guests are holding onto their reservations with start dates throughout the summer.
- Revenue: As we announced in our post on how many rural vacation rentals are seeing a boom, numbers for the most prominent urban vacation rental markets are grim. New York and Boston were both down over 60% year-on-year for the month of March, and places like Chicago, Los Angeles, and Seattle follow suit. For the entire year, Airbnb is projecting 2020 revenue to be down a whopping 54% compared to 2019.
- Supply: Throughout all this, the number of active properties on Airbnb has remained stable. With only a 3.5% drop-off in inventory since January, hosts seem to be keeping their listings published and active. Why is this?
Why Supply has Remained Stable
- Converting furnished listings to traditional annual leases can be costly and time-consuming.
- In many vacation rental destinations, there isn’t enough full-time demand to fill vacancies
- Over half of the world’s Airbnbs are not full-time rentals, so income is mainly supplemental with little alternative
- As seen below, demand hasn’t evaporated, it has just changed form.
- There’s a certain ‘stickiness’ of short-term rentals as many hosts still have large bookings for the fall and winter.
Mid-Term Stays: The New Face of “Short” Term Rentals
Beneath all the unnerving data above, there’s one promising theme emerging from the situation: the dynamics of demand have changed, and Airbnb is now becoming a very suitable option for travelers seeking medium and long-term stays.
Average Length Of Stay
Below is a chart showing just how commonplace long-term reservations have become in recent weeks. Since the week of February 17th, the average global length of stay has increased from 3.3 days to 7.7 days — an increase of 133%.
Reservations between 1 and 7 days — a segment that normally comprises almost 80% of all nights booked — now accounts for roughly 30%.
All other categories have made up serious ground in their share of total room nights. Weekly and monthly reservations are exactly what’s keeping many managers in business.
All in all, the share of longer-term (7+ days) room nights booked has tripled in recent weeks.
Plus, over 50% of the nights booked in the last two weeks are for stays of over 2 weeks.
These are some pretty convincing statistics showing that we’re headed into uncharted territory.
Booking Lead Time
Not only are “travelers” (take that term with a grain of salt as many fall into the staycation category) booking longer stays, they’re also making big changes to booking lead time.
Here is a chart showing the distribution of reservation by booking lead time (the number of days a reservation was made prior to the check-in date).
There are three big things to note from this chart.
- Consider how much reservations with short booking lead times have increased in the last few weeks. Whereas those with a booking lead time of fewer than 7 days traditionally made up 30% of all bookings prior to COVID-19, in mid-March that number shot up to 75%.
- The share of reservations made for over 3 months in the future has also been steadily rising since early March. In other words, people are increasingly making plans for mid-summer and fall.
- Even though the trends above are real and pronounced, there’s also been a gradual trend showing a return to normalcy.
What’s the best revenue management approach knowing that guests are booking for both the immediate future and 3+ months down the line? We’ll dive into that below
Airbnb Pivoting to Align with the New Reality
Homesharing giants like Airbnb have been closely monitoring this sea change towards longer-term local stays. In fact, Airbnb recently announced some major changes to its tone and positioning.
Tracking Airbnb’s Push for Long-Term Rentals
- New tools, alerts, and onboarding flow to help hosts open up their listings to long-term guests
- A new homepage advertising Monthly Stays for guests
- The announcement that the platform now boasts over 1 million listings equipped for monthly stays necessary amenities.
- COVID-19 recovery in Asian markets is largely being driven by long-term stays.
- Advertising how the platform has been essential for an entirely new demographic of guests ranging from medical workers to students and remote workers.
The New Look of Revenue Management in 2020
If the dynamics of demand have tilted significantly towards long-term stays (and if Airbnb is clearly pushing hosts and guests in that direction), we’re encouraging hosts and managers to give their revenue management strategies a thorough audit.
Here are some steps hosts can take to make sure listings stay competitive in this new rental landscape.
- Utilize weekly and monthly discounts
As of now, only 48% of global listings currently implement a discount (weekly or monthly). The data surrounding weekly/monthly discounts is clear: In the U.S., hosts who implement discounts average 27% higher occupancy rates than those who don’t.
|City||% of Properties with Monthly Discounts||Average Monthly Discount||% of Properties with > 30% Monthly Discount|
- Actively toggle minimum night stays according to seasonality
Does it make much sense to accept a 3-day booking for 3 months in the future? Chances are you’re eliminating yourself from the running for a potential long-term stay. As a general rule of thumb, use minimum stay requirements strategically: use shorter requirements in the short-term and to fill gaps, and use longer requirements in the long term.
In that same vein, we recommend considering your market’s seasonality. Shoot for short-term rents during peak seasonality, mid-term rentals during shoulder months, and long-term rentals during the offseason.
- Leverage Pacing and Future Data
As announced in our latest feature launch, MarketMinder now includes an entirely new section for hosts looking to track their market’s recovery from COVID-19. New charts allow users to spot how many bookings are currently being made, when they’re being made for, and at what price.
Wondering when your market is starting to see a turnaround? These tools make that process extremely simple.