How urban short-term rental managers are surviving COVID
Sep 15, 2020
Whilst rural vacation rentals are booming, the outlook remains uncertain for urban short-term rental managers. A recent article in The Daily Telegraph highlights the challenge faced by operators. It contrasts two case studies of a professional host in Edinburgh, and another in London. When COVID-19 hits, the London operator (who manages a portfolio of 22 properties) resolves to place all unoccupied properties on the long-term rental market immediately. Her revenue has fallen by 40% in total. In contrast, the Edinburgh operator chose not to do this. His revenues will likely fall by a total of 80% in 2020.
With such exposure to weak booking demand, operators need greater optionality and flexibility. They need to be better equipped to mitigate future downside risks. In the case of urban hosts, easy access to longer-term bookings has the added benefit of enabling them to more easily respect local regulatory limits on short-term renting – which is undoubtedly why Airbnb, VRBO and most recently Booking.com have all introduced new functionality to this effect. It has a much needed and very positive halo effect of helping legitimise the sector.
Some interesting data points:
Inbound tourism to the UK is set to drop by 73% in 2020 according to VisitBritain.
Before the pandemic, prime STR accommodation in Edinburgh had occupancy of 90% throughout the year, resulting in returns 1.5x higher than traditional long-term lets.
According to Hamptons (a major UK estate agent), in May 2020 ~12% of all its new rental instructions in zones 1 and 2 of Central London had previously been STR accommodation. This was as high as 17% in the borough of Lambeth
These data points highlight not only the fungibility of a property asset, but the growing need for operators to tap into the full spectrum of rental demand. Both of these are founding principles and benefits of what we refer to as “omnichannel” property management – and are possibly just as relevant to rural operators as they are for urban short-term rental managers.