Covid-19

Short-term rental resilient

Short-term rentals were found to be more resilient than hotels during the pandemic, according to analysis from STR and AirDNA.

The study reported that, at the end of June, hotel revpar in 27 markets around the world was 64.8% lower than the previous year, while short-term rental revpar was down 4.5%.

The pair said that a key theme in the early stage of recovery for each segment was a shift in travel patterns away from urban markets and toward regional destination markets. To that end, they tracked performance variances across destination types in 15 urban markets and 12 regional destinations, from 1 January 2019 to 27 June this year.

Prior to the pandemic, hotels historically had the upper hand in performance compared to their short-term rental counterparts. In 2019, hotel occupancy was on average 11.4 percentage points higher, at 75.0% and nearly 20 percentage points higher when compared to 2+ bedroom rentals. The same was true with average daily rate, which was 22.7% higher for hotels.

As the pandemic spread globally, so too did travel restrictions and nosedives in accommodation demand. In the markets covered in the analysis, hotels bottomed out at 17.5% occupancy for the week ending March 28 while short-term rentals reached a low of 34.3%.

Urban and regional markets were hit just as hard in the decline, with hotel occupancy declining 78.6% in regional markets and 77.6% in urban locations. Rentals declined 46.2% in regional spots and 44.5% in urban markets

The study said: “Quarantine restrictions, social distancing and economic troubles took hold, many business meetings, conferences, and other events were canceled. Given the hotel sector’s reliance on demand from group and business travel, this had an unequal impact on hotel occupancy.

“As the economy struggled, hotel travellers migrated toward midscale and economy class options, which led to a significant decline in hotel ADR. All major short-term rental key performance indicators plummeted within the span of a few weeks as well. Global new bookings fell 47% from more than 2.3 million in January 2020 to just 1.2 million in April. Year over year, global new bookings were down 61%.

“While these numbers seem grim, the fall for short-term rentals was not as severe as hotels’ for a variety of reasons. First, short-term rentals can make social distancing easier given the availability of larger units as well as an availability of inventory in more rural and/or remote vacation markets - locations that allowed travellers to escape more densely populated urban markets where cases were spiking.

“Second, most short-term rentals offer full-service amenities (such as kitchens and living space), which allowed for longer-term stays and became more popular as families looked for spaces to retreat. As a result, average length of stay increased by 58% during the crisis.”

Hotel occupancy bottomed out at 17.5%, down 77.3% from the prior year; Rentals occupancy fell to 36.4%. Hotel occupancy has since increased 123.8% from its low, while occupancy increased 60.0%. Hotel ADR has increased 31.9% during that same period, while Rentals ADR increased 23.2%.

The study said: “In terms of ADR, 2020’s booked rates are already back on track with 2019 levels. In fact, Airbnb rates in July are reporting higher than in 2019 for many countries around the world. Whether this is a momentary or longer-lasting trend is difficult to predict. While short-term rentals have recorded stronger performance of late, the hotel sector continues to make up ground.”