The UK Short Term Accommodation Association has partnered with STR to measure the performance of serviced apartments, short-term rental accommodations and hotels.
The move was expected to push the segment closer to being a recognised asset class, with closer integration with the hotel sector expected.
Merilee Karr, chair, STAA, told us: “It allows [the segment] to become more of an asset class, it allows it to compare itself with hotels and serviced apartments and get an idea of how they are performing. It will help with investment, it will help the traditional hospitality world to better understand this segment of the market. This means we can speak their language and they don’t look it as a black box which they don’t understand.
The pilot programme was focused on London, with initial segmentation done along property types, rather than quality. Karr said that, for August and September, initial data had showed the short-term rental sector performed better than hotels.
Karr said: “There are a few intricacies with our industry that mean you’re never going to get to 100% occupancy; we tend to have three-night minimum days so you don’t have single night stays to fit in between and products aren’t so comparable. If someone books a home you can’t just move them to another home, so there’s never the possibility to overbook, like in a hotel, to make sure you don’t end up with last-minute cancellations and holes in your occupancy.
“That tended to mean that ceiling occupancies in a portfolio were 80% in peak months. For hotels in London in peak July, they could easily reach 95%. What we’ve seen in the first two months in the data is that short-term occupancy is about 10% higher than hotels.
“What’s interesting is the consumer shift towards short-term rentals. People are looking for extra space, that sense of security that it’s private, they’re looking for smaller properties. As consumers start to travel, they’re hesitant to go back into larger properties and the hotel offer.”
Karr anticipated an increase in investment in the market “and if anything Covid will accelerate that. Our businesses tend to be asset light, so comparing them to a hotel operations business should be transparent and comparable if you have enough data.
“It’s always been my vision to see how we can cooperate with hotels and where there are opportunities to work together and the best way is through investment. The investors will push those synergies - Marriott Homes and Villas is a good example because Marriott was at risk of losing customers who wanted a different product at certain moments.
“With that product, Marriott is saying that it will offer whatever product people need. This will happen more and more and it can be very complementary; we often get guests who want to arrive a day earlier than booked, it would be very convenient if we could offer a hotel for that night. The more that companies work together the better the results.
“What we’ll start to see is that if you start to integrate operations - check in, linens - you can significantly cut costs. There is a model where this can be delivered at scale, at reasonable costs and profitability.
“Hotels still see our industry as a threat. They lobby against our industry, but the reality is that consumers have already spoken and they have said that they want this. So rather than work against each other on a regularity battlefield, why not work together and look at ways to integrate businesses? The hotel industry is far better capitalised than ours is and the opportunity is for hotel companies to be buying stakes and then looking at how to integrate and then get the value out.
“If we all fight each other, everyone will lose.”
Insight: There can be no doubt that this summer has been the summer of the short-term rental. I’ve done it. You’ve done it. The neighbours and their grandparents have done it. But the hotel sector has been spooked by it.
Accor had to scale back Onefinestay when it couldn’t get the access to supply to make the cost of servicing it stack up. Marriott International acknowledged that it wasn’t making money on the offering, that it was something its loyalty members wanted, although we will look to its Q3 results to hear whether it is singing a different song (but given the small scale of Homes and Villas, it’s unlikely to make a significant difference).
After this initial burn, will hotels realise that they need to gird their loins and try again? They are, after all, looking at extended stay and serviced apartments with more enthusiasm. If short-term rentals can be sold using the terminology it understands, then maybe.