Jul 07 2020
The pandemic resulted in widespread travel restrictions across the country. There is no doubt that Covid-19 has dealt a huge blow to short term rental owners as most of them have seen almost zero demand. Many homeowners are shifting their model by making their properties available for long term tenants. But there isn’t enough immediate long term demand to cover their losses.
Casual homeowners who depend on short term rentals as an additional income would continue participating in the sharing economy and even increase the frequency of letting out their space due to economic slowdown.
Professionals operators who lease out properties on minimum guarantee agreements, have started offloading properties or renegotiating agreements to revenue sharing model as they see a significant setback in demand.
However, short term rentals seem to be outperforming hotels according to a recent report by Skift. This is due to the advantage vacation rentals have over hotels in terms of reduced guest traffic and control over their living environment.
The Way Forward for Short Term Rentals
The past decade we saw the short term rental space grow exponentially. The first wave of the sharing platforms matched homeowners to guests in a peer to peer model of sharing. The homes rented out on the platform are unique and uneven in quality.
The future of sharing platforms is towards a controlled marketplace where the basic aspect of the service is standardized, just like Uber, which exerts a tight control over its supply side (the drivers). Uber drivers need to have a clean driving record and their vehicle must meet formal standards. In the case of STRs, the hospitality standards should be codified when it comes to basic amenities and safety standards.
We also have companies capitalizing on this trend by operating multiple units, more like a deconstructed hotel with almost everything you can expect from a hotel room.
The crisis will influence the way sharing platforms and short term rentals operate.
Standardization of Norms
The main disadvantage vacation rentals have over hotels is that they are uneven in quality. Unlike a hotel, there are no quality standards or cleaning protocols that STRs follow. As the market evolves, short term rentals will resemble hotels as customer demand pushes for greater standardization, easy check-in process and professional hospitality. The STR market is commercializing.
The Case for Hygiene
When people travel again, it will look vastly different from how they used. Their shift in mindset will influence how they select accommodation with hygiene being the #1 criteria. Now it's time to take sanitation more seriously amidst the coronavirus outbreak. Travellers are going to have a heightened sense of awareness while venturing into new spaces. In the wake of the crisis, platforms have enforced cleaning protocols.
The Internet has been the crucial enabler of short term rentals. Guests can find a place they like millions of miles away, pay and reserve it online instantly. Automation drives efficiency by handling the redundant processes and making operations smooth.
Automating a short term rental can refer to many things from pricing and communication to guest access and security system.
Communication is seen to be key in building customer confidence as people start to travel again. A game changer would be a self check-in feature using a lockbox or smart lock. In this time of uncertainty, guests prefer minimizing the number of people they come in contact with. Also, this decreases the need for manpower.
Coming to a full circle, while only few may be letting out during the pandemic period, we can expect an increase in rental as soon as demand rebounds. The economic downturn from Covid-19 will increase the number of rentals in the market in the long run. Short term rentals will go a long way in supporting the recovery of the economic health of the country.
I empower asset owners to create passive income from their underutilized homes. At Hubloft, we match homeowners with discerning travellers looking for accommodation.
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