Airbnb had their headline moment back in 2008, when the unlikely home-sharing arrangement became a widespread market success. But since the beginning of the COVID-19 pandemic, during which the company made its long-awaited IPO, more news around Airbnbs and short-term rentals (STRs) have been making the headlines.
Supporting the buzz is real numbers – short-term rentals have become an almost unfailing way for hosts and investors to make higher-than-average returns with still-low risk. In October of 2021, the average nightly price of a short-term rental in the US was an impressive $236. Hosts were also seeing an average occupancy rate of 57% for the month. And because both the price and the demand varied widely by city, many hosts were seeing head-turning returns from sustained demand at much higher prices.
Adding to the financial allure of short-term rentals is how easy it can be to take part in the market boom. “Every homeowner who has an address has a powerful asset,” says Emir Dukic, CEO of Rabbu, a full-service asset management company that helps investors source, optimize, and sell short-term rentals. “They can rent while they’re away on vacation, offer a single unused bedroom, or leverage the entire property as a full-time short-term rental. Regardless of the strategy details, this market movement is one that’s here to stay – and it’s worth understanding in full.”
Downstream Demand for Short-Term Rentals
The short-term rental (STR) market is being supported by three major channels of demand, none of which are set to change or wane anytime soon. Leisure travelers are looking for nearby stays where they can enjoy a change of scenery and make the most of working from home. Now, leisure travel is also supported by international travelers who are again free to visit as the borders have opened up.
The second demand channel is coming from prospective buyers who’ve been priced out of the sky-high housing market. Without the resources to settle into a dream home, more people are pushing off purchase decisions. And still unsure of how the next few months might play out with returns to office, family visits, or relocations that come with new jobs and new priorities, short-term rentals offer an important sense of freedom and flexibility.
The final channel of demand is coming in from the corporate world. As meetings, conferences, and events return to in-person gatherings, STRs are becoming the preferred way to make the most out of company travel. Larger homes offer engaging team building opportunities, still tucked away from any lingering dangers of big-hotel activity. With the added value of having an immersive and unique stay, corporate travel is positioned to introduce much more STR demand. “These three streams of market interest flow into one big, lucrative lake, supporting the continued strength of the STR market as the pandemic slowly resolves,” says Dukic.
For Hosts: A New Way To Invest
Technology and innovation in the STR space has taken the risk out of second property investments. A new Airbnb revenue generator can help prospective hosts understand exactly what their property could make. The tool gives a three-tiered adjusted analysis of the property’s potential profits based on comparable rentals in the area. This helps homeowners establish a plan and do the proper due diligence that any investment requires.
To optimize revenue, new tech-heavy solutions are lending hosts a helping hand. Guest underwriting, home access control, adaptive property staffing and automated marketing takes the grunt work out of property operation. “With those kinds of solutions in place, the STR market is operating just like any other asset class,” says Dukic. “Most of the investor’s work is in finding the property and putting the right workflow in place. Then, the investment takes a life of its own-accumulating value even as the investor sleeps.”
Lessons Learned: Short-term Rentals and Sustainable Living
STRs have one more important value offering: the return to more engaged, more sustainable living. For smaller communities and secondary markets, the circular home sharing economy helped attract tourist revenue and keep many businesses afloat. Similarly, getting back to basics and engaging in the unique experiences of local communities provides more human connection, and paves the way for new employment opportunities.
Throughout the pandemic, the average person’s environmental awareness increased in staggering amounts. The return of wildlife and signs of small environmental reprieve convinced many people that further actions were not only necessary, they were immediate. Many popular STRs offer people a way to reconnect with nature. Stays near hiking trails, natural sights, and outdoor activities are seeing ongoing demand. During the challenges of this past year, more people appreciated the natural world that we have and the restoration it can offer. STRs now stand as an affordable way to engage in more sustainable travel, to contribute to local economies directly, and to reap the benefits of getting outside, appreciating nature, and striving for a greener way of life.
