I have a subscription to AirDNA and have been waiting for the first report reflecting the COVID-19 coronavirus impact on the industry. Today it arrived and much to my surprise....not, it shows a rapid decline in the number of new bookings and cancellations. There is also a new trend reported, which correlates the number of nights booked with the new AirBnB promotions.
"Over the last 30 days, there have been 2 major jolts to global short-term rental markets — one obvious, and one not so obvious.
The first is COVID-19. With the unprecedented deluge of cancellations and refund requests, this month-long period marks the worst in industry history. That much is clear.
(This is backed up by two recent changes: 1) the number of passengers flying into Lindbergh field is now at about 15 percent of what it was on same day a year ago, and Comiccon has just cancelled its get together this July, which typically brings in about 135,000 visitors.)
The second, not-so-obvious change is amounting to be a bit of an industry-wide identity crisis. Indeed, the business that built itself on pricy 4-night stays is now catering to a longer-term crowd. The dynamics of demand have changed so much that the concept to which the industry owes its name — “short-term” rentals — doesn’t seem quite fit.
As the data below will show, relying on solely short-term revenue in 2020 is a surefire way to fall behind. In this update, we dive into what has happened, where things may be headed, and what hosts can do to stay competitive."
The latest report shows that the average length of stay globally has increased from 3.3 days to 7.7 days. Going on, the reservations between 1 and 7 days that normally is about 80 percent of the bookings is now down to only 30 percent. The number of seven plus day bookings has tripled in the last few weeks. And fifty percent of the bookings in the last two weeks are for stays more than two weeks.
The report perhaps surprisingly shows an increase in the rural bookings with an accompanying decrease in the urban or tourist locations. This seems to be the result of travelers wanting to get away from COVID hotspots. Mission Beach, while not a hot spot, is not in a rural setting. AirBnB is projecting a 54 percent decrease in revenue compared to 2019. That is a huge number and is one of the reasons why AirBnB is promoting monthly rentals as part of their package.
The article also makes the point that the number of listings has not declined, which is borne out here in Mission Beach which has about 1445 active listings. The AirDNA report offers several reasons, including:
1. Converting furnished listings to traditional annual listings can be costly and time-consuming.
2. In many vacation rental locations, the demand does not fill the vacancies, which is true in Mission Beach, but only during the three summer months.
3. Over half of the world's AirBnB rentals are not full-time, so income is mainly supplemental.
4. The demand is changing from short to longer term.
5. There is a certain "stickiness" since some hosts have a number of bookings in the fall and winter months.
AirBnB has been evolving with the times, providing new tools to help hosts and guests open up listings to longer term stays, the addition of a new page advertising monthly stays an announcement that the platform now has over 1 million listings that can accommodate monthly stays.
The data below is specific to Mission Beach for the month of March, or more accurately about half of the month of March as the virus effects kicked in. This chart shows occupancy for four levels of confidence from 25th to 90th. Most important here is to see the decrease from March 2019 to 2020, which is shown on the graph at 38 percent (again for only about half the month). The decreases for the four levels are:
90 percent - -10 percent
75 percent - - 22 percent
50 percent - -36 percent
25 percent - -38 percent
There is substantially more data, but I think this first look into the impact of the COVID-19 Coronavirus is fairly insightful. One takeaway is that if owners/investors rely on short term rentals in 2020, they will lose money.