STRs converted to LTRs and impact to LTR market

[Ryan K.]

I know it's early to try and predict the total impact of the current pandemic on the STR market, but wanted to start a discussion -

How many STRs will ultimately get converted to LTRs in each market? Any thoughts on how it could affect your specific market and what that affect may be? Possibly an increase/flood of LTRs hitting the market soon or within the next year with an impact to supply/demand and rental rates? Just a short term (year or two) impact, or maybe longer?

In my local market the city (Richmond) was already getting close to passing new rules that would prohibit many of the currently operating STRs/AirBNBs, and I originally figured at least a portion of the the hundreds/thousands of STRs would ultimately get converted to LTRs. With the pandemic I’m thinking for some STRs it may  speed up that process or have a larger impact. 

[Jesse Lynch]

It probably goes without saying, but it depends hugely on the market, and as a rule, the worst run airbnbs will be the quickest to move to LTR (or get sold).  

Vacation areas probably won't see that change, since they exist largely for STR purposes and couldn't be profitable at long term rates. But, I believe urban areas, like Minneapolis/Saint Paul where I am, will see a large temporary loss of STR inventory, and most of that loss will be from the bottom of the barrel, because they aren't profitable enough to justify the risk, but the highest performing STRs will of course stick around, because they're doubling or tripling income from LTR.

I also own a duplex in Rochester, MN a few blocks from Mayo Clinic, that I'll be putting half of onto airbnb when it's done (I wish it was ready so I could help some healthcare folks out).

I think it's like most industries though, the most robust and efficient businesses will withstand this crisis, while the weaker, unfortunately, might not.

Just to predict, I think across the airbnb platform we'll see a temporary (maybe up to a year after the crisis comes to an end) drop of inventory around 10-15%, but I think bookings will drop by less than that amount (after the quarantines stop).