Short Term Rental Trends

[Michael Smith]

Yet again I am writing about an aspect of the real estate industry that is experiencing fundamental change because of COVID, but Black Swan Events do tend dramatically change everything. AirBnb’s research arm, AirDNA, recently released their “2021 AirDNA Trend Report”. This report is a review of some of the interesting trends they saw in AirBnb’s data during past year and their analysis of what it means heading into the next 12 months. My main takeaways are below (all charts were taken from the report, link above).

Bigger is Better

Rental homes with at least bedrooms will finish 2020 with positive Y-o-Y demand change compared to smaller 1 & 2 bedroom units, or what they call HC “Hotel Comparable”. These units also have the highest nightly rates, so as the data shows it definitely pays to looks for as many bedrooms as possible when shopping for a vacation investment.

The chart above also had some interesting parallels to what we have been seeing in the long term rental space, which is that the demand for single family units has now surpassed that of multi-family units. This may also be attributed to changing demographics, millennials are starting families and are no longer choosing to live in apartments and apparently don’t want to vacation in them either.

Working Remotely?

This next set of data was the one that I found the most fascinating. This was that longer term stays, over 7 days, went from 21% of AirBnb’s total bookings at the beginning of the year to now 41%. With the pandemic closing offices around nation, a lot of people were working remotely full time, and AirBnb’s data is showing that a larger and larger part of their business is people figuring that they might as well get out of town for a few weeks and continue to stay online a work. This is a potential paradigm shift in the way that the average American travels, spending the entire Summer in a vacation house is no longer for the independently wealthy, now that both Mom and Dad are working remotely and the kids are out of school for the summer the family can head to the lake for the Summer.

Large Investors

Although the majority of units that compromise AirBnb are offered by hosts with less than 5, those with more than 6 properties have been gaining ground of the past 5 years.

The charts above clearly show that smaller investors are losing ground to larger investors, with larger investor gaining quite of bit of steam in the share of revenue in the past two years. It’s hard to say exactly why this is happening but if you own more than 6 AirBnb units you are clearly making money and are most likely looking to expand, compared someone who owns one unit and may be looking to sell. This will sound similar to those who have been investing in multifamily or rental homes for a while, there always comes a point when you decide you are going to try and become financially independent and scale your business up or cash out.

AirDNA’s report represented some really fascinating data, especially the increase in long term stays. This is something that “digital nomads” have been doing for several years now. These are professionals, mostly in tech, that work remotely and travel the world while continuing to report into work. Now that remote work has been hugely increased it looks as though a lot of others are joining in on the party. I also found the data on larger investors interesting. The aspects of what makes a strong vacation rental are much different and more complicated that the aspects of a strong traditional rental but the opportunities for huge revenues are present if you can keep your vacancy levels low.