Opinions on the Recent Wave of STR Entrepreneurs (Updated Forum)

[Ben Tunduwani]

As many landlords are aware, following Covid, there has been an uptick in "catch up" travel as lockdown restrictions ease. Among other effects, this has led to an increase in RE investors in some markets looking to rent from landlords and then sub-lease through Airbnb, VRBO, etc.

What are your thoughts/comments on the subject?

[Joe Splitrock]

@Ben Tunduwani it seems there is a steep increase in people looking to do this which could be a response to increased traffic that short term rental platforms have seen through COVID. As you mention, some of this is catch up travel. Another factor is reluctance to return to hotels, combined with hotels being slow to reopen. Hotels across the country are facing staffing problems, which is limiting hotel capacity and driving prices up. So you have a market where a hotel may be $250 per night and short term rental actually costs less. What I predict will happen is hotels will get up to speed and take business back from short term rentals. Some of these arbitrage operators will not survive. 

As other mentioned, if the market is so profitable for short term rental that you can charge market rate to a sub-lease that runs AirBNB or VRBO and makes good money too, that tells me the landlord may not be using the property for best use.

Everyone should also be aware that the "catch up" travel was partially fueled by stimulus money. An average income family of four banked over $11,000 in extra stimulus money and it is burning a hole in their pocket. That is why travel, car sales and home renovation have been hot. That money is not going to be there in 2022. Another factor in travel is that COVID has made it hard to travel outside the USA and hard to travel to certain popular domestic destinations. Once these other destinations are an option, it will reduce travel to some destinations that saw a COVID uptick. 

Always remember that there is a "snap back" or "boomerang" effect that can happen, so what goes up fast can go down just as fast. Understanding the underlying reason it went up is critical to determining if it will keep going up or drop.