Why Short-Term Rentals Are Still a Wise Investment

By Taylor Hills and Dana Lubner

It is no secret that short-term rentals have been a hot topic whether promoted, maligned, or somewhere in between. This alternative style of accommodation has evolved into an industry disrupter and is fast becoming the preferred choice of travelers young and old.

Airbnb and Vrbo rentals across the United States have increased by 105% over the past three years propelled by a new wave of travelers looking for more unique and affordable hotel alternatives. Between July 2018 and May 2019, Airbnb added more than 1 million listings. For comparison, Marriott added 46,101 new rooms between July 2018 and March 2019. Seeing the outsized returns that short-term rentals generate, U.S. real estate investors both big and small have jumped into this new asset class purchasing 1.8 million properties with the intent to earn shortterm rental revenue in 2018 alone. *(AirDNA)

On March 13th, the travel sector was gutted by the COVID-19 pandemic. Effortless Rental Group saw 87% of reservations cancel in a matter of hours as travel came to a standstill. Shortly after this new reality set in, we noticed a change in booking behavior, with guests reaching out for longer than the average 3-day stays. This may be due to the fact that short-term rentals are perceived, and proven, as safer than hotels during this pandemic. A new breed of traveler has been born; one that includes frontline workers, those looking for cozy quarantine spots, and most importantly, travelers who want to avoid a crowded hotel lobby at all costs.

After stay-at-home orders were lifted and businesses began reopening, there was a big uptick in demand. Weekend getaways are now turning into week-long getaways, guests are even deciding to book for a month or two, now that “work from home” opens the opportunity to work from anywhere. Travelers are wanting to escape city life to visit a nearby drive-to destination. This type of travel is expected to continue through 2021.

Since the pandemic began, the percentage of bookings on Airbnb within 200 miles has grown from a third in February to more than 50% in May. Travel in a post-COVID world is shifting “from airplane to car, big city to small location, hotel to home,” Chesky said in an article from the LA Times. Airbnb’s newest marketing strategy is “Getaway, without going far. A journey close to home is just the break you need”. We have observed this within our own booking data as a majority of guests reside in state.

Traveler needs are changing and that is nothing new to the short-term rental industry. Although COVID-19 has created extraordinary circumstances, we have always demonstrated our ability to adapt and meet guest expectations.  Proactive communication of cleaning procedures reassures guests and helps demonstrate the full value of the services provided to them.

Shifting travel expectations and behaviors present an opportunity for investors. When stacked up against hotels, professionally managed shortterm rentals often win out in cost, size, amenities, and quality. These advantages are historically amplified during economic downturns, making short-term rentals the most attractive option over the next year and beyond.