Short-term rental bookings worldwide this summer are unrivaled.
July was a record month for U.S. bookings. The industry recorded approximately 23 million nights, an increase of 18% year-over-year. Likewise, in the UK, 84% of short-term rental owners say bookings for 2022 are stronger than ever, and research shows that the number of holiday rentals in the country has grown by 40% over the past three years.
But as the year draws to a close, persistent inflation, major global events and a looming recession threaten the industry. As it stands, the number of nights currently booked for December 2022 to March 2023 is 16% below 2019 levels, with nearly 70% of economists predicting that the US will declare a recession sometime next year.
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As the founder of Boostly, a leading online training provider and web design agency that provides landlords with the tools to increase direct bookings, I’ve worked in the short-term rental industry for many years – and I know how difficult it can be to navigate the industry in unprecedented times.
Many homeowners and investors have never operated a short-term rental business during an economic downturn, and the thought of doing so is understandably daunting.
While a recession doesn’t necessarily mean your business is doomed (in fact, one of the vacation rental industry’s most significant periods of growth occurred between 2006 and 2012 — right in the middle of the Great Recession), there are places.
Here’s my take on how property managers can protect their portfolios, weather the storm and ensure the survival of their short-term rental business.
1. Take advantage of mid-term rent
The short-term rental industry is undergoing a massive shift right now, and being proactive means identifying trends and taking advantage of them where possible. Demand for medium-term rentals (average 3 to 9 months) is on the rise, and now is a critical time to incorporate them into your short-term rental strategy.
Access to mid-lease spaces gives you access to different types of guests, from students and employees to healthcare workers, contractors and digital nomads who need to stay (and work) somewhere for longer periods of time. Having guests stay at your property for an extended period not only means you spend less on cleaning costs, but also involves less property management. Plus, you get the added security that your rent is full in times of trouble.
2. Invest in smart home technology
There are plenty of smart solutions on the market that can help you reduce costs and make short-term rentals more efficient, but it’s not just your budget that will thank you—guests will, too. Equipping your rental with smart technology can have a huge impact on your energy bills, which is critical when dealing with rising energy prices and the cost of living crisis.
Start with the big ones, like smart thermostats and lighting. Invest in a Nest Thermostat and you can monitor your home’s efficiency and adjust the temperature of your rental home in real time, even when you’re not home, reducing your bills and energy consumption.
Other small tech investments can make a difference, too. For example, an air fryer costs far less to run than a conventional oven, while a water-efficient shower head can save more than $70 a year in energy and water bills.
Reevaluating your current appliances and energy use is a good place to start.
3. Drive direct bookings
While energy costs are saved, so is the way bookings are generated. Last year, Airbnb charged hosts an average commission of 14%. If your property portfolio relies entirely on online travel agencies (OTAs) like Airbnb and Booking.com, you’ll be paying huge fees.
Word of mouth is still one of the best marketing tools.
Mark Simpson – Boostly
My suggestion is to reduce commission costs for OTAs by focusing on driving direct bookings. There are many ways to do this, but the most important investment you can make is a mobile-friendly website that provides guests with a seamless direct booking experience. With 66% of travelers saying they would book directly with an accommodation if possible, now is the perfect time to move away from OTAs.
When it comes to attracting guests, email marketing lists are one of the most valuable assets you can use to increase direct bookings. Create a referral network and capitalize on previous guests by asking them if they know anyone who might be interested in staying at your property; it sounds cliche, but word of mouth is still one of the best marketing tools out there.
4. Be proactive, not reactive
Companies often cut sales and marketing budgets at the first sign of a recession. But evidence suggests that the companies that focus on sales during times of uncertainty are often the ones that survive and thrive.
When other property management companies hold back, I strongly believe you must step up. In my opinion, the sensible place to start is by hiring a salesperson. Forgoing commissions and base rates may hold you back when everyone else is tightening their pockets, but the benefits will outweigh these costs.
Having someone working full-time each week to source leads, manage contacts, get in touch with past guests and drive direct bookings will ultimately drive your business forward. Then, have your newly hired salespeople contact local businesses and healthcare organizations to let them know your property is available for rent in the mid-term.
5. Leverage Online Industry Communities and Groups
Many online resources are available to property managers, from training academies to Facebook groups such as the Hospitality Community. My final piece of advice is to join industry groups and communities and connect with as many other industry property managers as possible.
Not only is it useful to have these connections, but there is a lot to learn – from the pricing strategies others use to how landlords can save money on rent. It’s a good idea to iterate on ideas, take notes, and most importantly, support each other during unpredictable times.
With a recession looming, it’s time for short-term real estate managers to step up their strategies. Installing smart home technology can help you save money for your business, you can take advantage of online resources to expand your knowledge, and capitalizing on mid-term rental trends can bring in extra income.
I strongly believe that with an effective marketing strategy and less reliance on the big OTAs, we can all tide over this – and the industry is poised to thrive from the other end.