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Will Short-Term Rentals Bounce Back in the Fall?


May 08, 2020 by Erik Martin
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If you host a short-term rental via Airbnb, VRBO, HomeAway, or another service, you are probably feeling the pandemic pain by now. The coronavirus has hit this industry hard, resulting in massive cancellations and refund requests.

Despite Airbnb's extenuating circumstances policy and offer to pay 25% of what hosts would have received for a guest cancellation, many hosts are in the red and feeling blue about prospects for the remainder of 2020.

These uncertain times raise a few questions: How soon before short-term rentals pick up again? Can the latter part of this year be salvaged?

Recent data suggests the answer is yes. One of my Fool colleagues reported that Guesty, a short-term rental management platform, has observed a year-over-year 40% increase in Christmas bookings, 38% jump in Thanksgiving bookings, and 23% rise in New Year's Eve bookings through VRBO, Airbnb, Booking.com, and other services.

Proceed with caution

But Suzanne Hollander, a Florida International University real estate faculty and Miami-based property attorney, isn't so optimistic.

"The ability for short-term rentals to bounce back by autumn will depend on several key factors," she says. "First, will statewide bans on short-term rentals be lifted? Many states have enacted these bans, which impacts many people."

Additionally, Hollander asks, "Will international, national, and state and local restrictions on travel be lifted? Will the airline industry adapt to create safer experiences? And will larger events, like conventions, festivals, and graduations, be allowed to occur, which can also affect demand for short-term rentals?"

And even if the answers to these questions are yes, another question lingers: Will prospective renters want to travel?

"The psychological impact of sheltering at home orders is that many people may indeed continue to feel safer in their own homes, even after these orders are lifted," notes Hollander.

A dose of reality

Caleb Liu, owner of House Simply Sold, a real estate firm that flips homes and is based in Orange, California, seconds those sentiments.

"I don't expect short-term rentals to rebound by the fall. While many people are eager to get back to work and start socializing again, it won't be at pre-pandemic levels," he says. "Millions have been laid off or furloughed, and my guess is that a significant portion will not be rehired once the lockdown is lifted."

Following that logic, little to no income means little to no money will be spent on travel -- even though many people will be eager to escape their stale surroundings and enjoy a getaway to an exciting new location.

Looking for silver linings

Nick Calvi, CEO of Phoenix-headquartered Tweener Homes, a real estate brokerage, is hopeful that business will increase at least slightly for hosts later this year.

"People have short memories. I believe some short-term rental activity will bounce back as the months progress, and without any further pandemic issues, more activity will follow," Calvi says. "Remember -- not all renters are vacationers. There will be people who need a temporary place to stay, such as those waiting out their home sale and new home purchase and those experiencing a job relocation."

Planning ahead

Liu recommends developing a realistic post-coronavirus strategy now and preparing for worst-case scenarios.

"The rest of 2020 is likely to be quite painful. Demand will remain low for the rest of the year, so to me there are really only three viable options to pursue once things open up again. One choice is to drop rates significantly to undercut the competition. Another option is to sell the property if things get really bad. Or you can convert the property to a traditional long-term rental unit, which may result in a cash flow that's substantially lower than a short-term model."

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