CEO of Mashvisor, industry-leading real estate data analytics company using AI-powered analysis to help investors find lucrative rentals.
The rollout of the Covid-19 vaccine has given us all hope that things might be going back to normal soon, something that did not look plausible a few months ago. This renewed hope is even more tangible in the short-term rental industry than in other businesses because it was immediately – and disproportionately – affected by the pandemic.
The ongoing coronavirus pandemic has put vacation home rentals to the ultimate test. Short-term rental websites existed before the establishment of Airbnb in 2008, but in the decade-plus since Airbnb’s founding, a lot has happened. Similar platforms emerged, and home-sharing experienced exponential growth. It turned into a stand-alone real estate investment strategy and an independent industry in a few short years. Hundreds of thousands of residential investors turned their traditional, long-term rentals into short-term ones to pursue higher profit – all alongside an influx of new investors starting in Airbnb.
Naturally, this massive expansion of vacation rentals across the U.S. housing market was quickly met with opposition by both the hotel lobby and the local residents of hot tourist destinations who saw an inrush of short-term travelers in their neighborhoods. As a result, many large U.S. cities adopted restrictive legislation in an attempt to limit, control or even prohibit short-term rentals – at least in residential areas. The creativity and adaptability of hosts allowed them to find solutions and continue prospering across the U.S.
This is to say that the success of Airbnb has not been smooth and unproblematic. Nevertheless, the extent to which the pandemic has challenged the short-term rental industry’s ability to survive – not to mention to grow and expand – has been impressive.
My team at Mashvisor and I set out to measure the impact of this global health crisis on the U.S. short-term rental industry as soon as the pandemic was officially declared by the WHO in early March 2020 by looking at one of the largest platforms, Airbnb. As you can imagine, the effect was immediate and sizable.
Between March 2019 and March 2020, we observed significant drops in Airbnb occupancy rates in all major U.S. cities. Data coming directly from Airbnb.com showed the decline was the largest in Atlanta, where the occupancy rate decreased by over 33% year on year – from 69.3% in March 2019 to 36.2% in March 2020. We observed similar declines in Dallas (30%), Boston (29%), Miami (29%), Austin (26%), Chicago (25%), and Los Angeles (23%). The pandemic impact was instantaneous and happened across all geographies.
Around this time, industry experts were pessimistic about the future of vacation rentals and their capability to survive this unprecedented crisis.
But as we already know, Airbnb and other short-term rental hosts are not ones to give up easily. Once again, their creativity and adaptability – even in the most challenging of circumstances – were crucial for the industry’s survival. One particularly important strategy they adopted was turning to long-term rentals. Though this sounds a bit like an oxymoron, it’s actually a full-scale rental strategy that emerged years ago but reached a peak since the coronavirus outbreak.
This new reality we are all talking about – namely, working remotely – has been one driving force behind the short-term rental industry’s ability to adapt and move forward.
In early October, my team took an in-depth look at the performance of Airbnb rentals across the U.S. market. By September, the short-term rentals industry was already in a recovery mode, at least at the national level. Airbnb data from more than 300 U.S. cities revealed a 13% increase in occupancy rate between March and September 2020.
We were once again reminded of the key role of location in real estate as recovery occurred in a geographically uneven manner. Overall, the Midwest witnessed the quickest recovery in Airbnb occupancy rate. It was led by Milwaukee, where the rise in occupancy reached 31%. At the state level, Iowa, Minnesota and North Dakota led the way, with 47%, 39% and 39% increases, respectively.
Meanwhile, the slowdown in short-term rentals continued in the South. Florida, Arizona and Georgia witnessed further drops of 42%, 20% and 11%, respectively, from March to September 2020.
This brings us to the current moment. We bid 2020 farewell with the renewed hope that the Covid-19 vaccine’s rollout brought to stakeholders in both Airbnb and the larger short-term rental industry.
Inspired by this hope, we looked at nationwide Airbnb data once again, but this time looking forward to the rest of 2021. Short-term rental historical performance, recent trends, along with the slower-than-expected vaccination rollout (paywall), point to September 2021 as a likely time for when we can expect a real, deep recovery in the U.S. Airbnb and short-term rentals market. In spite of month-on-month growth happening in the second half of 2020 and continuing into some months of 2021, we forecast that year-on-year growth will likely only start in September, when the 2021 occupancy rate will match the 2020 one. From that point on, we can expect the industry to start growing on an annual basis.
While the development of Covid-19 vaccines is great news for the short-term rentals industry, it’s important to keep in mind that the recovery will not happen as instantly as the decline.
The main lesson here is that Airbnb is more resilient than many expect, and similar adaptability can be expected in the larger short-term rental industry. Signs point to an industry coming back from the shock of the pandemic, especially as pandemic solutions like the vaccine continue to roll out.
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