The 1-, 15-, 30-, 60-, 90- or 364-day, flexible rental market provides a separate and distinct source of demand for apartments, outside of annual leases. While Covid-19 crashed the short-term rental market, it also created a new class of demand targeted and served by specialty short term rental companies with names like Kasa, Frontdesk, Vacasa and WhyHotel.
These companies manage vacant units on behalf of multifamily owners and help to create continuous-tenure living that is emerging as an identifiable demographic preference.
In this Multifamily Innovation Conference – Atlanta (MICA) session, Jamie Lane, Vice President of Research at Airdna, spent compared annual and flexible rental rate data in key markets in the Southeast, as well as overlaying jobs, spending and COVID trends. His firm tracks 10 million properties worldwide.
He said the unprecedented supply and demand situations caused by the pandemic mean operators need to pay attention to Year-over-Year (YoY) numbers and/or those comparisons made pre-pandemic, such as FY 2019.
By reviewing slides he presented during the session, you’ll see the trends in hotel REVPA, car traffic, plane traffic and overall demand.
“We’ve been given unprecedented fiscal stimulus and we’re seeing a robust recovery underway and expected into 2021 given consumers’ comfort level about traveling as vaccines are administered nationwide,” he said.
“It’ll be years (not months) before the level of international travel to the U.S. returns to near normal. Consider that international travelers tend to spend more money inside the U.S. than U.S. citizens spend outside this country. Miami, San Francisco and New York will not come back until global travel resumes at a more normal rate.
Bookings Surge Underway
So much pent-up demand has led to huge spikes in bookings vs. stays right now.
Bookings on Airbnb and VRBO in January and February were at the highest rates ever recorded since 2014. Stays are presently at record lows, but bookings for summer are looking very strong, he said.
Urban short-term rental (STR) demand was down about 50 percent last year and mountain/lake destination resort markets saw the biggest spikes in 2020.
Coastal markets such as Myrtle Beach, Tampa, Morehead City/Emerald Isle, and the U.S. Virgin Islands all experienced significant gains since the start of the pandemic. Likewise, inland areas like the Ozark Mountains, Gatlinburg/Pigeon Forge, and Fredericksburg, Texas, were also able to increase their supply of available listings.
Growing supply in destination/resort areas has benefited many of the larger property managers who tend to manage a high percentage of units in these locations. Globally, large operators (those with 21+ units) increased both their available unit counts by more than 14% over the past year, while available listings declined by 9% over the year for hosts with just one unit. These single-unit hosts are much more likely to be located in large urban markets which explains most of the decline in availability given the lack of demand.
Mirroring the declines in the top global cities, there was a decline in available listings in both large and mid-size cities in the United States, while urban areas were the only location type to also register decline in active listings.
Listing removals are only really happening in urban markets, he said. Gains in active listings, however, are up in just about every other segment as many prepare for the upcoming wave to STRs in the second half of 2021.
Looking at the Southeast
Lane provided much information about demand and forecasting for many dozens of markets in the Southeast United States, as his slides indicate.
In the Southeast, Myrtle Beach, S.C., supply is up 86 percent YoY, for example. Athens, Gainesville and Miami are down over 20 percent; largely because they are college towns and have struggled because so few students are on campus this school year.
Locales that are attracting increases in demand, but declines in listings are the work/vacation areas such as the Lower Hudson Valley (N.Y.) area; Greys Harbor, Wash.; Lake Tahoe, Nev.; and Joshua Tree, Calif. Many owners are using their own “second homes” or “vacation places” to live and work during the pandemic.
The number of trips booked for 7+ days has doubled – an indication that they are pulling share from the hotel industry.
As of June 2021, bookings are pacing at levels from June 2019. A great deal of the bookings has been at destination and small towns, and not the large cities. People tend to book further out for destination trips, he said.
STR bookings had been gaining share of travel demand, and boomed with a big comeback in 2020, but should pull back some after 2021, Lane said.
Lane said it will another year or two before STR demand returns to the positive, surging trend line established in 2019. He expects more new supply and new investors who become comfortable in the STR space to fuel the rise.
Expect Inventory Growth for Professional Operators
Individual owners’ listings are declining, and professional operators are increasing their supply, especially in the multifamily space.
For STR/apartment-style operators, bookings in major cities are pacing below 2019, mostly due to the lack of business travel. But, given the trend toward digital nomads and long-term stay trend in 2020, and work/travel and play/travel come back, these branded experiences will “really dominate” the travel lodging space because people are looking for home-like amenities while on trips, he said.
Travelers will want to be able to “act like they are at home.” Lane said that maybe more people won’t even want to have a home location, and that “home” could become a location in different parts of the country.
This will lead to a continuation of the trend toward more inventory for “those” professional operators to manage.
Lodging industry hiring is another trend to watch to measure supply and demand. Companies such as WhyHotel and DayDream and their competitors are hiring to get ahead of the coming surge. Some hotel/lodging workers are moving to the STR model companies.
“If you don’t have a sense that the recovery is already here, you aren’t going to be able to capture it when it comes roaring back in April and May,” Lane said. “Hotel chains are not moving fast enough to hire for the increased demand. They need cleaning personnel. The recovery is here. You need to have people in place.”
Here is the replay:
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