The impact of coronavirus on the holiday rental market and broader travel industry will be deep and long lasting
With travel grinding to a halt the impact of Coronavirus on the holiday rental market and broader travel industry is disastrous. The World Travel and Tourism Council estimates COVID-19 could cut 50 million jobs worldwide. Travel and tourism represents 10% of global GDP – and the Council suggests that it’s likely to take 10 months to rebound. Though it’s clear the rebound will create opportunities for some and the need to rethink business as usual for others.
We think the timing and strength of the rebound at this stage is too uncertain. Though what does this mean for the short-term holiday rental market?
Potential impact on the holiday rental market
Whilst there are a number of scenarios that could pan out in the short to medium term we look into three potential ways Coronavirus may impact the holiday rental market:
1. An uptick in rural and regional over urban stays
2. A preference for domestic travel or perceived ‘safe’ destinations
3. Ability for holiday homes to cater to a new normal
Here are some things we’re seeing in the market:
- The impact of coronavirus on the short-term rental market has been disastrous: according to AirDNA short-term rentals in Rome and Beijing are down 41% and 96% respectively for week of March 1-7 compared to January 5-11. Undoubtedly the fallout has worsened in the last few weeks as more cities and countries restrict travel and introduce bans.
- Accommodation providers are trying to respond to the new environment. According to Skift accommodation providers are introducing quarantine packages offering travellers full-board 14 day isolation stays. Hotels have teamed up with governments as part of mandatory hotel isolation. For example, the Australian government introduced mandatory 14 day hotel isolation for inbound travellers funded by the taxpayer.
- Booking platform such as Beyond a room have tried to position to the changing market dynamics: “Don’t get caught out staying in a boring hotel for your 14-day isolation period,” reads Beyond A Room’s advertising blurb. “Book with us and get a clean and sanitised home with unlimited WiFi, Netflix, food delivered to your door, a cosy space and if you’re quick, a games console [available to first 20 customers].” AirBnB is now offering frontline stays to open up homes to frontline healthcare workers.
- According to CNBC wealthy individuals are driving up rentals as they seek solace in quieter locations. This is leading to mixed opinions on the desire to accommodate guests in smaller, vulnerable towns. Understandably this hasn’t been without backlash: a not-in my backyard type response with call to shut-down “quarantine holidays” and experts in the United States warn of the risk to susceptible rural populations and limited healthcare resources.
- The longer-term impact upon supply of holiday rentals is still too early to predict. New York magazine has seen 2.8% of short-term rentals in 3 US locations taken off the market. However, I imagine the rental market is also in lockdown with a limited number of active rent seekers. Margins for short-term rentals will continue to exceed long-term however the risk-return trade-off may be questioned after the dust settles. Though in holiday destinations a degree of stickiness in market segments will inhibit a switch.
We explore 3 Ways Coronavirus may impact holiday rentals
1) We will probably see an uptick in regional or rural stays over urban escapes
With approximately 20% of the world’s population in lockdown, social distancing has become the new norm. But how long will this last?
The New York Times attempts to take an educated guess. Two possibilities are the current arrangements last until the end of the year with Ed Young in The Atlantic hazarding a guess that it may come in waves – lasting until 2022. Until we have a good degree of resistance in our communities or a vaccine social distancing is going to be a fixture of modern day life.
How will social distancing impact holiday rentals?
Provided that restrictions loosen in society we may see travellers looking for opportunities to develop a new norm whilst respecting the need to distance. During uncertain times, the idea of escaping crowds where there is a high risk and spending time in relative isolation. Getting back to nature and disconnecting from the constant barrage of negative new stories and the reminders of a changed world sounds very appealing.
Coming into the crisis we were already seeing an increased awareness and demand for sustainable travel. In 2019 immersive nature getaways were growing in popularity with “Forest Holidays” becoming increasingly popular. The Japanese – always ahead of their time – have been practicing the art of Shinrin-Yoku or ‘forest-bathing’ since the 1980s.
Hopefully the winner in this will be nature. The UN’s environment chief Inger Andersen pointed out that nature is sending us a message with the coronavirus and ongoing climate crisis.
We see a possibility here to cater to customers looking to get away from the cities and give travellers the opportunity to get back to nature. With rolling restrictions and travel bans we are likely to see customers preferencing escapes to quiet, natural settings that respect the need to avoid large crowds whilst adapting to a new normal.
2) Customers will preference domestic travel or ‘safe-destinations’ with long-haul travel taking some time to recover
Drastic and necessary measures have been taken to reduce the spread of Covid-19: 93% of the world’s population live in countries with restricted border crossing, 39% with completely closed borders to non-citizens and non-residents.
There’s been numerous horror stories of stranded passengers. Travellers have experienced border closures, disrupted travel plans, some haven’t been able to get home and some have ended up in foreign hospitals. These experiences will weigh on the psyche of travellers for some time, whether they actually experienced these situations or not.
It’s not only sentiment that contributes to the decline of long-haul
The longer-term impact will undoubtedly reduce non-essential travel. It’s hard to see how countries don’t go through a process of mandatory 14-day isolation as total restrictions start to ease. As Ed Yong in The Atlantic points out, “As long as the virus persists somewhere, there’s a chance that one infected traveller will reignite fresh sparks in countries that have already extinguished their fires.”
Adam Blake, a professor of economics and head of research in the Department of tourism and Hospitality at Bournemouth University in the UK states, “People haven’t changed in that they still want to go places, but they’re going to necessarily be a lot more cautious about what they do.”
The need to remain vigilant and the barriers to travel are going to severely disrupt the destination mix. I can only imagine travellers are going to think twice when planning where to go – preferencing nearby locations or countries with dependable travel links and reputable healthcare systems. This will put domestic travel options firmly at the front of the queue.
3) Holiday rentals can cater to market sentiment but will need to ensure hygiene standards are well communicated
What we can predict with a little more confidence is that not a lot of people will be looking to go on a cruise in the near future! Though there is an opportunity for holiday rentals to differentiate as Alexandra Ormerod says “[customers] they don’t want to share communal spaces or having to touch lift buttons – it’s on everyone’s mind.”
Holiday rentals provide comfort and privacy and most importantly no communal spaces
Stephen Haskell, OneFineStay GM, Americas believes social distancing will play in favour to private homes over hotels, “What we’re going through is unprecedented. People who don’t want to stay in a hotel because of social distancing are booking private homes. We don’t want to say we’re actively capitalizing on this, but it is happening.” If private homes and property marketing companies can cater to a sense of space and privacy this will help them differentiate from large hotels. Private vacation rentals provide an opportunity to escape crowds and higher density accommodation formats.
Though as Christopher Anderson, professor of business at Cornell University’s Hotel School in Ithaca, New York states, “I’m going to want the safety and security of established cleaning protocols that I get from an established lodging provider.”
It’s imperative that holiday rentals ensure standards are maintained and are well communicated to guests.
How are The Origins responding to the current environment?
The impact of coronavirus on the holiday rental market will last for sometime. It’s certainly a challenging time for everyone involved. Starting a travel and lifestyle company shortly before a global pandemic is not ideal. However, it’s all relative. There are many individuals and families who find themselves in terrible situations. Our thoughts are with them and the people on the frontline fighting this pandemic. With the public under lockdown (including us) there’s not a lot of opportunity to travel in the current market.
We however, are continuing to investigate how we can better cater to our customers and suppliers. We are expanding our destination mix and currently exploring options in the Australian and New Zealand market space. We are busy putting together The Origins Great Stay Guide – a resource to help you discover a wonderful collection of homes. Along the way we’ll feature some beautiful properties and share the stories of the people and passion behind creating these amazing homes.
In the meantime, if you have any thoughts, comments or suggestion please reach out to me (Brett@The-Origins.com). Take care.