Is it time to expand in the short term rental industry?

There is no question that the short term rental industry took one of the worst downturns during the months of the coronavirus. Thankfully, it appears that the worst is behind us as the world and the travel industry is starting to reopen. Indeed, even though cancellation rates for March-April were nearly 85% in many travel destinations. Airbnb said that June 2020 bookings in the U.S. grew on an annualized basis for the first time February. Some short term rental companies, like Frontdesk and Vector have looked at the downtown as an opportunity to expand. Other short term rental companies like Vacasa, and corporate housing companies like AKA have also been aggressively expanding – so is that the right thing for you?

Here are some key points for why this might be right time to expand?

  • More people want to be traveling. In Tripadvisor’s recently published White Paper on the industry, the company states there are “clear signs of pent up consumer demand based on sentiment and search activity”
  • As short term rental units fall off the market, the supply (7 million Airbnb units?!) will likely stop it’s trend of exponential growth. With pent-up demand, and a deeply rooted customer base of vacation renters (it’s not just for tech-millenials anymore) – basic economic principles say prices (and revenue) will be going up for those who are still in the business.
  • A turbulent real estate market gives plenty of opportunity for new expansion at locked-in lower base prices for your rental if you were planning on rental-arbitrage.

What kinds of companies are expanding?

  • Lower risk models, such as management or intelligent rental arbitrage are currently growing – where not as much growth seems to be happening in the purchase and rent model.
  • Lean and business savvy smaller companies seem to have an advantage over the overly funded or overly leveraged venture capital backed companies.
  • Destination travel locations are doing incredibly right now. Lots of “backyard travel” while people don’t want to hop on planes.

Overall it would seem that now is an excellent time to expand your short term rental operation, if that growth is focused and targeted!

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