Sabrina Must is wondering where her vacation rental bookings have gone.
“I would have made upwards of $12,000 in a month in the summer,” says Ms. Must, 37, who for just over three years has short-term rented her two-bedroom, one-bathroom property in Encinitas, Calif., a beach town located about 25 miles north of San Diego. “Any weekend I wanted to be booked during the pandemic, I was booked. It was kind of like that prepandemic. Not as busy, but still busy.”
Then something changed. Ms. Must, who doubles as a real-estate investor and a content creator and consultant, noticed a significant drop in bookings starting late this past spring. By August, she had only one booking for the entire month. This surprised Ms. Must, a seasoned vacation-rental host who has been in the rental game with various properties over the past decade.
“I’ve felt a massive drop,” says Ms. Must, who in the height of the pandemic could command more than $1,000 per night on a holiday weekend but now has her rates starting around $275 on Airbnb. “I am so beyond stressed by it.”
Vacation-rental owners across the U.S. have taken to social media, from Facebook to Twitter to Reddit, to lament that their bookings have come to a screeching halt, punctuating their disquietude with #Airbnbust, a hashtag that went viral this fall.
“I was always full,” says Lilly Lazarus, an interior designer and real-estate agent who, since 2017, has accumulated a portfolio of six short-term rental properties of assorted sizes in southwest Houston. “I kept on having to buy more and more houses to accommodate people,” says Ms. Lazarus, 53, who caters to travelers seeking care at the nearby Texas Medical Center and currently charges rates on Airbnb starting around $200 per night. “Now I have an opening here for a week and an opening there for a week. It’s very unusual.”
It is the same situation for fashion designer Fiona Burbank, 30, and her husband, Francesco Pollice, 35, who is a fashion brand’s client development manager. In addition to running a coffee catering company together, they decided to combine their interests in design, real estate and travel and get into the vacation rental business. Since the start of the pandemic, they bought two two-bedroom, two-bathroom properties in California’s Palm Desert, about 15 miles southeast of Palm Springs. They started renting their first property in October 2021. “Our bookings were great in the beginning. And then nothing during the summer,” says Ms. Burbank, whose prices currently start at about $220 per night on Airbnb. They listed their second property in October 2022. “That one has been very slow,” she says.
“For all the people asking if we see any weakness at all in consumer booking behavior, that is saying no,” says Jamie Lane, AirDNA’s vice president of research. “People are booking short-term rentals, and they are booking stronger than ever before.”
However, while the absolute number of bookings has risen, there has also been a sharp rise in supply of available short-term rental listings in the U.S., up 23.3% in October 2022 compared with October 2021. “That’s massive growth,” Mr. Lane says. In the spring, at the peak of the short-term rental supply increase, there were between roughly 80,000 and 88,000 short-term rentals being added per month. There has been some pullback since then—it is normal to see more new supply added ahead of the summer high season and some slowdown in the fall—but between about 66,000 and 70,000 new listings have still been added per month since August.
The net result? In October 2022, each short-term rental property in the U.S. received an average of 6% fewer nights booked, said Mr. Lane.
The supply increase has multiple causes. Taylor Marr, an economist at real-estate brokerage firm Redfin, notes that during the pandemic, demand for second homes pretty much doubled. But, Mr. Marr says, “as the overall housing market has started to cool because of the economy tightening up, that has impacted sellers who would list their houses for sale. To hold on to their low interest rates, they are saying, ‘Why not rent the house?’ ”
There are also second-home owners who bought properties before the pandemic who have decided that now is the time to enter the vacation rental pool. “We hear these stories every single day,” says Brian Egan, co-founder and CEO of Evolve, a vacation-rental management and hospitality company. “All this inventory that has been sitting there is being brought into the short-term rental market now.”
Mr. Egan believes it is a combination of people whose finances are strained by inflation seeing where they can create income and people not wanting their properties to sit empty because it feels wasteful.
As economic headwinds continue to blow, it isn’t just second-home owners that are eyeing the vacation-rental market as a way to weather the storm. Starting last summer, any time Los Angeles-based screenwriter Leslie Rathe traveled for a week or more, she considered renting out her primary house, a three-bedroom, three-bathroom 1920s Spanish bungalow in Larchmont Village, a quaint neighborhood tucked in the middle of Los Angeles. Her home is listed on Onefinestay, a luxury home and villa rental company with a global portfolio of 5,000 rentals. Ms. Rathe’s asking price starts at $770 per night.
“We don’t need to rent out the property, but with the economy the way it is right now, I’d be lying to say we weren’t renting it out to make some extra income,” says Ms. Rathe. She and her husband, who works in marketing, are both in their 40s and have owned their house for a decade.
“Owners who want to succeed in a market this complex and competitive need to master three key areas: reach, conversion, and experience,” says Evolve’s Mr. Egan. He explains that reach, or how many guests see a listing, is driven by marketplace algorithms. Conversion, or how many lookers turn into bookers, is influenced by the quality and competitiveness of the listing. And experience is how guests feel about their stay.
Lilly Lazarus in Houston has been working on conversion: She reduced her properties’ nightly pricing and minimum-duration periods, which she says has been helpful. Fiona Burbank in Palm Desert has also dropped her nightly rate. She has been trying to boost her reach by updating her marketplace listings with more photos, and she has also been promoting her properties’ Instagram accounts, which she says has led to booking inquiries. In an effort to up her hospitality game, she has decorated for the holidays.
Mr. Egan says, “I think we can all agree that the next four to six quarters, through the end of 2023, we should be prepared for a down market. This could actually drive more homeowners into the market as they seek to monetize vacation properties and turn them from simply an expensive item into an income-producing asset.”
Source : MansionGlobal