This summer was unprecedented for short-term rental bookings across the globe.
July was a record month for bookings in the United States. With an estimated 23 million night stays, the industry saw an 18% year-over-year increase. Similarly, in the UK, 84% of short-term rental owners say bookings for 2022 are stronger than ever, and research shows that the number of holiday lettings in the country has increased by 40% in three last years.
But as the year draws to a close, persistent inflation, major global events and a looming recession threaten the industry. As it stands, currently booked nights recorded from December 2022 to March 2023 are 16% below 2019 levels, and nearly 70% of economists predict a recession will be announced in the US sometime next year.
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As the founder of Boostly, the leading online training provider and website design agency that gives hosts the tools to increase their direct bookings, I’ve worked alongside the short-term rental sector for years – and I know how much difficult may have navigated the industry in unprecedented times.
Many property owners and investors have never run a short-term rental business through an economic downturn, and understandably, the concept of doing so is daunting.
While a recession doesn’t necessarily mean your business is doomed (in fact, one of the most significant periods of growth in the vacation rental industry occurred between 2006 and 2012—right during the Great Recession), it pays to have a survival strategy in place.
Here’s my take on how property managers can protect their portfolios, weather the storm and ensure their short-term rental business survives.
1. Use medium term rentals
There’s a big shift happening in the short-term rental sector right now, and being proactive means tapping into trends and capitalizing on them where possible. The demand for medium-term rentals (three to nine months on average) is increasing, and now is the crucial time to include them in your short-term rental strategy.
Entering mid-term rental space allows you to access different types of guests, from students and employees to healthcare workers, contractors and digital nomads who need to stay (and work) in places for longer. Having guests occupy your properties for extended periods not only means you’re spending less on cleaning costs, but also involves less property management. Plus, you have the added assurance that your rents are met during challenging times.
2. Invest in smart home technology
There are plenty of smart solutions on the market to help you cut costs and improve the efficiency of your short-term rental, but it’s not just your budget that will thank you—guests expect it, too. Equipping your rentals with smart technology can make a big difference to your energy bills, which is essential when you’re going through rising energy prices and the cost of living crisis.
Start with the big stuff, like smart thermostats and lighting. Investing in a Nest thermostat allows you to monitor your home’s efficiency and make real-time adjustments to the temperature in your rental even when you’re not there, resulting in lower bills and less energy used.
Other small technology investments can also make a difference. Air vents, for example, are much less expensive to run than a conventional furnace, while water-efficient shower heads can save more than $70 a year on energy and water bills.
Reassessing current equipment and energy use is a good place to start.
3. Drive direct bookings
While there is money to be saved in your energy costs, there is also money to be saved in the way you create backups. Last year, the average commission that Airbnb charged hosts was 14%. If your property portfolio depends solely on online travel agents (OTAs) like Airbnb and Booking.com, you’re paying huge fees.
Word of mouth is still one of the best marketing tools out there.
Mark Simpson – Boostly
My advice is to reduce commission costs for OTAs by focusing on driving direct bookings. There are many ways to do this, but the most important investment you can make is a mobile-friendly website that provides a seamless direct booking experience for guests. With 66% of travelers saying they would choose to book directly with accommodation where possible, there’s no better time than now to move away from OTAs.
When it comes to attracting guests, an email marketing list is one of the most valuable assets you can use to increase direct bookings. Create a referral network and use previous guests by asking if they know anyone who might be interested in staying at your properties; it sounds old fashioned, but word of mouth is still one of the best marketing tools out there.
4. Be proactive, not reactive
At the first sign of an economic recession, companies tend to cut sales and marketing budgets. But evidence shows that companies that focus their sales efforts during uncertain times tend to be the ones that survive and thrive.
When other property management companies pull back, I’m a firm believer that you should push forward. In my opinion, a reasonable place to start is hiring a salesperson. Dealing with commission fees and base fees may make you cringe when everyone else is pinching their pockets, but the benefits will outweigh these costs.
Having someone working full-time weekly on lead generation, contact management, contacting past guests and pushing direct bookings will ultimately drive your business forward. Next, task your newly hired salesperson with contacting local businesses and healthcare residences to let them know that your properties are available for lease on a medium-term basis.
5. Use online communities and industry groups
Many online resources are available for property managers, from training academies to Facebook Groups such as Hospitality Community. My final tip is to join industry groups and communities and connect with as many other industry property managers as possible.
Not only is it helpful to have these links, but there’s a lot to learn—from the pricing strategies others are using to how property owners are saving money on their rents. It’s a good idea to bounce ideas around, take notes, and most importantly, support each other during unpredictable times.
With a recession on the horizon, it’s time for short-term property managers to step up their strategies. Installing smart home technology can help economize your business, online resources can be used to expand your knowledge, and using the medium-term rental trend can bring in additional income.
I truly believe that with an effective marketing strategy and less reliance on the big OTAs, we can all weather the storm – and the industry will hopefully come out on the other side thriving.