Finding opportunities in the new travel landscape: monthly rentals and domestic tourism

Barcelona: Rentals United co-founder and CMO, Vanessa de Souza Lage, analyses how businesses in the short-term rental sector can find opportunities in the new travel landscape post-pandemic, particularly in terms of mid-term monthly rentals and domestic tourism.

In these unusual times with the global fight against the Covid-19 pandemic, businesses in all sectors are challenged and forced to rethink their business model at least for the near future.

The travel industry has been hit particularly hard as most mobility has been suspended both locally and internationally. And it appears that the nature of travel, at least immediately after quarantines and lockdowns are lifted, will have changed.

To prepare for recovery, the short-term rental industry is now forced to look outside the box and consider options it has not considered before.

On a positive note, this current mobility crisis could presumably act as a catalyst for more mobility in the future. Months of lockdown will create much more demand for travel and an appetite for discovering new destinations.

After months of being confined at home, people will undoubtedly be looking for a change of scenery. Travellers will look for new ways and options to travel albeit differently than before the pandemic.

Is mid-term travel the new short-term?

One of these options is looking at mid-term stays, targeting travellers who are looking to book stays for 28 or more days.

While there has been an undeniable drop in short-term bookings, we at Rentals United have also seen an increase in demand for longer stays, with a 25 per cent increase in mid-term stays this year compared to the same period in 2019. Furthermore, Airbnb has reported an increase of 20 per cent in longer-term bookings at the end of this March compared to same time last year.

The crisis may have temporarily brought short-term rental activity to a halt, but the mid-term model seems to have gained in popularity.

One main driver for an increase in mid-term bookings is the potential for remote working to become more of the norm than an exception. In these times of lockdown, most people are forced to work from home, making remote work much more normalised.

Transparent Intelligence has found that 4.5 per cent of professionals in Europe work from home usually, with nine per cent working from home sometimes.

We can expect this trend to increase as companies start seeing remote work as a viable option. This will pave the way for more flexibility for travellers to book extended stays, provided of course full amenities are available.

Normally, guests who book mid-term are usually not travellers. They are individuals or families who live in or close to your destination and need a temporary place to stay and very often for work reasons.

They could be tenants whose long-term lease has just expired and they are in-between places. They could be expats who do not want to commit to a long-term lease before they get to know a city.

They could also be owners who have already sold their old home but haven’t found a new place yet. And let us not forget about digital nomads, many of whom do not have a home base at all.

The coronavirus crisis has also started trends that favour mid-term rentals.

The Rentals United / Transparent Intelligence webinar held last month found that 74 per cent of mid-term bookings are for three-12 months, which lowers the cost of operations and increases stable income sources.

Another interesting point from the webinar, according to Housing Anywhere, is that 40 per cent of bookings happen within ten days of listing to receiving a booking.

This is important because it shows how long it takes a property to get a reservation once it is listed and how long the property will stay empty.

In terms of rates, mid-term rental prices are lower than short-term rentals but expenses are also lower. Take into account that seasonality is much less pronounced and exemplifies a more stable source of income from your listings.

Rentals United has also found that 15 per cent of all travellers book on the same day and 45 per cent book between one and 30 days of booking.

With domestic travel only, we found above 70 per cent book within the first 30 days. This statistic combined with the coming upsurge of demand to travel post-lockdown anticipates that bookings will spike and immediately impact revenue.

With such a short booking window, it is imperative that property managers are prepared for the onslaught of travellers in the coming months.

The pandemic is also driving many people out of cities, away from the crowds.

There has been an upsurge in bookings at remote, off-season locations – especially for luxury rentals. Families are looking for 30-day rural hideaways to isolate themselves while also being close to nature.

Even for planning for the coming summer where long-haul international and domestic travel may also be compromised, Tahoe Luxury Properties which specialises in luxury accommodation in the United States, has seen an increase in bookings of 20 per cent or more for this coming July and August with rental prices up 15 per cent compared to last year. This shows that there is confidence that travel may resume [domestically at least] and an appetite to travel especially to rural areas.

And this trend is not going anywhere.

As Moriya Rockman, CEO, CMO and Founder at Smiling House Luxury property management, told us: “Getaway destinations close to nature and luxury properties niche will grow and will be much more desired after recovering from the lockdown in the cities.”

Domestic Tourism: Staying close to home

With international mobility compromised for the foreseeable future, domestic tourism can be expected to recover first. The uncertainty around when borders will be open and challenging travel procedures will inspire travellers to seek out places to visit that are in close proximity to where they live – often somewhere easy to drive to.

The return of travel will first incite leisure travellers before business. Business travel will lag due to companies’ need to ensure the safety of their employees and to justify the essential travel.

Initial leisure travel, however, will be based on new factors such as reuniting and reconnecting with family members [and with family whom they have been separated from for months], rather than travelling for pure tourism and sightseeing.

Rentals United data shows that domestic tourism has already increased in our top destinations over the last five weeks.

When comparing the total reservations per country to the same weeks in 2019, there is an increase in the total percentage from those guests that are travelling to the same country. For example, domestic bookings in the United States increased from 66 per cent to 87 per cent from the same period last year to this year.

A survey conducted by LuggageHero of 2,500 people shows that 58 per cent of Americans are planning to travel between May and September 2020, as long as their destinations are not in quarantine. That said, a quarter of participants said they will avoid big cities and public transportation, and 21 per cent will travel domestically.

Using China as a barometer, based on a survey of 15,000 people across 100 cities in China at the end of March, Trip.com found that 16 per cent of respondents will be ready to travel again in May in time for Golden Week, a five-day public holiday. However, the vast majority — to the tune of 90 per cent — would prefer to travel domestically.

Looking at domestic air travel in China further shows the increase of domestic travel whereas international travel is staying static.

China: Number of daily flights (domestic vs. international)

[Source: AirNav RadarBox]

Airline industry experts expect slow recovery with fewer choices available in airlines, flight times and available routes and markets. This would create higher airline ticket prices, likely driving travellers to more economical options such as cars and trains.

This all paves the way for a surge in domestic travel that property managers need to be aware of now.

Some countries have been traditionally well-positioned to retain occupancy as international travel bans have become the biggest barrier to demand. China, USA and Brazil are the top destinations that may be able to regain booking traction as travel becomes more localised.

The UK and France are also top domestic tourism destinations in Europe.

As seen, the mid-term and domestic tourism markets will be great adaptations and strategies for the near term, post-pandemic.

As we are seeing the peak of the pandemic being surpassed in certain countries and the lessening of confinement laws following, travel will slowly return.

Travellers will be coming back quickly booking with shorter lead times, as seen in China where according to the ADARA anonymised data, unique flight searches in China were up 29 per cent in the week of 8 March and travel search volume has nearly doubled since February, with incredibly short booking windows. Property managers can now vie for travellers looking for alternative ways to get away.

Conclusion

To reach these markets, property managers can look for the best distribution channels for these segments, for example top mid-term rental channels such as Homelike, Spotahome, HouseStay and AltoVita. Domestic tourism channels are slightly more complicated to seek out as they are clearly more localised.

Property managers can look to top localised channels for their region as a starting point and pinpoint which sites draw more domestic travellers. This area will also evolve quickly in the near future as more and more travellers start to look for more domestic options.

As confinement restrictions are slowly easing in different parts of the world, property managers can take comfort in seeing some travel begin to resume. And to stay on top of recovery, now is the time to rethink your marketing mix and stay aligned with the changing nature of the way of travel.

For more information, you can tune in to Rental United’s webinar, “Embracing Domestic Tourism: Stats and Distribution Strategies for Property Managers”, on 30 April 30 at 19.00 CEST. To register, click here. 

Visit the Rentals United website here.