Worldwide: It was Airbnb CEO Brian Chesky who said in June that the spectrum of travel would “never be the same again” post-pandemic. Though that may be the case heading into 2021, we should expect some prolonged turbulence before an industry recovery becomes a reality.
In a year when our use of the word ‘pandemic’ has skyrocketed by more than 57,000 per cent, the seismic impact that Covid-19 has had on our businesses, our travel plans and our health cannot be understated, and the demise of the likes of Stay Alfred and Hostmaker leaves the short-term rental industry with much soul-searching to carry out.
Nor could we have imagined how transformative 2020 would be for our industry. At a time when the short-term rental segment has never faced so many threats to its future, there have never been more opportunities to reinvent business models and showcase resilience, agility and strength in adversity, and further innovation will be key to surviving in the “new normal”.
Intriguingly, a number of the predictions I made last year have materialised, such as Brits opting for domestic travel and staycations [due to Brexit], the continued convergence between travel, hospitality and real estate, and the implementation of industry-wide standardisation and quality control. Check out last year’s predictions piece here – how did I get on?
Looking ahead, it is clear that the direction of the short-term rental industry over the next 12 months will be dependent on how quickly we neutralise the virus with the rollout of effective vaccines.
Scroll down to view my 2021 forecasts.
- Tiny and mobile homes will be preferred types of lodging
The collective desire for privacy, seclusion and ‘micro-adventures’ beyond typical tourist destinations will persuade renegades and road trippers to turn to tiny homes and mobile homes as their accommodation of choice in 2021.
While some now perceive traditional American homes to be “too large, too expensive, and environmentally unfriendly”, homes with their own sequestered space will provide the necessary havens and sanctuaries for wanderlust-seeking suburbanites hoping access the great outdoors to combat cabin fever. The proliferation of startups such as Globe [San Francisco] and Getaway [Brooklyn] point to how confined spaces can offer the booking flexibility that vacationers crave; the latter seeing bookings surge in June and July by 260 per cent on the last three months.
Though RVs, caravans and motor homes may not have been all the rage pre-Covid, they will be the principal beneficiaries from the ensuing travel chaos as millennials and baby boomers hit the road to escape virus hotspots on domestic staycations.
The success of Outdoorsy accurately illustrates the peer-to-peer RV rental industry boom. The company saw a 350 per cent YoY growth in bookings in September and 90 per cent of bookers were first timers in the same month.
Outdoorsy CMO and co-founder, Jennifer Young, said: “Not only is a road trip in an RV or camper van a more affordable option than travelling by air, but this mode of travel gives travellers the keys to controlling their environment. It naturally provides people with the ability to travel away from crowds and camp in a location where fresh air and open space are your two closest companions – a welcome reprieve after months spent in confinement.”
Private equity firm KKR’s $100m+ investment in rental marketplace RVshare shows too that investors are taking notice of this profitable vertical and will want their own stake. Having already amassed more than two million bookings, RVShare will deploy its 100,000-strong RV fleet even further in 2021.
- Remote, far-flung destinations will gain further traction among Covid-weary urban dwellers
Holiday parks and campsites enjoyed a huge renaissance in 2020, and the signs are that remote destinations and leisure resorts will see sustained traction.
Further restrictions on mobility and transmission concerns will make Covid-weary urban dwellers reticent to commit to international travel right away but they will be eager to book ahead, even if in hope rather than expectation. Data collected by McKinsey & Company aligns with this, as 37 per cent of survey respondents said they will reduce how often they travel abroad.
In the summer, families and groups opted for hassle-free staycations in drive-to destinations over cross-border holidays. Self-catered accommodation operators such as Awaze, Sykes Holiday Cottages and Roompot [bought by KKR for $1.1 billion] reported record booking surges and the pent-up demand built up over lockdown will translate to bookings in early 2021 and beyond.
Off-the-beaten track locations will be favoured as guests become more creative with their trips outside of major hubs. A recent AirDNA report revealed its top performing US locations included Terlingua, Texas, Sevierville, Tennessee, and Blue Ridge Georgia close to mountains and national parks where they are closer to taking part in adventurous outdoor hobbies [e.g. hiking].
Unique experiences and unforgettable experiences remain at the top of the agenda, particularly for small groups travelling together spontaneously. Yurts, geodomes and cycladic homes will start to be seen as more viable accommodation options, while Google searches for “camping near me” and “glamping near me” are up 60 and 200 per cent year-on-year respectively.
O2 Treehouse principal Dustin Feider said: “Covid has spurred a need for local escapes – treehouses don’t need to be in fancy resorts or retreat centres. If you live in a city centre, you should be able to escape into the leaves, even if it’s in a backyard.”
Short-term rentals will consequently lose their undesirable “alternative” tag, as established asset classes seek their slice of the pie.
Properly founder and CEO, Alex Nigg, said: “2021 will be the year when “alternative accommodations” truly become mainstream and be remembered as the year the category really took off.”
- The ‘Attenborough effect’ and the rise of ‘regenerative travel’
2020 has taken its toll on the whole world, not just on the people who live in it, but on the environment we live in. That’s why you should expect to hear a lot more about the term ‘regenerative travel’ in 2021.
In a year which began with devastating bushfires in Australia and high-profile Extinction Rebellion protests, Swedish schoolgirl Greta Thunberg forced the world to confront some uncomfortable truths. That being the case, 2021 should be the turning point when Sir David Attenborough’s warnings about environmental impact ignite an ‘impact awakening’ from the travel industry.
Through The Blue Planet [BBC] and A Life On Our Planet [Netflix] programmes, Attenborough has the power to change public opinion on the climate crisis, and his ubiquitousness is bringing sustainability into the mainstream conversation.
Euromonitor’s head of travel research, Caroline Bremner, believes this will push consumers to question their behaviours and shift towards responsible consumption.
She said: “Globally, over a fifth of consumers consider permanently shifting away from international travel with the desire to reduce carbon emissions and stay closer to home. This message is reinforced in Scandinavia and Europe, where 65 per cent of travel businesses in the Nordics are implementing a sustainability strategy, ten per cent higher than the global average.”
According to Casal dei Fichi owner Bob Garner, the impending inauguration of Joe Biden as President of the United States will prompt a “massive” shift in emphasis on the climate crisis as the USA will opt back into the Paris Climate Agreement.
Garner said: “The US will rejoin the Paris Agreement on climate and the mood music and tone around the climate crisis will shift. Responsible travel will get a massive boost.”
Organisations and tourists will develop a more eco-conscious mindset about their accountability in limiting carbon offsetting, with 44 per cent of US travellers saying they wanted to travel more sustainably in a recent YouGov report. Travellers left with little other option will therefore opt again for domestic staycations, and home swaps are ready to capitalise on this demand.
Love Home Swap managing director Celia Pronto said: “Covid-19 added a new dimension to the desire to holiday locally, particularly as many people were unable, for months, to travel anywhere else. For these reasons and because of the perceived safety and practicality that they offer, staycations and in-country home swaps will continue to boom.”
Besides the climate, Covid-19 has triggered an unprecedented mental health crisis, characterised by social isolation and a deterioration in our wellbeing. The relaxing of restrictions, though, will spur vacationers on to engage in regenerative travel through immersive nature trips as a remedy for anxiety, depression, and weakened immune systems.
Yonder founder Tim Southwell said: “The year 2021 will mark the beginning of a transformative new chapter in travel. People will continue to develop a more heightened awareness of their interconnectedness with nature and the many benefits it offers, which will in turn spark their passion to protect it. It will be a win-win. Nature’s healing power will fuel our focus to heal it back.”
- Tech convergence will continue at rapid pace, while contactless technology will become second nature
Smart home products such as Google Nest, Google Assistant and Alexa may have been considered novelties in short-term rentals and apartments a few years ago but the situation could not be more stark now.
From now on, the end goal of any smart home technology will be to provide peace of mind, safety and convenience, beyond simply personalisation. 80 per cent of common infections are spread by hands so sanitisation will be critical when it comes to touch point devices such as wall switches, thermostats, door knobs, faucet handles and tablet-based guest engagement systems.
Virtual Concierge Service founder Dana Young said: “When I go places outside my home now, it is becoming second nature to only touch things that I absolutely have to – I am now regularly looking for ways to not touch things, and if a way exists, I use it and I appreciate it.
“This is especially true of touch points like wall switches, door knobs and other high-touch items, and I don’t think I’m alone in this. We are now ‘tuned in’ to decisions that could potentially have a health risk associated with them,” he added.
Now smart home technology with voice control is a way of eliminating risks altogether as it allows guests to avoid touching wall switches, thermostats etc. Short-term rental hosts are known to be savvy and will adopt tech innovations when they need to differentiate their properties with touchless technology and increase guest satisfaction.
Property owners’ adoption of technology and building systems related to safety and wellness will continue in 2021. The integration of mobile room keys and remote door codes will professionalise check-ins to replicate the hotel space, while autonomous cleaning solutions such as sanitation robots and spray disinfectants will become commonplace.
AJL Atelier co-founder and CEO, Simon Lehmann, said he expects more players [such as Amazon] to establish themselves in the space – both on the supplier and tech side – but technology will “consolidate because of competition and compression from OTAs”, as property managers attempt to maximise their profitability.
- Quality control will continue its acceleration
If 2020 has taught us anything, it is that the travel industry will never take safety and cleanliness for granted again.
As anticipation grows for the rollout of Covid-19 vaccines, traveller sensitivity to the setup of short-term rental properties, including cleaning guidelines, sanitation, smoke alarms and HVAC systems, will be heightened as property managers Covid-proof homes. Minimising the spread of viruses is emerging in high-end homes, with measures such as antimicrobial kitchen work surfaces, self-contained entrance halls and touch-free fridges, and this will filter down to the mainstream [Love Home Swap].
Such is the blurring of the lines between hotels and short-term rentals, property managers will merge into hospitality providers to deliver a complete guest experience and provide operational technology as travellers “cross shop” between the two asset classes.
Breezeway founder and CEO, Jeremy Gall, said: “This trend towards higher quality and more customised service should continue to accelerate in 2021, expanding the opportunity for hospitality providers to differentiate their inventory through automated operations. Hospitality professionals will continue to adopt new programs and tools to drive more predictive property care and accommodate the demands of the modern guest persona.”
Safely.com CEO Andrew Bate concurs, saying that short-term rentals will take a “more meaningful business travel share from hotels” as rental health and safety protocols become more professionalised and standardised.
Restoring the confidence of guests and germaphobes will also be key, according to Cleancio CEO Rocio Lane: “The market is demanding that businesses revamp their protocols. Rental properties that embrace these new demands will be able to rise above their competitors that are slower to adjust to the changing market conditions.
OTAs will also need to take more active steps in understanding how properties are prepared, and pilot studies such as that between Properly and Booking.com suggests they will find it impossible to ignore to move the category forward.
- The rise of hospitality hybrids will blur the lines even more with hotels
Speaking at a virtual event earlier this year, Lakestar partner Christoph Shuh said that in a “post-Covid new normal, vacation rentals could overtake hotels”.
He added: “I think there are a lot of opportunities for that kind of inventory and that will stay. People are testing vacation rentals this year and they like it.”
It is almost inevitable that short-term rentals draw comparisons with hotels now that the former has outperformed the latter in occupancy rates in 27 global markets during the pandemic, as reported in a joint analysis by STR and AirDNA four months ago. Expedia Group has also recognised the importance of its Vrbo vacation rental brand, which saw a “markedly better performance” in May compared to late March and April, in driving revenue during a worldwide lockdown on travel.
The emergence of hotel-like alternative brands such as Casai and Limehome underlines the ongoing convergence between short-term rentals and hotels, as they are able to incorporate sophisticated technology, high standards and luxury amenities in one space for the digitally nomadic generation.
This, according to Guesty CEO Amiad Soto, will lead more hotel-goers to become short-term rental converts: “Private rentals have lower guest turnover, which already reduces the risk of exposure between guests significantly; and, by nature, private homes have fewer “high-touch” surfaces in shared spaces, such as elevator buttons or door handles, than crowded hotels. This, coupled with accommodations that limit human interaction and enable larger, socially-distanced gatherings, will certainly be a deciding factor for holiday bookings.”
- Work from home [WFH] will shift to work from anywhere [WFA] and the return to urban centres will be led by millennials
Working from home has not only transformed us all into digital nomads but it will enable individuals to consider living anywhere in the world with super-fast wifi and an abundance of activities.
Intrepid travellers and freelancers will lead the diaspora from urban centres as they are prepared to quarantine in order to travel further afield to their dream locations. Certain countries are actively offering visa opportunities for digital nomads to stay and drive economic growth, which will give rise to flexible long-term short-term rental stays, dubbed ‘flexcations’ or ‘workations’.
AirDNA data from October highlighted destinations such as Barbados [120 per cent], Bermuda [113 per cent] and Serbia [81 per cent] as locations which had seen the steepest increases in the number of 30+ day stays at entire home properties.
Unlike previous generations, millennials and Gen Z are less likely to remain in one place for too long and commit to costly long-term leases. Instead, the ability to work remotely will entice them away from major metropolitan cities that were once the epicentres of a plethora of job opportunities, according to Vered Raviv Schwarz, president and COO of Guesty.
She said: “We’ll see continued stays booked for one month or longer as many, especially digital nomads, are life shopping and experimenting with stays to test drive various cities in order to see where they might want to settle during the pandemic and after. Through 2021, we will see a widespread allergy towards the concept of commitment and more and more individuals gravitating towards flexibility and work/life balance and boundaries.”
Despite this, the resurgence of urban travel will be led by millennials eager for a return to a stable and healthy work/life balance.
Alex Nigg explained: “Millennials will flock back to the cities, and cities will become super hip again after we realise how much we missed city life. Travel will change much less than we thought; after a summer of catching up on lost travel, travel patterns will return to something not that different from what we had before,” he added.
- Airbnb’s IPO will intensify regulation of the short-term rental industry
The imminent Airbnb IPO promises to be a watershed moment for the home-sharing industry, following a year where a record amount of money has been raised in new issues on US exchanges. The tech unicorn is propped up a loyal customer base and a unique brand presence but its ability to raise a profit is what will instil confidence in potential investors.
A blockbuster public market debut would propel Airbnb even higher into the echelons of travel behemoths. However, onlookers believe the listing will only intensify the heavy scrutiny already being placed at the company’s door.
Destination cities such as Amsterdam, Lisbon and Toronto are attempting to curb short-term rental companies over fears about neighbourhood disruption, rising housing prices and shrinking availability, and this will present a considerable obstacle to Airbnb’s growing global footprint.
Those protestations of Airbnb’s detractors will only grow louder in the ears of investors, and the impacts of rentals on neighbourhood character and quality of life will exacerbate in a post-Covid world. Given almost 12 per cent of Airbnb’s revenue was generated by its top ten active cities, the firm will need to work hard to repair those relationships over the next 12 months.
So-called ‘party houses’ have also been a recent scourge of Airbnb, despite the firm’s pledge to ban them outright. Host Compliance calculated that ‘party house’ noise complaints in 350 US cities tripled during the pandemic, and that will do little to take the glare of the media off the platform.
Bill Evans, CEO of Party Squasher by BlueZoo Inc., highlighted the impact on General Data Protection Regulations: “The technology to comply with GDPR regulations will be better understood in the category. There will be regulation limiting both inside and outside cameras, while sex trafficking, parties, damage and parking are all important factors in this pandemic.”
The “redistribution of travel” that Brian Chesky is envisaging will lead holidaymakers to book short-term rentals in drive-to destinations or less-concentrated bucket list capitals.
Pam Knudsen, director of compliance at Avalara MyLodgeTax, says some hosts will take matters into their own hands: “Hosts and property managers will start employing self-regulation tactics to ensure that guests are complying with local area guidelines. Big cities are out of favour for short-term rentals for the foreseeable future, and the shift to remote areas will push local governments to ensure hosts are compliant with existing rules and regulations, including tax collection and remittance.”
- Travel ‘verticalisation’: OTAs will rethink their space and specialised travel will rise
2021 will usher in an era of ‘verticalisation’, portraying how different travel verticals are becoming intertwined with each other.
OTAs will want to diversify their listings into boats, glamping and campsites to broaden their user base, having seen the popularity for more niche accommodation segments and “Airbnb-style alternatives” rise sharply over the last 12 months.
Airbnb’s ventures the hotel segment may have so far fallen flat but that has not stopped Four Seasons and Marriott branching out in the other direction to test their feet in short-term rentals [Private Retreats and Homes & Villas].
Airlines too will become more aggressive in the short-term rental vertical as international travel drops and domestic trips soar. JetBlue Airways is one such case in setting out its diversification plans, and it will follow the lead of Ryanair and Easyjet in setting up their own branded accommodations to upsell on flight packages.
Evolving traveller appetites and rapid changes in the landscape present a threat to airlines but an opportunity for disillusioned hosts on major OTAs to launch their own targeted booking channels that are hyper-local or curate a particular travel need / trend. Emerging platforms such as Golightly, At Ease Rentals and Whimstay can be more agile in catering to the bespoke needs of their specialist demographics, so the managers that drive bookings from multiple sources will have less reliance on traditional OTAs.
Vanessa de Souza Lage, co-founder and CMO of Rentals United, which recently published its “Who’s Who of Niche Listing Sites 2021” list, said: “Demand for vacation rentals will rise precipitously in January / February 2021 as people look to book their summer vacation. They will turn to the large OTAs of course, but speciality travel will also be on the rise. Take for example sites that curate a list of quirky accommodation, sites that focus on inclusivity, premium & luxury sites, outdoor travel, sports tourism… and the list goes on.”
- Mergers and acquisitions will dominate early 2021
In an ever-growing and fragmented marketplace, the number of players is rising but the distinction between them is diminishing. The increased competition, combined with the urgency to raise funding, means that heavy M&A activity will be inevitable in the opening months of 2021, and those companies that have been unable to innovate sufficiently will be swallowed up by those with the largest financial reserves.
Simon Lehmann said: “In early 2021, there will be acquisitions and roll ups so we should expect lots of M&A. These will be big transactions, not just smaller ones, particularly on the channel management and PMS side.”
Additionally Vrbo will be acquired in 2021.
With many deals already in the pipeline behind the scenes, this relatively nascent category is on the verge of its largest internal shake-up and the pandemic will leave its own indelible mark on the short-term rental landscape.
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