Worldwide: After consecutive years of pandemic-induced turbulence, making my short-term rental predictions for 2022 has arguably never been as challenging. Even now, the surfacing of the new Omicron variant of the coronavirus threatens to put the brakes on the recovery of an industry that has been decimated by closures and stringent regulations.
And yet, unlike a year ago, the short-term rental industry is in a much healthier place and its mindset is gradually shifting away from mere survival to revival.
The segment has not only benefitted from travellers’ desire for privacy, safe spaces and a rich offering of amenities but it has also been catapulted into the public consciousness as a realistic, viable lodging alternative to hotels and other traditional accommodation providers.
Guests now have more choice than ever before when it comes to short-term accommodation, with Covid-19 accelerating the repositioning of booking platforms to curate their offerings to evolving consumer needs, and more emphasis being placed on how rentals fit into the “connected trip” concept. Institutional investors are also muscling their way into the space wanting their slice of the “alternative” accommodation pie.
Meanwhile, vacation rentals are being showcased on mainstream public platforms such as Netflix and other streaming sites, enticing new waves of travellers to opt for unique accommodations in desirable locations.
Looking back from 12 months ago, a number of my 2021 predictions resonated across the hospitality landscape, including tiny and mobile homes becoming preferred types of lodging, the blurring of the lines led by hospitality hybrids, and work from home [WFH] shifting to work from anywhere [WFA]. Check out last year’s predictions piece here – how did I get on?
Rather than a ‘new normal’, what will the ‘next normal’ look like? Scroll down to view my 2022 forecasts to find out.
- Value-added services will become more commonplace within short-term rental offerings and professionalise the guest experience
After an extended period without families and friends being able to spend precious, meaningful time together, the desire to get away for a digital detox, pack the itineraries and share experiences on holiday has become even more palpable.
The well-received Netflix series – The World’s Most Amazing Vacation Rentals – highlighted the lengths that some companies are going to in order to guarantee best-in-class guest experience. Private helicopters, planes and yacht charters – nothing is off the table / helipad / marina etc in ultra-luxury travel.
Looking ahead, groups and solo travellers alike will go to even greater lengths to enhance their stays and unpack the benefits of value-added services – a trend underpinned by the “Netflixisation” of travel, where guests pick the services they want when they want them.
Now short-term rentals are set to tap into the burgeoning micro-mobility market, which includes small, lightweight vehicles such as bikes, e-bikes, electric scooters, skateboards and golf carts designed to travel five miles or less. Worth an estimated $540 billion, the market’s global value is projected to skyrocket in the years ahead.
One startup positioned to cater to the demand for rental amenities is Mount, whose co-founder Madison Rifkin says self-service offerings and setting a new bar for guest experience: “With Covid, companies have had to rethink the way they are attracting guests to their properties. It isn’t about just having a place to stay. Travellers are actively seeking out that unique experience and unique way to get around town.”
The trend will also harness the surging popularity of adventure travel and sports tourism, the latter of which is shaking its ‘micro niche’ tag and wading into the mainstream. Estimated to be worth €710 billion, sports tourism is a significant, yet largely untapped, addressable market.
Fred Diaw, CEO of recently funded French startup Sportihome, revealed that 42.5 per cent of its 46,000 members are female and 35 per cent are male – 48 per cent of which are also in the millennial bracket trying out activities from hiking to cycling and kayaking. This underlines how the segment is banking on unique experiences to appeal to younger demographics.
That sentiment is shared by JamieRose Briones, director of strategic advisory and business development at Luxury Frontiers, on the boom in adventure travel bookings.
She said: “Within the adventure travel space, unique and bespoke experiences will become increasingly important. With the rising popularity of more intimate, nature-focused camps and lodges, travellers seek authentic and memorable programming to fill their days.”
Breezeway CEO Jeremy Gall anticipates that focusing on enhancing the guest experience will accelerate the professionalisation of the short-term rental market: “The industry is shifting from a transactional give-and-take to a service-based and experience-oriented relationship.”
- New categories of flexible living and housing solutions will emerge
As the return to travel maintains its upward trajectory, short-term rentals, hotels and flexible rentals will all exist in parallel, serving different travel personas with variety in their accommodation, trip type, location flexibility and inventory.
Jetstream Hospitality Solutions’ Mike Liverton predicts that remote working will remain in the long-term, citing a Leavetown.com survey in which 81 per cent of travellers said they would continue working remotely at least part of the time post pandemic. Equally, Goldman Sachs’ October Alternative Accommodations Landscape report indicates that “Covid-19 has the potential to permanently shift the way people live, work and travel” and have “dramatic effects” on the travel lifestyle.
Should that be the case, property managers will continue turning to smart tech solutions to automate, simplify and streamline operations, that will be conducive for a viable hybrid work / leisure environment and central to the standardisation of seamless technology.
Digital nomads embracing the work from anywhere concept will fuel demand for mid-term rentals [14-90 days], but their lifestyle wants and needs, home comforts and nearby amenities will have to be considered to attract a higher revenue guest.
During the pandemic, flexible leasing options have replaced rigid long-term arrangements, in particular the rent-to-rent model which will gain sustained traction in 2022.
The model enables both investors and building owners to reap the benefits and residents to sublet their apartments on major OTAs, and its user base is diversifying as more demographics spot opportunities to earn extra income.
Cindy Diffenderfer, co-founder and CEO of multifamily management firm Orion Haus, said: “The age demographic of people participating in home-sharing has been traditionally younger and millennials, but over the past year, we have seen a shift with more and more entry into the space throughout all other age groups. Currently, our age demographic is almost completely evenly split across all age groups up to 65 years of age.”
The sharing economy has been around for millennia but only now is it becoming more prevalent, structured and affordable – one only has to look at how car-sharing apps such as Uber and Lyft have been adopted in recent years – and the rent-to-rent model is poised to boom in a similar vein.
- The push for more sustainable and responsible tourism will step up a gear
Facing up to sustainability was the biggest problem facing tourism before the pandemic but solving the issue has become even more urgent as the shoots of a Covid-19 recovery begin to appear.
The alarming rhetoric reverberating out of last month’s COP26 Summit has galvanised an army of eco-warriors that will strive to hold the travel industry to account.
A report released by the Intergovernmental Panel on Climate Change could not be any more damning by asserting that human influence has “unequivocally” caused “widespread changes” in the atmosphere, ocean and land. The tourism ecosystem already accounts for five per cent of all man-made CO2 emissions and travel leaders must take a lead to ensure these drop to net zero by 2050.
The short-term rental industry lags behind other sectors in terms of incorporating Environmental, Social and Governance [ESG] at the core of their businesses but 2022 will mark a far greater shift towards more tangible action.
Jessica Gillingham, founder and MD of Abode PR, says that consumers will be “increasingly selective about buying from companies that share their values”, a point echoed by Yonder CEO Bill Lee‘s statement that travellers will seek “authentic, environmental and socially responsible booking choices”.
Combatting “greenwashing” by educating travellers about their environmental footprint will also take on added significance in 2022. Cooperatives and organisations such as Fairbnb.coop and Intrepid Travel are among those leading the way in showcasing the benefits of community powered tourism and balancing purpose and profit to provide genuinely sustainable experiences.
Consequently, the latest batch of holidaymakers and globetrotters will look beyond the most typically hyped vacation destinations and instead visit regions that have been largely untouched by tourism thus far, so that they can give back to local communities. This feeds into Airbnb CEO Brian Chesky’s vision of travel “redistribution” that will occur as a result of people’s reflections during lockdowns on how their travel choices must change post-pandemic.
But for this vision to be realised, online travel agencies [OTAs] will need to work more closely with cities and partner with technology providers to promote responsible tourism and create a more positive perception of short-term rentals in wider circles.
Airbnb will build on the ‘Summer of Responsible Travel’ initiative that it unveiled in April to ensure hosts are prioritising the health and safety of their guests and guests are respecting local neighbourhoods, including prohibiting large gatherings that break occupancy limits or exceed noise levels, and enhancing community support through dedicated hotlines.
Technology providers such as NoiseAware, Minut and Party Squasher will have a big influence in protecting property owners from onerous regulations and ensuring health and safety best practice is carried out in rentals by launching pilot programmes with OTAs and establishing ordinances with city governments, thereby promoting a realistic future for responsible tourism.
- Organisations and governments will tighten restrictions on short-term rentals – especially in Europe
Airbnb’s IPO last December catalysed a lodging revolution and marked a watershed moment for the entire home-sharing industry. Though the company’s blockbuster public market debut instilled confidence in onlooking investors, the episode has intensified the scrutiny on short-term rentals as a whole.
That is not to say that scrutiny of the short-term rental industry did not exist before December 2020 – Airbnb et al have long been accused of extracting affordable housing supply, driving up accommodation prices and stoking community division by disrupting neighbourhoods. However in 2022, we can expect even more tightening of restrictions on rentals as governments intervene.
In Europe, the European Commission is coming under increasing pressure to introduce a single set of pan-European rules and allow data access to holiday rentals from local governments in cities that have seen high influxes of tourists. Though the Commission claims to support an expansion of competition and players in the sector, the need to appease its member states and respect EU law will hasten calls for more specific sector regulation.
Shomik Panda, CEO of Inline Policy and director-general of the UK Short-Term Accommodation Association [STAA], said the Commission is likely to make its first legislative intervention specifically directed to the short stay sector, after years of consultation and examination of the ecosystem.
He said: “This initiative will likely address how public authorities can gain better access to data on short term rentals; and how to clarify and streamline rules and requirements that public authorities can impose on hosts and online platforms, for instance when deciding to implement registration schemes or other authorisation requirements.”
Similarly in Scotland, the regulatory saga is unlikely to reach a mutually satisfying conclusion soon as the government presses ahead with plans to empower individual authorities to initiate short-term letting zones and licensing schemes.
Fiona Campbell, CEO of the ASSC [Association of Scotland’s Self-Caterers], suggested that regulators will need to establish a framework that “works for everyone and ensures a balanced approach for business, tourism and local communities”.
She said: “The industry is still in recovery mode and developments with Omicron shows that it is still in a precarious state. Any regulation of the sector should be underpinned by necessity, justification, proportionality and non-discrimination.”
In the United States, the voice of advocacy is getting louder from organisations such as Rent Responsibly, but there is some way to go to gain the trust of cities and ensure that rentals receive the same rights as more established lodging segments.
Speaking in June on a RockSTRz webinar about “The challenges and opportunities facing the short-term rental industry”, Smart City Policy Group founder Matt Curtis concurred with Campbell that appropriate rules can be good for communities and neighbours, but predicted that more property managers would feel emboldened to join national alliances, in order to create “common sense” regulations and allow rentals to co-exist harmoniously in residential neighbourhoods.
Investment will continue to pour into the short-term rental space but the SPAC bubble will burst
If 2020 was characterised by property managers, booking platforms and suppliers scrambling around for emergency funding, 2021 was the year of consolidation, mergers and acquisitions [M&A] and special purpose acquisition company [SPAC] mergers, and that is fuelling an optimistic future outlook among industry professionals.
According to Hostaway co-founder and CEO, Marcus Räder, the short-term rental industry will “attract a record amount of venture capital financing” in the next year, and companies specialising in technology and operations that are leading the consolidation of the ecosystem will be best positioned to capitalise on investment opportunities.
He said: “With many acquired companies ceasing to exist or rebranding, this will start to narrow the pool of available ‘good’ tech solutions for property managers to use and have an upward pressure on prices.
Property management companies [e.g. Vacasa], holiday resort operators [e.g. Awaze] and rental agencies [e.g. Sykes Holiday Cottages] have all ramped up their M&A activity, making strategic purchases to increase their portfolios, generate supply to meet demand for domestic staycations, and consolidate their brands to deliver consistent, on-the-ground services.
Meanwhile, travel technology will remain a major opportunity for investors. Amiad Soto, co-founder and CEO of property management platform Guesty, which has acquired Your Porter [now Guesty for Hosts] and MyVR in 2021, anticipates further consolidation as his own firm looks to power hosting businesses in a fragmented marketplace and bring more standardisation through technology to the end product [the rental unit itself].
He said: “Property management companies will continue to acquire additional inventory to meet the surging consumer demand for short-term rentals, purchasing smaller hospitality brands and updating the units design-wise, while also introducing automation and technology into their operations. These companies are catering to digital nomads and life shoppers.”
In addition to early-stage VC financing, institutional money will continue to flood the sector as private equity firms and investors search for alternative investments in a frenzied market and benefit from the added exposure short-term rentals have received during the pandemic.
Tyler Carrico, managing partner at Derive Ventures, said: “Look at the amount of institutional money pouring into single family homes as a proxy for excitement of short-term rentals. Large institutions change regulatory environment for lasting.”
Furthermore, although 2021 has been a record year for SPAC mergers [498 by October in this year alone], the bubble could yet burst as the US Securities and Exchanges Commission prepares to propose new rules governing SPACs and address the disadvantages they can pose to investors.
- Domestic travel to rural destinations will dominate the early 2022 landscape but urban destinations will begin to see a travel rebound
Despite people’s eagerness to fly off to far-fetched destinations for a winter getaway, domestic trips look set to dominate the travel landscape in early 2022.
The emergence of the Omicron variant and the threat of new iterations, as well as the continued rollout of booster vaccines and wide vaccine inequity across the world, means that travellers will continue to feel hesitant about venturing further afield for a while.
Safely.com CEO Andrew Bate agrees, maintaining that “the blurring of work and leisure travel, coupled with continued concern over safety and privacy, will mean demand for vacation rentals as the preferred accommodation option will remain high”, heightening the “growing appetite” for rural and coastal resort destinations.
In countries where strict lockdowns have been enforced by governments, such as Australia and New Zealand, international travel has been impossible but for exceptional circumstances, but it has served to swell pent-up demand for vacations in drive-to destinations.
Jon Lawry, founder of The Urban Butler, said: “We remain confident that the domestic market will continue to thrive, as it has overseas post Covid-19. Once the international borders open in New Zealand, I believe we’ll see unprecedented demand, as well as new guest requirements and behaviours that we’re super excited about.“
Companies such as Vrbo are making a significant play to recruit new hosts from competitor OTAs and support group and family travel, which will drive pent-up demand for holiday destinations, as per Breezeway CEO Jeremy Gall: “Vrbo has a great opportunity to exploit the trend towards bigger group and family travel, particularly if they emphasise the quality of their inventory. They have already been marketing themselves as family-orientated, which is smart because it’s what a lot of their supply is gravitating towards too.
“Their properties are also generally in holiday destinations that are more likely to withstand regulation challenges and the fluctuations of urban rentals,” he added.
Recent reports released by AirDNA support evidence that leisure destinations are due to fare well in the first half of 2022, however the data and analytics provider is confident that US urban travel to gateway cities will rebound by Q3 / Q4 2022, ahead of a full recovery in 2023. As more and more companies move to hybrid working models, extended stays in cities will rise as travellers combine business and leisure trips and appreciate the convenience of having services and activities on their doorsteps.
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