How are the north-eastern US state markets withstanding the Covid-19 impact?

By Paul Stevens and Miles Hurley, news editor and reporter for ShortTermRentalz

US: In the latest feature of our short-term rental market recovery series, we analyse the situation in the north-eastern US states of New York, New Jersey, Connecticut and Pennsylvania to track how they are responding to the Covid-19 pandemic ahead of a gradual reopening process of their hospitality sectors, how businesses in the rental space are being impacted, and how prepared each state is to react to a potential second wave. 

The fact that the United States has more confirmed cases and deaths than any other country in the world is well documented, but contrary to widespread hope, it is still a long way away from emerging from this crisis.

None of the country’s 50 states has emerged unscathed from this pandemic thus far. New York was one of the earliest hotbeds for positive cases in early March, and it has recorded the highest number of coronavirus-related deaths of any state, so much so that it has reported more cases than any single country outside of the United States, according to Statista.

The infection rate of the Covid-19 disease continues to rise in countries around the world, as the latest figures show that more than 12 million people have officially contracted the coronavirus and 548,000 have died directly from it or with Covid-related symptoms, although there are likely to be many, many more who have had it without displaying any symptoms.

Last weekend’s Fourth of July Independence Day celebrations have once again shone a spotlight on the United States and whether it is taking all of the precautionary measures to effectively combat the virus.

This week’s news that Miami-Dade County in South Florida, which is home to 2.8 million residents, has ordered the immediate closure of leisure and hospitality venues including short-term rentals, will do little to convince the sceptics that it is doing enough to prevent the spread of the disease. The Miami region is fast emerging as a hotspot for the virus, exacerbated by the fact that some people are crowding and not following public health rules, as state governor Carlos Gimenez warned this week.

As the number of nationally confirmed Covid-19 cases surpassed 3.11 million on Thursday [an upsurge of 62,425 cases in the last 24 hours], Doctor Anthony Fauci, who is also a physician and immunologist, warned Americans that the country was “still knee-deep in the first wave”. He also used his address to reiterate his message to young people that they are not immune to the virus, quoting data from John Hopkins University.

Fauci furthermore warned US communities that they had “never came down to baseline and are now are surging back up”.

Images of young people partying and drinking without wearing face masks or attempting to socially distance, measures that health experts say are key to containing the spread, were shared widely across social media over the weekend.

While US President Donald Trump announced that 99 per cent of coronavirus cases were in fact “harmless” amid rising and alarming hospitalisation rates in numerous states, questions are being raised over whether America is suitably prepared for possible second and third waves when its leader is downplaying the impact of a virus that has already claimed the lives of hundreds of thousands of people across the world. It has also been confirmed by the United Nations that the USA will leave the World Health Organisation next July, after President Trump made the decision to withdraw the country from the specialised agency.

In some of the Northeastern US states, cases have been significantly reduced after their initial peak in March and April, and in this piece, we take a deep dive into the markets of New York, New Jersey, Connecticut and Pennsylvania to analyse how their short-term rental sectors are responding to the pandemic.

New York

The latest outbreak in Miami-Dade County, Florida, has thus far steered clear of north-eastern states such as New York and New Jersey, which experienced the initial peak of the wave in March and have since emerged from lockdown at a more gradual pace.

That is not to say that governors are not remaining on edge, however.

Andrew Cuomo, the governor of New York State, broke rank by criticising revellers who packed onto beaches near New York City over the Fourth of July weekend, with apparent disregard for social distancing measures or face mask rules. As a result, the city took a “pause” in its Phase Three reopening, by requiring restaurants to remain closed for indoor dining after taking stock of surges in southern states such as California, Texas and Florida.

Unsurprisingly, short-term rental bookings in Central New York have nosedived as non-essential travel was banned and non-essential businesses were closed for a month until the end of April. President Trump’s sweeping restrictions to suspend travel to the US from 26 European countries also limited the amount of international travellers coming into the city, who would usually take up a broad portion of tourists booking rental stays.

In June, AirDNA reported that US vacation rental bookings were up by 20 per cent compared to pre-pandemic levels a year ago [over the course of 17 May – 10 June].

However, this does not tally with the situation renters are facing in the state of New York City, as bookings took a 32 per cent drop from 118,852 to 81,099. Only Illinois experienced a sharper drop [41 per cent] in stark contrast to southern states such as Oklahoma 98 per cent, Arkansas 96 per cent, Mississippi 82 per cent, Arizona 75 per cent, whereas West Virginia to the south west of New York saw a 103 per cent rise.

 

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Short-term rental demand has dropped in New York City and other major cities [Credit: City Metric, Inside Airbnb]
New York has suffered a similar drop in demand to other major cities and tourist destinations around the world, as restrictions are placed on air and international travel.

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New York has seen a 49 per cent drop in market level per cent change in new bookings [Credit: AirDNA]
According to AirDNA’s data, New York is the US city market with the seventh highest drop in new bookings, seeing a 49 per cent drop compared to 2019 levels.

Covid-19 appears to have prompted travellers to vacate major urban destinations in favour of destinations that are instead within driving distance of a major urban hub, as tourists sought to self-isolate and socially distance away from larger crowded settings in their own private space. That correlates with recent trends outlined by the short-term rental data provider, as beach destinations, mountain towns and lakeside getaways have seen an upsurge in bookings to signal a potential rebound for the domestic short-term rental sector.

On the plus side, such is the size of state that many of those types of destinations can be found in New York, outside of the main central hub. Renters on Long Island, in the Adirondack mountains and at the finger lakes, near Niagara falls, have all seen sharp uptakes in bookings as New Yorkers divert their attention towards staying in less densely-populated areas where the rate of infection will be less high.

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Airbnb demand in New York has been hardest hit, ahead of Pennsylvania, New Jersey and Connecticut, as the number of nights flatlined at the start of travel restrictions [Credit: AllTheRooms]
Airbnb noted a 40 per cent rise in user searches for rural rentals in the Catskills, Adirondacks and Hudson Valley as part of its Fourth of July trends data. Small businesses have profited as well, as July enquiries for Lindsay Bolton’s Finger Lakes Premier Properties have risen by 44 per cent in comparison to the previous year.

The Hamptons, a popular long island summer vacation spot, skyrocketed in demand over April and May, with many fleeing Manhattanites booking properties for the full summer season. Vrbo data, provided to Travel + Leisure, showed The Hamptons was the third most popular Fourth of July destination, only after beachfront locales in Florida and Alabama.

New Jersey

Meanwhile, in New York’s neighbouring state of New Jersey, governors have done well to keep a relative lid on the coronavirus, until the situation changed this week.

Governor Phil Murphy confirmed that the state’s transmission rate had exceeded 1.0, marking a ten-week high for the region. Bypassing the threshold infection rate of 1.0 means that the virus is on average being spread to more than one person at a time, which could potentially trigger another wave of cases if not effectively contained.

Murphy said: “This is an early warning sign that, quite frankly, we need to do more.”

Several New Jersey outbreaks have been directly linked to incoming travel from outside of the state, as Hoboken mayor Ravinder Bhalla said 12 of the 13 cases diagnosed late last week were tied to travellers from other Covid hotspots in the country.

Like New York City, New Jersey’s state capital of Jersey City has seen a significant drop in new bookings from a market perspective.

The Jersey Shore, one of the area’s prime vacation rental sites, showed an abrupt drop in reservations in March and April. Initial restrictions on beach locations and outdoor activity crippled the rental market, which heavily relied on its beachfront activities.

Maria Kirk, owner of Shore Summer Rentals, said in an interview with Accuweather: “This year was awesome – my owners were saying ‘wow, they can’t believe it they’re almost booked in February.’ Then March comes and crickets.”

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New bookings have dropped in Jersey City by 52 per cent compared to 2019 [Credit: AirDNA]
As with many markets, short-term rentals in the shore managed to recover as restrictions were lifted on hospitality and leisure. Rentals in the area went from a position of being down 26 per cent at highest point to rising by 11 per cent, according to some operators.

Eric Birchler, owner of Birchler Realtors, told NJ.com: “We had a lot of cancellations, but they were re-rented after Governor Murphy opened the shore. We have never had a busier month than June.”

According to a variety of sources, that busy season increased over the Fourth of July weekend, with many families booking in travel to the beachfront areas. As beaches, casinos and beyond opened, worries of a secondary flare-up in the area was doubled.

Paul Kanitra, mayor of Point Pleasant on the shore, said: “We’re seeing spikes across the country in states that opened up weeks ago, and while we’re doing a good job in New Jersey, there are a lot of people that are way too cavalier about social distancing. There’s inherent risk in all of this.”

Connecticut

In the state of Connecticut, governor Ned Lamont announced the state would “take a pause” in Phase Three of its reopening process, as positive confirmed cases of Covid-19 in the state reached 47,000 in the latest spike on Monday.

Lamont added he was “erring on the side of caution” in postponing the reopening of indoor and outdoor events as he saw other states around the country, such as Texas, Florida and Southern California, do the same to prevent a further spike. He has however expanded the number of people allowed to gather for outdoor events.

Connecticut, like Kansas, Kentucky and Rhode Island, had not reported any data at all over the previous three days, even though the percentage of people testing positive in Kansas had risen steeply before the 4 July weekend. On a national scale, 21 states set all-time records for new cases over the past week.

Connecticut moved into Phase Two of the reopening plan in June, allowing short-term rentals, B&Bs and hotels to open their doors once again, as well as other services and attractions such as amusement parks, hotels, nail salons and driving schools.

The result of that was a sudden increase in staycationers, according to business owners such as Josephine Guarnaccia [Mermaid Inn in Mystic] and Amanda Arling [Whaler’s Inn, Downtown Mystic]

Arling told NBC Connecticut: “We are seeing a lot of staycationers. People from Connecticut and the surrounding areas that are just looking forward to getting away for a night or a weekend.”

While some guests have retracted their bookings due to the postponement of events, more guests are likely to reserve last-minute stays, thereby reducing booking windows, in a local, nearby destination while still having the feeling of going on vacation.

That trend was echoed by Guarnaccia: “I am optimistic. The mentality of the traveller is changing.”

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Forward booking rates in Connecticut [Credit: AllTheRooms]
Metasearch engine AllTheRooms’ data indicates that occupancy rates are returning closer to pre-pandemic levels in 2019 [around 45 to 50 per cent] before stuttering later in the summer and taking a sharp dive after Labor Day in early September, when the autumn off season will begin.

To capitalise on the surge in local and domestic travel, the state’s tourism office has launched a campaign to rebuild its tourism industry as owners begin to welcome guests back. Costing $1.2 million, the “So Good to See You” campaign will run throughout the summer season until Labor Day [7 September] and it aims to target residents in Connecticut, New York, Rhode Island and Massachusetts who are seeking a change in scenery.

Connecticut Director of Tourism, Randy Fiveash, said: “It is time to start reinvigorating the industry.”

Pennsylvania

In Canada, the province of Quebec banned Airbnb and other short-term rental services during the Covid-19 state-of-emergency. That, coupled with the collapse of the summer tourism season, has pushed hosts onto platforms on the long-term rental market and others into operating short-term rentals illegally.

Pennsylvania governor Tom Wolf announced plans at the start of April to ban short-term rentals in the state and remove them from a list of “life sustaining businesses”. His reasoning for this was that many homes were being advertised as coronavirus getaways in rural locations, with owners tempting guests with offers of low rental prices and stringent sanitisation procedures, before allegedly causing a surge in cases and creating new epicentres of disease infection.

The trend is now stretching across into North America, as states such as Pennsylvania, Ontario, Florida, Georgia, Delaware, Maine and Vermont issued temporary bans on short-term rental platforms including Airbnb and Expedia.

This decision was not fully embraced by all operators, with a select few continuing to advertise in spite of the ban. However, as time passed, the decision to reopen vacation rentals and travel was made, with quarantine mandates for visitors to hotspot states.

Later, as rental owners pivoted to marketing their homes as coronavirus getaways, officials in regions such as Monroe County reversed Wolf’s ruling on short-term rentals and announced that long-term rentals would be permitted to encourage travellers to stay in one place and reduce the virus spread.

In that initial period, many vacation rental hotspots in the state were named as disease hotspots. The three counties which include the well-known Poconos Mountains, a popular New York vacation spot, struggled heavily with managing the healthcare needs of the initial influx of tourists.

Now, as summer returns, however, tourist activity in many of these areas has picked up. And as the state has now entered its “yellow phase” of coronavirus prevention, short-term rentals hve been allowed to re-commence operations for the time being.

Pennsylvania has notably not been included in the decision by New York, New Jersey and Connecticut to cut off incoming travel. This means that the Pennsylvanians, who often will travel to New Jersey and upstate New York for vacations, now many not have that option during the summer.

In Philadelphia, occupancy levels and ADR are slowly stabilising, even if they are not yet back up to pre-pandemic levels, but the recovery will have to be monitored in the event of a more sustained downturn and further case spikes.

Will Lucas, founder and CEO at hospitality startup Mint House, said: “We were at 65 per cent occupancy in May and 72 per cent occupancy in June in our downtown Philly location, while our ADR was about 20 per cent compared to pre-Covid times.”

Robertin Nunez, the president of management service Co Host Expert Company, which assists owners in the conversion process of their standard units into viable rental properties, said: “In March, everything came to a screeching halt, all regions went into complete freeze for 21-30 days. In that time, some people made bad decisions to vacate but we as a company got better as we had time to focus and realise where we were spending money, so we plugged holes and became more streamlined.

“The turning point was when owners became stressed because they couldn’t evict tenants when an eviction freeze came in. Owners started reaching out and offering inventory in pristine locations at discount rent. We took on the extra revenue and increased our inventory as everyone else was decreasing it by negotiating good rents and took a two-week buffer window.

“Regions started doing better as operators realised more reservations were coming and owners are now creating more inventory. Operators in Philadelphia, New York, New Jersey and Connecticut scaled back, modified reservation nights and started taking less money up front.

“Now as the weather’s got nice, we saw a spike in reservations in May and all through June, particularly with people booking gatherings at short-term rentals as they had nowhere else to go. We’re now at 100 per cent occupancy in Philadelphia and New Jersey and taking more mid-term stays over the last 60 days,” he added.

In addition, Allegheny County in the south-western part of the state has seen a huge resurgence in cases, leading it to put certin restrictions back in place. The county placed a one week ban on in-person service and closed certain businesses in response, as the whole state saw a 37 per cent jump in cases.

Domestic travel is on the rise in the United States during the pandemic

Domestic travel has been a trend during the pandemic as the proportion of international travellers booking stays has plummeted due to border closures and restrictions on air travel from certain countries which have experienced high Covid-19 infection and related death rates.

Data from Transparent Intelligence highlighted that the percentage of domestic US guests booking short- or mid-term rentals has shot up on a consistent arc since cases began to rise steeply at the end of February to mid-March [weeks eight-ten], to such a point where around 98 per cent of guests are domestic travellers across the country.

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More US citizens are turning to domestic travel in 2020 [Credit: Transparent]

The chart above indicates that the percentage of domestic guests staying in US vacation rentals this year has risen progressively in line with key turning points in this pandemic. When the first death from coronavirus in the US was reported at the start of March, the percentage had jumped to 89 per cent, while since the travel ban was enforced around two weeks later, the figure has gone up from 92 per cent to almost 99 per cent now.

At the same time, the crisis has led to a significant increase in the average length of stay in rental properties across the US, as caution weighs heavier on travellers’ minds and they are unable to move about as freely as before the pandemic due to closures of borders and restrictions on air travel. Essential key workers are also driving this increase, given that they are seeking to stay as close as possible to their place of work, such as a hospital, for convenience and not wanting to perpetuate the spread of the virus if they were needing to use public transport.

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Average length of stay has risen sharply [Credit: Transparent]
Over the first half of 2019, Transparent’s data highlighted that average length of stay remained stable at between three and four nights, whereas in week nine in 2020, the early peak of cases in the US, there was a sudden drop to 2019 levels before a sharp leap to a peak of eight nights in week 14 and stabilising at around five and a half nights at this time.

All four of the states we are analysing reported a rise in domestic bookings, according to Transparent:

  • New York – 79.31 per cent of guests were from domestic bookings, up by 12.59 per cent on 2019
  • New Jersey – 81.6 per cent of guests were from domestic bookings, up by 11.76 per cent on 2019
  • Pennsylvania – 94.44 per cent of guests were from domestic bookings, up by 3.73 per cent on 2019
  • Connecticut – 92.68 per cent of guests were from domestic bookings, up by 2.11 per cent on 2019

Interestingly however, as consultant Jade Tinsley points out, New York holds the second lowest proportion of US guests in 2020 [despite a 13 per cent rise in domestic guests from 2019]. She attributed this change to international visitors from Canada and international guests coming over from the UK.

She said: “The nation providing most international visitors to the States this year has been Canada, but currently, most international guests are arriving from the UK.

“Meanwhile, the proportion of domestic guests has been persistently elevated across every state in America since the escalation of the Covid-19 crisis. Since the start of 2020, domestic visits to vacation rentals in the US have increased from 86 per cent to 99 per cent,” she added.

Meanwhile, Nunez said: “From March for the first time, New York was full of New Yorkers, Philadelphia was full of Philadelphians and New Jersey was the same. More and more operators are getting reservations now for staycations.

“There is a big trend for domestic local travellers as they do not want to be in their neighbourhoods. The benefit of people from your city staying in your neighbourhood is that there is no culture shock, which reduces the negative reviews as people already know the city, whether it’s New York or Philadelphia.

“Short-term rental inventory in shared spaces took a huge hit as no one wants to share. Our guests are happier knowing it’s clean, rather than in co-living establishments where people don’t know who the other person is and if they have Covid,” he added.

What next?

The inconsistency of border closures and easing of restrictions on hospitality sectors in states, rather than a uniform nationwide lockdown is likely to be a contributing factor behind the divergent set of results seen across each state. For that reason, further spikes appear a very realistic prospect, especially if social distancing and other basic preventative measures are neither obeyed nor strictly enforced.

Furthermore, many of the states seem to have various different restrictions depending on the county and the level of infection. As has been seen in Allegheny County and other states, lawmakers are not hesitant to return to lockdown measures if need be.

These markets, however, align with a variety of trends which seem to demonstrate a continued interest in holiday rentals in already popular locations. Beachfront, lake, and mountain areas across the three states have seen interest growing, some with more noticeable consequences than others. Most states are also benefitting from a rise in domestic tourism, both from the US and from within the state, as travel restrictions make it difficult to safely cross each border.

While travel may not be at the same level it was before the pandemic, the shift in the markets show that there is still interest for leisure travel as the summer season commences.

President Trump’s flippancy towards the gravity of the coronavirus should not fool hospitality businesses into believing that this crisis is anywhere near its end. The recent outbreak in Miami-Dade County following the 4 July weekend should serve as a warning about the risks of failing to abide by social distancing measures and facial covering rules if the virus is to be ultimately contained.

The pandemic is likely to accelerate many more trends, including domestic travel to non-urban destinations and more mid-term stays in rental properties, but it also shows that those businesses who have spent the downturn streamlining to become more lean are likely to be more adaptable when the next downturn arrives, whenever that will be.