STRz top 10 predictions for the short-term rental industry in 2019
After Michael Goldin shared his predictions ahead for the vacation rental industry, it is the turn of ShortTermRentalz to gaze into its crystal ball to predict what the top 10 trends will be in the sector in 2019.
1) The OTA v direct booking battle looks set to heat up
The OTA vs direct booking battle will intensify further in 2019 and direct bookings look set to become more commonplace as guests look for an easy, instant booking option, while property owners receive a higher percentage of the amount paid as a result. Those reserving directly have cottoned on to the fact that metasearch sites’ listings often include mark-ups while those travellers also do not require the hosts’ approval to book with them.
At a time when the market is as fast-paced and competitive as ever, Skift reported that travel will have the highest percentage of online payments than any other industry by 2020. In response, vacation rental managers are simplifying online reservations by streamlining checkout processes and providing urgency marketing messages, social sharing tools, and flexible date selections.
HotelPerfect first predicted this years ago when studies of its direct booking engine displayed a 45 per cent increase in booking revenue for Jan/Feb 2016 compared to 2015.
2) Properties to be used as vacation rentals are being bought more for investment purposes than for personal use
In 2019, the vacation rental industry is projected to surpass $169 billion in revenue. Companies like Airbnb and HomeAway have created a formalised market for travellers wishing to stay in alternative accommodation to hotels and given that renters have to cover high ownership costs, they look not just to cover the costs but also make profits on top of that.
Now, research by HomeAway and Savills has revealed vacation home buyers are for the first time prioritising rental income over personal use in the United States.
The survey revealed in the 1970s, 90 per cent of homeowners kept their second home for themselves but that has all changed in the last 10 years. Now, two thirds of second home owners who lease their properties to travellers rent them out in order to cover ownership costs.
Of those two thirds of vacation home owners who lease their second homes, one third makes enough to cover ownership costs and the remaining third makes a profit on its properties, according to Savills world research director, Paul Tostevin.
As a result, vacation home rentals are becoming a more appealing alternative to traditional hotel accommodation. Florida and California have been at the heart of this shift with 14 per cent and seven per cent of the United States’ second homes found in these states respectively.
3) Illicit apartment rentals will come under increased legal scrutiny
Platforms such as Airbnb and HomeAway have moved into the mainstream to compete with the hotel industry, meaning short-term rentals have often gone unregulated without proper government or authority restrictions. In 2019, the signs are pointing towards illicit apartment rentals coming under increased legal scrutiny.
Subsequently, governments and parliaments in Ireland (Dublin), Australia, Cyprus, USA and Portugal amongst others are standing up to Airbnb and implementing ordinances to restrict short-term rentals in certain areas and who can list such properties. In one case, Ireland’s minister for housing, Eoghan Murphy, has proposed to place restrictions on Airbnb lets in the country’s 21 current rent pressure zones and is reportedly discussing the measure with Taoiseach Leo Varadkar.
In Japan, the Japanese Tourism Agency is going one step further, by cancelling any reservations made via Airbnb that do not adhere to the rules and regulations, otherwise known as unlawful ‘minpaku’ listings. The measure will be implemented in June when a new housing and accommodation business law in the country comes into force.
4) Penalties for violations of regulations could be more severe
Following our previous prediction, the penalties for violating regulations appear to be becoming more severe; a trend that we expect to continue well into the New Year.
Many of these situations are taking place in the United States where renters in the likes of Nashville, San Diego, Las Vegas, Hawaii, Long Beach and Jacksonville have all come under regulatory fire in recent times.
A large factor in this is the impact of noise disturbances from loud guests so consequently, the importance of respecting neighbours is being emphasised more than ever. This was recently noted in a NoiseAware survey which suggested introducing noise violation fines as a deterrent for noisy short-term rental guests. Could this also be a consequence of over-tourism?
5) How will the industry counter an over-tourism backlash?
In recent years, municipal authorities around the world have been accused of not doing enough to combat backlashes by locals protesting about supposed over-tourism.
In places like Byron Bay and Cornwall, wealthy tourists have forced out local residents who can no longer afford to live there and beaches have been almost inaccessible due to heavy transport congestion. However, the signs are that cities are listening to protesting locals and will propose more solutions to the issue in 2019.
Berlin has gone so far as banning all whole home rentals outright in the face of mounting pressure and Barcelona, Venice and Reykjavik in Europe are also finally looking to introduce legislation to curb over-tourism. Potential solutions could be limiting transportation options, raising property prices and protecting overcrowded areas.
Cities may also consider taking drastic measures to attract fewer larger groups and high-spending guests by revising their taxation arrangements or even de-marketing themselves.
6) Niche markets will gain more traction
In addition, STRz is predicting a continuation of the trend of niche markets gaining more traction as travellers increasingly look for novelties and experiences from their rental properties which meet their unique needs.
For example, travellers are starting to move away from the hotel industry in favour of ‘destination markets’ which are not bound to the same increasing regulatory, financial and customer care demands.
A major industry niche which should gain popularity in 2019 is the country cottage industry as couples seek enticing getaway break options. This comes at a time when HomeAway reported a 55 per cent growth last year in barn bookings, a 40 per cent increase in houseboat reservations and a 30 per cent rise in treehouse bookings. Similarly, Airbnb announced this year that nature lodge bookings have gone up by 700 per cent, ryokan (traditional Japanese inns) bookings have increased by 600 per cent, yurts up by 155 per cent and RV reservations have grown by 133 per cent.
7) Vacation rentals are increasingly accommodating families in their sharing spaces
Nowadays, vacation rentals do not simply have to accommodate individual travellers working away from home but can now bring families together to share a common space and participate together in activities such as cooking, playing games, swimming and watching films.
In the US, the National Multifamily Housing Council (NMHC) estimates around 65 per cent of Airbnb bookings this year have been in multi-family buildings such as apartments, condos and pop-up hotels.
The units are often furnished and hyper-amenitised, which require shorter-term commitment and this has led to a greater proliferation of these multi-family sharing models.
In the meantime, Airbnb has outlined its plans to create APIs that would allow multi-family operators to integrate directly with the Airbnb platform and improve direct management of bookings and payments. The company already has a Friendly Buildings Program, which provides revenue-sharing options for multifamily residences and their landlords.
8) The Airbnb host demographic age group is on the rise in Ireland and Thailand
One developing trend is multi-generational family travel, where the booking guest is a senior accompanying their children or relatives on their travels. This in turn has seen the host and guest age demographic increase on short-term rental platforms such as Airbnb this year, particularly in Ireland and Thailand.
In Thailand, over-60s now account for the highest proportion of guests on Airbnb, with the number of seniors who have booked with Airbnb over the last year increasing by 66 per cent. There are also now around 1,500 senior hosts on Airbnb in Thailand, up by 26 per cent on 2017. It is a similar scene in Ireland, where the over 60s are both the fastest-growing hosting age demographic and the fastest-growing guest market as they believe short-term rentals promote “local, diverse, inclusive and sustainable” tourism.
This could be a reflection of customer confidence, which affects who travels and how they book. Typically, travellers respond to economic growth and shrinkage: booms see younger groups travel while downturns see more economically stable groups travel.
9) New tech and experiences will continue to attract millennials
Airbnb reported in its 2019 trends report that the biggest draw in terms of its Experiences offering was cocktails and craft food tastings, and now live concert recommendations and outdoor excursions are set to increase in popularity in 2019.
In an ever-competitive and fragmented market, guests are seeking out immersive experiences which will provide them with the opportunity to participate in the same activities as the locals. This represents a distinct divergence from the traditional tourist model in that millennial travellers want to integrate into the local community and share in unique experiences.
Furthermore, the news that VRBO are offering a skiing holiday in Utah for one lucky competition winner and 30 friends highlights the growing demand for such packages which differentiate themselves in terms of marketing, photography, web descriptions and reviews to attract visitors.
Phocuswright, meanwhile, now anticipates the vacation rental market will be worth $36.6 billion by the end of the year.
10) Greater investor influence
Rented.com CEO Andrew McDonnell stated earlier this year at Kigoworld that “more institutionalised, more sophisticated investors would keep coming into the space, creating a gold rush of investment.”
As we have seen with partnerships such as that between AccorHotels and RedAwning, more and more hotel groups are collaborating with companies in the vacation rental market. In this way, the collaboration can lead to establishing accommodation and hospitality brands that serve a diverse range of travellers requiring different needs across various scenarios, not just traditional hotel guests.
McDonnell also suggested that companies such as IHG and Hilton were currently missing the mark so it remains to be seen if the pair edge their way into the market in 2019.