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Achieving resilience: how the short term property rental sector is carving out new patterns of demand

Achieving resilience: how the short term property rental sector is carving out new patterns of demand

As part of its investment in research development, PACE regularly conducts interviews with industry leaders to develop thought leadership on strategically important topics, sectors and markets.  This article draws on a recent interview with Pierre Becerill, CEO and co-founder of Transparent – leaders in data intelligence for the short-term rental sector – he shares his insight on the trends impacting the industry as its profile grows. 

With Airbnb’s IPO going live and setting a frenzy at the end of 2020, it is somewhat fitting that the last year has been one of the most dramatic for the short term rental sector. Bringing greater awareness and transparency to the sector, the IPO might be making the headlines, but it is the underlying trends in the industry that are ones to watch. Traditional patterns are being shaken and elevated by massive shifts in travel demand due to the Covid-19 pandemic. As these fundamental changes, particularly the leisure travel market, take hold for the longer term the analyst predictions of Airbnb’s 2021 revenues exceeding 2019’s doesn’t seem at all far-fetched. 

Nimble footing: how short stay vacation providers are responding quickly to Covid-19 demands

“The longer length of stay is here to stay” states Pierre Becerril, CEO at Transparent, the data intelligence business for the short term rental sector. “There is a significant shift in the travel demand profile, and there will be considerably less international mobility for a few years yet. But domestic demand is up, and the short term rental sector is demonstrating resilience compared to other sectors of the travel industry” he continues. 

He is quick to point out that the Covid-19 crisis has forced many people to discover the short term rental sector, and that this has been a coming-of-age moment for the industry. “The characteristics of a short term rental – interesting and convenient options, from kitchens to washing machines, and the flexibility this brings, has been really attractive to travelers in a Covid-19 world.” Importantly, the sector’s speed to recognise and build on the opportunities presented by unprecedented times has been key to its success. 

Becerril continues, “The short term rental industry responded far more quickly to new demands than the hotel sector. It’s much easier to scale changes per rental property, than for hotel chains, but it is how hosts and property owners have set hospitality sector standards that have been impressive. As travel restrictions eased, it was rapidly commonplace for hosts to offer bedding and towels sealed in plastic, and dated when they were closed so that the guest knows nothing has been touched for several days. The freedom to make your own bed in a world where we are all taking steps to prevent exposure to Covid-19 is the kind of gesture that gives real confidence to travelers.”

The guest mindset in a short term rental makes these changes easy to implement. No one staying in a hotel expects to make their own bed, and there aren’t many major hotel brands that would be comfortable with that as an option for their guests. As Becerril points out, this isn’t the only shift that feels natural and comfortable for a short term rental, “Property managers and hosts have experimented with leaving properties empty for two days between stays, and operating a rotation of available properties, in order to make sure their accommodation is extra safe in Covid times.” Again, this isn’t something that naturally works for a hotel and even if this applies to rooms, the guest overlap in shared areas means it simply doesn’t deliver. Vacation rentals have taken advantage of their operational flexibility, and have been able to deliver a quick reaction to the pandemic.

Long stays: finding the advantages in times of Covid-19

Being truly responsive to an ever-changing and dramatically impacted market has been key to the short term rental sector’s ability to counter some of the impacts of the pandemic. Flight data for 2020 makes stark viewing, showing that international travel has almost ground to a standstill and the weekend getaway has pretty much disappeared. Remote working, or long stay holidays, for much of the world’s affluent population means that temporary relocations – for any time period from 30 days to a year – is a trend that many in the sector are betting on. 

“The largest and best of the OTAs are heavily invested in this sector; Airbnb promotes the ‘live anywhere’ concept on its homepage, and Booking.com has launched mid-term stays. Working from anywhere is an absolute reality for many, and it’s delivering a surge in demand for people looking to call somewhere else in the world home for a short while, explains Becerril. In fact, Becerril has himself temporarily relocated from Madrid to the Canary Islands for the immediate term to live somewhere with slightly fewer lifestyle restrictions than have been commonly found in most European cities as the second wave of Covid-19 infections bites.

While he’s deeply embedded in this trend, he’s also realistic about the true scope of demand. “There’s definitely a surge in people wanting to work anywhere, however, I’d urge caution in assuming this trend will absorb the demand lost in other areas of the travel industry,” Becerril points out, nodding to the players whose strategy seems a little over-optimistic about the mass roll-out of nomadic lifestyles for the long term.

Read more: understand the ‘work from hotels’ opportunity in this blog post ‘Making new services and hotel marketing deliver for the long term’   

Be ready: explore how PACE Dimensions has the research capabilities, methodologies and expertise developed over many years to help companies emerge from challenging times with greater success. Our expanded research programmes empower businesses to prioritise the right investments, and to be better informed when making the strategic decisions that matter. Learn more about our research here.

Room for more: hotel brands and their different approaches 

Testing the water in the short term rental sector by some of the world’s most prestigious hotel brands has been happening for some time. There have been acquisitions, investment partnerships, buyouts, affiliate approaches and more, and Becerril expects this to be an interesting area to watch in the future. “All of the major hotel chains have had a different approach to this one over the years,” he explains, “Accor bought One Fine Stay, Hyatt briefly invested in the Oasis Collection, OYO bought the @Leisure Group, and Choice Hotels has a partnership with RedAwning. One real winner is Marriott’s high quality vacation rental proposition, Homes & Villas, that also leverages on the brand’s loyalty scheme in order to boost its client base and allow points to be spent on short term rentals and in-property experiences. It’s a good proposition and one that I think will continue to expand, including competitors keen to follow suit.”

Brand standards and quality assurance mean something to loyal guests of a brand like Marriott and the application of these values to short terms rentals is powerful. Becerril is keen to point out that hotels and short term rentals are commonly not competitors, and in fact complement each other, “Travellers choose different accommodation options for different trips. For hoteliers, branching into the short term rental market isn’t about replacing hotel stay demand, it’s an area of business to expand and keep people within your brand fold for more of their travel experiences.” 

Alternative and complementary: how the industry is meeting and not merging 

The different types of travel requirement that short term rentals appeal to, over a hotel stay, mean that the two industries are meeting rather than merging. To Becerill, this is similar to how hotels and timeshares have operated alongside each other for many, many years. He outlines, “It is a different way of travelling. If you are going away with a large family group then a hotel doesn’t quite work for a variety of reasons. There’s unlikely to be the room configurations you need or the facilities that go hand-in-hand with meeting the needs of many different age groups, and for large groups, the cost can simply be prohibitive when opting for many hotel rooms.”

Short term rentals are not a pure threat to hotels, but also not a route to recover all of the lost demand seen in 2020. Becerril is keen to stress that there is room for hotels and short term rentals, but optimistic that forced traveller habit changes as a result of Covid-19 cautions and restrictions mean that the market share for short term rental is increasing. “It’s an interesting and promising sector, with an increasing profile that will bring new competitors and investment. This is good news all round for both consumers booking, and property owners and hosts. 

Sector giants like Airbnb are keeping the short term rental industry in headlines and front of mind. Becerril is passionate that there is definitely room for more businesses in this area, particularly local options specialising in one region or one audience segment, such as luxury, offering curated experiences on top of the accommodation. The key to success he believes is keeping the service, local knowledge and face of hospitality front and centre of any proposition. This is where Airbnb has excelled, and reached scale in a way that remains personal and relevant to the traveller. In a world of disruption and uncertainty, the comfort and safety of home – wherever in the world it may be and for however a short period of time – has never been more appealing. 

To explore the market dynamics and trends across different sectors of the travel and hospitality industry, PACE Dimensions’ interviews successful business leaders to bring to life the hot topics having an impact on the sector. These interviews highlight the latest insights around the industry and share a view on the opportunities and issues pertinent to those working or investing in travel and hospitality. The series of executive interviews are just one area in which PACE Dimensions provides thought leadership and advisory services to its clients.

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