Pandemic Response: 3 Ways Vacation Rentals are Coping with the All-Time Low Demand

Vito PauletićCOVID-19
8 min read

The year 9/11 attacks have shaken the world to its core, international travel has dropped by 11%

Eight years later, a financial crisis that left lasting scars on the global economy hit the industry once again, reducing both demand and rates for tourist accommodation by 7% and 7.9% respectively

Fast-forward to 2020, just when the industry started to display a healthy growth curve, and another devastating crisis strikes. 

As of this writing, over 678,000 people are hosting the world’s most unwanted guest — COVID-19. 

An Unprecedented Drop in Occupancy 

Globalization, combined with its stealthy, unpredictable nature helped the pathogen spread uncontrollably across borders, forcing countries into lockdowns and bringing life to a near standstill.

Consequently, the demand for travel in the last couple of months has been virtually non-existent. 

For hotels and vacation rentals, this tanking curve is uncharted territory.

People are postponing — or outright canceling — their travel plans with OTAs on their side, prompting accommodation providers to furlough or dismiss employees and shut their doors indefinitely.

Either by their own decision or through regulatory requirements, nearly 40,000 European hotels have closed in late March, those operating through forced to fully reimburse every single guest even if they managed to reach a mutual agreement beforehand.

To give you a more granular overview of the pandemic’s impact on travel and tourism, here’s a detailed breakdown of the occupancy declines per country:

Source – STR 2020, CoStar Realty Information, Inc.

As you can see, the effects are catastrophic, though there are some positive trends worth pointing out. 

Submarkets Showing Signs of Immunity

For one, Mainland China, Japan, and Singapore are slowly recovering despite being the epicenters of the pandemic, their revival largely attributed to an effective government response.

We are also seeing a reservations boom in non-urban, ”hideaway” style destinations that are clearly less vulnerable than others, with vacation rentals in Pacific Beach, Washington, for example, recording a whopping 378.7% growth.

Source – AirDNA

Other destinations that are faring relatively well are airports such as those in Dublin, Heathrow, Gatwick, and Paris CDG. It’s both unsurprising and sad that, at the moment, these are Europe’s top performers in terms of occupancy and ADR (Average Daily Rate).

Still, these outliers benefiting from the COVID-19 are only a byproduct of the market’s highly-diversified nature, and the vast majority of vacation rental owners around the globe are suffering record losses.

Here’s what they’re doing to stay afloat and help their community.

1. Joining the Frontlines: Hosting Essential Workers

Interestingly, Wuhan, the city in which this pandemic originated from, is now among the world’s best-performing submarkets in terms of occupancy, mainly due to a massive inflow of medical staff in need of housing. 

After having closed half of its hotels in January, China now has 87% of its hotels open for business. In the space of two months, hotels have reinvented their business model to provide accommodation to medical personnel treating coronavirus. 

Source – STR 2020, CoStar Realty Information, Inc.

Others are following suit. 

In Italy, the #StateACasaNostra movement was launched by six major companies managing short-term rental apartments in a bid to support medical and nursing staff fighting the pandemic. 

One of the initiative’s supporters, Michele Ridolfo, CEO and Founder of Wonderful Italy, says:

“Even without tourists, we are at work for when this emergency ends and people will have the physical and psychological need for a vacation.”

”In the meantime, companies must also help fight the spread of Coronavirus with their own work and this initiative goes in this direction.”

More radical measures can be seen in Spain, where, in an aim to alleviate stresses on its overburdened health system, 40 hotels have transformed into makeshift hospitals, offering the government additional 9,000 beds for future patients.

If anything, this crisis has shown us that despite being severely financially strained, accommodation providers are among the quickest to lend a helping hand to their communities and play an important role in our society. 

2. Switching to Long-Term: Targeting Stranded Travelers and Refuge-Seekers

Apart from essential workers, a couple of niche consumer groups have emerged from the outbreak and are still keeping vacation rentals in business: 

  • travelers who are stuck and need a plan B before they can return home 
  • guests seeking refuge hideaways in remote areas 

Forward-looking vacation rental managers throughout the world have shifted their focus on these groups by completely repurposing their properties as quarantine-ready accommodation.

Jerusalem Holiday Homes, for example, has all of its vacation apartments fully booked. 

But instead of vacationing, guests here are staycationing. The company has started targeting some 60,000 Israelis who are in self-quarantine with slashed prices and special provisions to eke out some income. 

“We were either going to lose business, or choose to adjust to what is happening,” Eve Jacobs, the manager at Jerusalem Holiday Homes, says. 

The same approach is adopted elsewhere, with the Indian hotel chain Oyo Rooms offering steep discounts for its accommodation worldwide in an aim to attract remote workers and stranded travelers. 

Most rates on offer are reduced by 40-50%, while in the U.S., Oyo welcomes doctors, nurses, and emergency service workers in need of a place to rest or shower free of charge.

3. Freezing Operations: Weathering the Storm & Preparing for the Future

With nothing but time on their hands, some vacation rental owners are making the most of their empty calendars to upgrade their rental, something they’ve long planned but never got around to doing.

Nick, who’s hosting an apartment in Niagara Falls, made a range of improvements to his space — from installing a smart lock to retouching the spots where paint has started to chip away.

He advised: ”If you have a lot of time off at the moment, go ahead and make these improvements. Your future customers will thank you for it.

Speaking of his response to the pandemic, Nick said: ”I was proactive in my pricing after the wave of cancellations, and managed to secure a week-long booking from someone who had essential work to carry out in my area… I am extremely lucky to have had only one empty night since the virus took over North America in early March.

”I intend to ride out the virus in the short term rental sector, and hope my high ratings and lower prices will lead the few people who will still travel, to rent my space over others and — once I’m done with my upgrades — enjoy it better,” he added. 

Is There an End in Sight to All This?

It’s hard to tell.

Unlike 9/11 and the Great Recession, this time we’re dealing with an invisible enemy, one that has no interest in people’s terror or bank accounts, only their cells.

If we’re going by the numbers in China, it feels like the Western world will need at least two months to get back on its feet. But considering the fact both the U.S. and Italy have now surpassed China’s COVID-19 case count, that timeline may be far too optimistic. 

We don’t know when but we do know that recovery will happen. 

We’ll closely monitor the situation and inform you of the latest changes in the market. 

In the meantime, you can make use of this hiatus to outline your long-term strategy and invest in technology that will help your rental business stay ahead of the curve once the demand picks up.

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Vito is a content contributor at Rentlio. A trained journalist who switched to the dark side and now writes conversion-driven copy and an occasional blog post along the way. Proud father of two dogs.