May 6, 2020
The COVID-19 pandemic has disrupted travel globally, causing a drastic decrease in demand along with sweeping short-term rental bans. As the market dries up, property managers are desperate to secure revenue, dropping prices and switching to longer-term stays to attract bookings. Consequently, average daily rates (ADR) have sunk to rock-bottom.
Based on our data, Autohost has found that the average ADR has decreased from approximately $104 a night to $69 since the outbreak. That’s a 33% decrease in price—and a serious hit to anticipated summer revenues.
Before the pandemic, stats from Transparent Intelligence show that the highest ADRs were achieved through booking lead times of 30+ days and stays of 2 to 3 nights. But these kinds of bookings have become nearly impossible to pin down. Lead times have shortened as travel plans hinge on the pandemic, and the average length of stay has increased from 4 to 11 nights as people book mid-term rentals for transitional housing solutions.
While bouncing back from the pandemic won’t be easy, there are recovery steps you can take once travel bans have been lifted. Here are a few tips on how to get your revenue back to pre-pandemic highs.
Market to domestic travellers
According to Simon Lehmann, CEO of AJL Consulting, it will be 12 months before international travel returns to full scale. Instead, he says domestic travel will be the first vertical to bounce back. In fact, it’s looking like domestic travel may be stronger than ever. Rentals United has found that 87% of the U.S.’s total 2020 bookings are domestic travel, a 21% increase from the same period last year.
To make sure you’re on top of the domestic booking spike, market your properties to locals, advertising them as safe spaces to get away and spend time with family. Hotels and motels will still feel too crowded, making short-term rentals the perfect isolated escape.
Leverage rural properties
Lehmann also predicts that seasonal properties in rural settings will be the first vacation rentals to see bookings return. For example, Tahoe Luxury Properties, a property management company operating on the shores of Lake Tahoe, has experienced a 20% booking increase for this July and August with prices 15% higher than they were last year.
Once lockdowns and travel bans are lifted, these types of properties will attract guests who are too nervous to travel by plane. Instead of urban destinations, we’ll see people driving to less populated areas where they can spend time with friends and extended family.
Show guests you’re an upstanding operation
One of the biggest issues with short-term rentals is that the industry is divided. For example, if you’re staying in a hotel chain, you know what to expect each time. But in the case of short-term rentals, each property is different. No coherent standards of care or cleanliness regulate the industry. This is why short-term rentals have developed a bad reputation; they’re being dragged down by careless operators.
In order to keep short-term rentals as guests’ preferred accommodation, we need to build trust. To do this, property managers should take this time to step back and retell the short-term rental narrative. This means proving to guests that we are responsible operators, committed to the high standards of cleanliness and care they expect.
Retelling the short-term rental narrative starts at the ground level of your operations. To secure bookings once the pandemic has subsided, you need to show guests that you are following proper cleaning protocols and that their safety is your top priority.
During an economic downturn, most people aren’t looking to empty their wallets on a place to stay. Appeal to your target traveller with rates suited to their travel plans.
A great way of doing this is through occupancy-based pricing. Instead of charging a flat rate for the booking, provide a discount if there are fewer guests. Say you have a three-bedroom that’s priced based on a max occupancy of six guests. If you have a family of three looking for somewhere to stay, your property won’t be a viable option.
When travel resumes, it’s unlikely that people will be travelling in large groups. Market your properties to smaller groups and families by setting your pricing based on the number of guests. To stand out even more, consider policies that accommodate children and people with pets.
Offer flexible cancellation policies
As flights were grounded and events postponed, COVID-19 caused mass booking cancellations around the world. According to Transparent Intelligence, Rome topped the chart in March with 32% of its bookings cancelled over a seven-day period.
Fewer bookings have caused decreased revenues, making it difficult for property managers to pay back refunds. To stay afloat, they’re trying to hold onto as much revenue as they can. That’s why many property managers have devised alternative solutions, including credits for future stays.
But guests are going to be hesitant to book with a company that doesn’t offer a flexible cancellation policy, especially following the pandemic. Flexibility in cancellation policies, however, doesn’t necessarily have to mean a 100% refund up until check-in. Consider setting a longer window for free cancellation and shorten the penalty window. That way, travellers have the flexibility to cancel closer to the check-in date.
Up your security measures
While lower rates attract more guests, they also make your properties more vulnerable to exploitation. In desperate times, guest screening might not be the first thing that comes to mind, but it is one of the most important. Autohost’s data shows that the potential for risk-related incidents has risen by 13% since the COVID-19 outbreak.
This is due to a number of factors. The first is that with domestic travel predicted to increase after the pandemic, local guests will be a property manager’s main source of revenue. But locals tend to pose higher risks because they’re less likely travelling for a family visit or sightseeing and more likely to be booking your property for prohibited activities, such as throwing a party.
The second factor is that decreased revenues has caused property managers to increase their risk tolerance, making them more likely to accept local guests and other reservations they normally wouldn’t. But the property damage and chargebacks caused by bad guests will only exacerbate financial losses at a time when you desperately need the cash and resources.
Finally, booking windows have shortened leaving, property managers less time to screen guests. Desperate for revenue, a property manager is more likely to accept a last-minute booking rather than taking the time to investigate the guest’s intentions.
To protect your property, you need to thoroughly screen each reservation, even if this means turning down last-minute, suspicious bookings. By making security a priority, you save the revenue that would be wasted on chargebacks and property damage. Instead, you can redirect that revenue into building a brand that guests trust, securing more bookings.