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The Macro STVR Market & the Micro STVR Market in San Diego
April 29, 2020
Since the middle of March articles focusing on how the Covid-19 virus will affect businesses have flooded our screens. One area that has been impacted, an area that is new to our economy, is the short term vacation rental business. In this section of our newsletter we are providing you with three articles (excerpts from each) as well as current San Diego data. We felt this information is important given that San Diego & La Jolla has such a large number of short term vacation homes.
On April 6, 2020 Fastcompany.com published Airbnb’s Covid-19 Crisis Could be a Boon for Affordable Housing Airbnb hosts are seeing drastic booking declines amid the pandemic, but housing costs could go down as a result. Further into the article, author Steve Melendez writes,
“As for how online vacation rentals will fare in the long-term, experts say the shutdown has raised questions that are still too early to answer. The pandemic may change housing supply in cities and vacation towns where activists say Airbnbs have depleted a limited housing pool, driving up rental prices. Some activists are already seeing conversions to longer term rentals, though the ultimate impact remains unclear. But in the short-term, the crisis may be a particular shock to individual hosts who use money from short-term rentals to attend school, fund startup businesses, or simply pay living expenses…”
“With travel halted, Airbnb drew the ire of some of its hosts after allowing guests to cancel many reservations with no penalty during the virus outbreak, even if properties normally had stricter cancellation penalties.”
“A flood of cancellations came through,” says Scott Shatford, CEO of AirDNA, a company that analyzes the short-term rental market. He estimates an industry-wide cancellation for the next month of about 80%.” To read the article go here
On April 15, 2020 Fastcompany.com authors Ana Andjelic and Jessica Davidoof wrote Why Airbnb made a big mistake by ditching its marketing, The lesson here for any company is that holistic brand management should be the new marketing,
“Airbnb lowered its internal valuation by 16%, to $26 billion. The company also saw a 40% drop in bookings, and that was back in mid-March. Its hosts are so angry about the company’s recent removal of cancellation fees that some people online thought one particular host video was a parody. The entire travel sector is in turmoil…”
“How much a brand invests in maintaining the relationship with its customers during the crisis defines its long-term success. In the case of Airbnb, this means keeping both sides of its marketplace (the hosts and the renters) going. If hosts lose revenue and feel unsupported by the company, they will leave (and many of them already are) and may not come back…”
“After the backlash, Airbnb secured a $10 million relief fund for “super hosts” and is offering grants of up to $5,000 for the hosts most impacted by the recent change in policy. It will also cover 25% of cancellation fees for hosts.” To read full article go here
On April 28, 2020, Wall Street Journal writers Tripp Mickle & Preetika Rana authored, A Bargain with the Devil’-Bill Comes Due for Overextended Airbnb Hosts, Entrepreneurs built mini-empires of short-term rental properties, borrowing against revenue that’s now vanishing under coronoavirus lockdowns…
“Airbnb hosts saw $1.5 billion in bookings vanish in mid-March as the travel industry froze, according to market-research firm AirDNA LLC, which analyzes bookings. Airbnb gave guests full refunds and forced hosts to dip into their pockets or beg for leniency on April loans and rent…The startup that gave rise to the short-term rental economy is slashing expenses and secured $2 billion in financing this month, including a $1 billion loan at a hefty interest rate. The Wall Street Journal reported last month that Airbnb had racked up hundreds of millions in losses due to the pandemic. The company hasn’t publicly reported figures…”
“AirDNA estimates that a third of Airbnb’s U.S. listings for entire homes or apartments—excluding shared rooms—are by hosts with a single property. Another third are run by hosts with between two and 24 properties. The remaining third involve hosts with more than 25 properties…”
“Hosts’ sense of control disappeared as the crisis took hold and the company stepped in to ameliorate travelers’ panicked cancellations. Airbnb granted guests full refunds for stays between March 14 and May 31, wrenching the finances of those who had used Airbnb income to underwrite and sustain their mini-empires.” To read full article go here (WSJ may require you to subscribe).
Let’s Look at San Diego & La Jolla
San Diego currently has 11,230 active STVR listed online with 67% listed on Airbnb, 18% listed on VRBO & 15% listed on both platforms per airdna.co. 82% of the rentals are whole home rentals, 17% are private room rentals and only 1% are shared room rentals. How many of these homes are owned by companies or people just trying to keep paying their bills is hard to know for sure.
La Jolla currently has 991 homes actively listed for daily and weekly rentals online with 50% listed on Airbnb, 23% listed on VRBO & 23% listed on both platforms per airdna.co. 87% of the homes rented are whole homes while 13% are private room rentals.
With this change in the short term vacation rental business due to the virus, we may see more homes coming to the market for long term rent and for sale due to vacancies and low bookings.
If you have questions or are considering selling your home, contact us today to discuss your options.