The Mid-Term Rental Market is Exploding and It's Here to Stay
Short Term Rental Demand Has Shifted to Mid-Term Rental Demand
We all know the last 7 weeks has been an onslaught of short term rental cancellations. It's been a stressful time for property managers and property owners in the space. Overnight, the traditional reasons for short term rentals, such as 'friend-cations', group celebrations and getaway weekends aren't feasible until these is more clarity from scientists and politicians on what the future looks like.
However, there's a silver lining in this whole ordeal. New data suggests that the unique set of coronavirus dynamics have created demand for a new type of rental product: mid-term stays.
AirDNA's data is showing an enormous spike is mid-term rentals.
"Since February 17, 2020, the average global length of stay has increased from 3.3 days to 7.7 days – an increase of 133 per cent. One to seven-day reservations – a segment that normally comprises almost 80 per cent of all nights booked – now accounts for only 30% on Airbnb." - AirDNA
It makes sense why the trend has taken hold during coronavirus lockdowns: people looking to escape cities for rural rentals, those stuck somewhere because of travel bans, self-isolation housing, new remote workers, etc. But the real question is this: will Mid-Term Rentals be here for good? I think the answer is a resounding yes.
A Bird In One Hand is Worth Two in the Bush
In fact, as I write this, the mid-term trend has already personally affected me as a property owner AND as a renter. As a property owner, all 7 of my May Airbnb reservations were cancelled because of Coronavirus, and I decided to rent the house out at a very low rate for 30 days to a VA doctor who had be reassigned. Before that, my house was rented out for a low nightly rate for 14 days to an essential work crew, which was the longest rental I'd had in 2 years.
Meanwhile, my childhood friend and I are renting a furnished house in the mountains of Colombia for 6 weeks (and possibly longer), as we aren't able to leave the country and didn't want to stay under strict quarantine rules in the crowded city. (By the way, don't let everything you see on the media scare you, being overseas right now isn't all gloom and doom. We aren't crying to the embassy to go home on a humanitarian flight.) 👇
The property owner in Colombia was happy to give us his house for a 45% monthly discount in this time of uncertainty, just like I was will to do with my house. As they say, "A bird in one-hand is worth two in the bush."
Over the last week, I've heard from several friends and families that are looking to transition from long-term leases to mid-term rentals during this time of uncertainty. I'll explain why below, and how the data is supporting the thesis that 2020 will be the year of mid-term rentals.
Airbnb has doubled down on embracing 'longer stays' for the long term
For starters, the CEO of Airbnb Brian Chesky believes this is the future of Airbnb's growth. He paints an interesting picture of how he sees the travel industry moving forward. He believes “multi-month and indefinite stays” will be a “huge part” of Airbnb in the future. In the weeks since the pandemic surged throughout the world, its bookings for stays of 30+ days have risen from around 15 per cent to almost 50 per cent.
Traditional Long Term Leases Aren't Flexible Enough In These Uncertain Times
Uncertain times call for more flexible housing agreements.
Until there is a vaccine available for widespread use, the threat of the coronavirus returning (leading to more lockdowns) will make it nearly impossible for businesses to plan months ahead. This anxiety about the future will undoubtedly rub off on employees. Without long-term planning possible, it’s difficult to envision individuals electing to sign up or renew 12 month leases. What if their job disappears? What if they don't need to be in the office? 12 months is an eternity right now.
StreetEasy, a booking platform for NYC renters has released new data showing renters are looking for more flexibility when it comes to their living situation as the coronavirus pandemic continues.
Since April 1, the share of rental listings on StreetEasy offering short term or month-to-month leases has grown by more than 70 percent. Meanwhile, the share of furnished rental listings offered in April rose by more than 40 percent over the previous year. They reported the demand for more flexibility comes from renters that are trying to delay a permanent housing decision as well as college students leaving their dorms and medical personnel that have come to New York City to help on the front lines. As a result, the website’s share of short term or month-to-month leases has grown by more than 70% since April 1.
Remote Workers & Their Families Will Become Digital Nomads
Coronavirus is expediting the inevitable future in many ways. For example, right now millions of Americans are working remotely, after spending their careers in a traditional office. As states reopen, many governments are likely to say "Any workers that can work remotely, must do so." Moreover, their bosses now trust them to work remotely if they've been productive during this time.
After years of being chained to an office desk, these workers will have the opportunity to live the digital nomad dream. The more adventurous will find top places on NomadList. The less adventurous will find spots in the United States near beaches, golf courses, cultural centers, the mountains, or whatever else their dream entails. They will find great deals on excess STR supply and flights.
One of my friends told me when his NYC lease is up in June he's going to store his belongings at his parents' house and becoming a digital nomad. This is finally his opportunity to experience a new culture while still earning a paycheck. Another friend had his salary cut 20% because of Coronavirus, so he used it as an opportunity to negotiate with his boss to be able to work remotely and stay in mid-term Airbnb's abroad until his original salary is restored. Yet another friend negotiated with their boss to work remotely for 3 months and plans to escape to the mountains of Asheville, North Carolina.
In a crazy time like this, who is going to commit to a 12 month lease? People want flexibility more than ever. Additionally, work-from-home families will look for creative ways to educate their kids, and change up the scenery after weeks of going stir crazy in quarantine.
Students & Medical Workers Will Demand Mid-Term Arrangements
No one knows what the future will hold. Will in-person colleges be back in session in the fall? Will the coronavirus flare up again in the fall like the Spanish Flu did, forcing colleges to send students home again?
Savvy parents won't commit to a 12 month lease for off-campus housing. They will look to the excess furnished housing supply that was previously used as STR to meet their needs. Parents will gladly pay a little bit extra for the flexibility of not being committed to a long-term rental contract. On top of that, colleges are already planning to limit existing dorm space to as low as 1/3 of full capacity. This will limit supply and force college students to look for other living arrangements.
Likewise, medical workers will face the same amount of uncertainty. Last month, our guest Zafar Mawani wrote about how many urban STR's will be converted into self-isolation housing for medical workers who don't want to risk living around high-risk family members. But that's not the only uncertainty medical workers are facing. Will a flare up happen in a big city where they're forced to drop everything and go help the new situation? Will they have to go through the pain of moving all their furniture again? Long term, unfurnished rentals just don't make sense for many in 2020. As leases end, look for renters to transition into mid-term rentals with more flexible arrangements.
So How Can Property Managers and Owners Adapt to this Trend?
Here are 7 ways I can think of off the top of my head. If you have any other ideas our readers would love to hear about them in the comments section or you can send them to me: email@example.com
1. Every STR guest is a potential Upsell Opportunity to a Mid-Term Rental
Airbnb has allowed hosts to cancel rentals without penalty, and continues to periodically extend this arrangement. This means every short term renter is a potential upsell opportunity right now. There is no guarantee that any guests will come until June 15th, so you need to treat future bookings like they won't happen. Again, a bird in one hand is better than 2 in the bush. Moreover, many property managers will use the opportunity to create a direct booking, instead of going through Airbnb for the extended stay.
2. Access your adding weekly, biweekly and monthly discounts on all OTA's.
According to AirDNA, only 48% of Airbnbs currently have weekly or monthly discounts. This means many are asleep at the wheel for the changing trends. To throw some hackney pop psychology at you: "You can't control the wind, but you can control the sail."
3. Consider unlinking other booking platform calendars to Airbnb's calendar until June 15th.
These are strange, unprecedented, fluid times. Airbnb is allowing hosts to cancel any reservations before June 15th without penalty. Renters are also able to cancel without penalty on you regardless of the cancellation policy they agreed to, so there is no guarantee you will even see that income. This means that one 3 day rental still on the books could be preventing you from receiving a significant more monthly, guaranteed income from a mid-term renter.
Although it feels a little weird to suggest, I don't see anything wrong with being opportunist and keeping booked dates open on other platforms in order to attract mid-term stays. It's good to have options.
4. Test and Advertise Internet Speed
Guests who are planning on staying at a house for medium term tend to care deeply about internet speed for streaming videos, getting their work done, and playing online video games.
Consider using this extra time to check the internet speed at empty properties, using this free and fast tool. It only takes a few seconds of you or your cleaner's time to do. If the Internet Speed is fast, post the screenshot to your listings to set you apart from the competition and prove your claims about fast Wifi. If it’s not as fast, you can also be proactive and contact the internet provider to fix the issue.
5. Advertise "Maid Services" as an Optional Amenity.
If you are getting more mid-term rentals like we are forecasting, your cleaners will need work. At the same time, busy digital nomads and families might find maid services the perfect amenity that puts them over the edge to book with you.
6. Consider marketing your properties as a mid-term listing to medical professionals and students during slower times
In Rhode Island, it's commonplace for landlords to rent a furnished house to a group of URI students during the school year and to weekly vacationers in the summer. Perhaps, during this time, arrangements like this will begin to become more common in other parts of the country that are near hospitals and schools. You could even only rent out the house for one semester at a time, and do a STR during the holidays. There are many ways to get creative by leveraging housing groups for students and medical professionals.
7. Consider adding security deposits to your mid-term rentals
From my experience, Airbnb's insurance and reputation system is usually good enough to limit damages. However, with mid-term rentals, there is a much greater chance of damage. For one, people will be spending more time inside in many cases. There's a reason that the long-term rental industry universally keeps security deposits to deter damage. If you are going to dip your toe in the mid-term rental market, strongly consider adding up-front security deposits to protect the house and furniture.
Thanks for reading the article. I'd love to hear any feedback in the comments or you can email me directly at firstname.lastname@example.org.
By the way, if you have extra time to work on your business, check out the 5 Ways VRMs Unknowingly Lose Money Mini-course I'm giving away to Property Managers for free to help them to save money during this time.
-James von der Lieth