David Friedman Forbes Councils Member
Virtually every aspect of the economy has been impacted by the coronavirus pandemic. One of the many areas that has been particularly hard hit has been the short-term rental industry. Hosts have faced a perfect storm of physical distancing guidelines and travel advisories, along with government regulations that, in the case of Britain, have outright banned the use of Airbnbs for anything other than providing shelter for essential workers. On top of it all, a global recession is likely going to keep travel to a minimum for the foreseeable future.
As a longtime Airbnb host myself, I’ve thought a lot about how people who depend on income through short-term rentals can adjust their businesses in ways that will result in better financial outcomes. Here are a few ideas for a range of different types of short-term rentals, from stand-alone properties to spare bedrooms.
For those who own seasonal properties that are typically rented for the majority of June through August, I’m sure you’ve already had booked guests attempt to cancel, and you’ve probably seen a slowdown in people contacting you this spring to see if you have any summer availability. Here are a couple of ways to make the best of the current situation.
First, if the public health outlook in the U.S. improves by June and people become able to take summer trips, try to market your place as “perfect for a last-minute getaway.” Odds are that many people who were planning to travel abroad this summer will opt for less expensive vacations, and they could see your place as a great alternative.
Second, try to find longer-term guests. Particularly during a summer where the spread of disease will remain on everyone’s minds, you might find more interest in renting your place out for a month or two to just one family, as opposed to trying to sell a series of week-long or weekend rentals.
If you typically don’t rent out your seasonal home but need some supplemental income, consider renting it out for at least part of the summer. Short-term rental sites like Airbnb and HomeAway make it easy to get up and running, and I’d highly encourage you to go through one of the well-established short-term rental companies as opposed to trying to rent it out yourself. These companies offer many protections for hosts in the event of a disagreement between you and the renter.
Investment Properties Rented Out Year-Round
If you own a separate investment property and have been generating revenue solely through renting it for short-term stays, the good news is that you are well positioned to continue to build wealth through your property. You’ll just need to find a different revenue stream.
Given that we’ll likely see fewer people traveling for the rest of 2020, I’d encourage you to consider turning your investment property into a long-term rental. Assuming you’re able to find a stable tenant who pays market rate for rent and agrees to a yearlong lease, you could very well build more wealth over the next year than if you tried to piece together a series of short-term guests.
If you’re interested in exploring this further, last year I wrote about what you need to know to turn a home into a long-term rental property.
When U.S. residents begin traveling again for work, family visits and vacations, we likely won’t see an immediate return to normal in the short-term rental market for people who rent out their homes when they’re not there. I imagine there will be a period of months, if not years, where people who rent out their homes when they travel will be concerned about their guests bringing in a disease, and guests will worry that hosts have not disinfected their homes before inviting the next guests in.
One way to mitigate this issue is to put in place even more stringent cleaning practices between guests and communicate these practices effectively. For instance, as a host, you may have had cleaners come in to “clean as necessary” in between guests, and paid for the occasional deep cleaning every few months. In 2020 and beyond, you’ll have to ensure guests that cleaners disinfect all surfaces and do an extremely thorough cleaning between each guest.
I won’t sugarcoat this scenario. If you’ve been renting out a bedroom in your home, you likely won’t be able to host guests for the foreseeable future.
If you’re ambitious, you could consider doing a renovation that creates a separate entrance and exit to the room or section of your home that you’ve been renting out. But this would really only be possible if you live in a stand-alone house. For those of you who own a unit in a multifamily house or apartment building, this type of renovation probably isn’t feasible.
The market for short-term rentals will recover. I imagine this recovery will take years, not months. Given the entrepreneurial spirit of many short-term rental hosts, I have no doubt that they will find creative solutions to continue generating income through their properties during these uncertain times.