Rental Market News – Short Term Occupancy Declines Nationwide
Airbnb and other short term occupancy rentals have boomed over the last 10 years, but as with anything, the party eventually ends.
As of June 2022, the short-term rental market has seen its biggest decline ever, and it’s likely that the market has not hit bottom yet as more economic uncertainty is predicted to hit our country this year.
Why Is Short-Term Occupancy Declining?
One of the biggest reasons why short-term rental occupancy is declining in the United States is inflation.
Thanks to the recent consumer price index report, we know that inflation spiked by 8.6 percent during the month of May, gas prices are also averaging over $5 per gallon nationwide, and broken supply chains have made it difficult for short-term rental owners to keep their property stocked with supplies that may have been common for them to have available just last year.
Even though occupancy has fallen by 8.6 percent for Airbnb and VRBO Nationwide, both companies have seen a net increase of 57,000 listings this year.
The net increase in short-term rental properties shows that investors are still eager to invest in Airbnb rentals but, inflation has already hit the industry hard and investors who are investing in Airbnb or VRBO right now are already late to the party.
The reality is that the time to invest in short-term rental properties was 3 years ago before Covid-19 rocked the world and most cities nationwide began to hit the short-term rental market hard with regulations that have made profitability not what it once was.
Will It Be a Dark Summer for Short-Term Rentals?
The summer travel season is officially here and during the time of year when most people hit the road for cities like Portland, Seaside, Beaverton, and other destination areas, the high price of gas, and inflation, are causing many people to stay home for the summer months.
Even though it’s predicted to be a hectic travel season for most people, summer occupancy for Airbnb’s and VRBOs have been down by 60%, as of May, and they are expected to fall much further by the end of summer.
Yes, consumers are still eager to travel and get away, especially following the end of lockdowns, but, with expensive flights, expensive goods, expensive gas, and inflation, it’s unlikely that most people will be staying in short-term rental properties this summer if they plan on traveling at all.
As an investor, you should be prepared for the worst. In this case, low occupancy due to a recessionary environment.
Depending on your market and the type of rental you’re operating, occupancy varies with the seasons. Do what’s best for your business in the long term.
Be prepared for economic fallout and changing STR laws (many local governments have turned their attention towards making it harder for STRs to operate in order to create more housing availability). Don’t allow yourself to be blindsided.
Many investors have enjoyed the short-term rental growth sparked by the pandemic. But now, times are changing again, and we must be prepared for what’s to come, good or bad.
Understanding The Typical Consumer
Consumers are still eager to travel during the summer months and get away but with more people spending money that they don’t have, it’s unlikely that the average American consumer will be able to afford to finance a summer vacation, especially when their everyday expenses continue to increase at home.
What does this mean for the typical short-term rental investor? Investors who are putting their money into short-term properties now in the hopes of capitalizing on the demand for Airbnb would be better suited to take those rental properties and convert them over to long-term rentals.
Long-term rental properties will always be a good investment, especially during times of economic times like we’re experiencing now in the United States.
The reason why long-term rentals are ideal is because of the simple fact that consumers will always need a place to live, and higher interest rates are making it unaffordable for the average consumer to purchase a house and accomplish the American dream of owning a home.
If the investor purchases a single-family or multi-family property, keeps it well maintained, modernized, and follows all the typical landlord-tenant laws for their city/state, they will be able to continue earning a consistent return on their investment from their property for years to come.
Is The Short-Term Rental Market Dead?
The short-term rental market is in by no means dead, but that doesn’t mean that investors should not use caution when putting their money into short-term rental properties, since as we discussed in this article, inflation is hitting consumers hard and, for the next 12–24-month, short-term rentals will not continue to produce the same return on investment as they have before.
The decline in the short term occupancy rental market following Covid-19 should have been an early warning sign for investors that Airbnb’s was not immune to economic uncertainty, pandemics, and other issues that affected the economy.
Thankfully, long-term rental properties continue to be a wise investment for investors, and it’s easier than ever before for them to convert their short-term rental properties into long-term rentals.
Long-term rentals will continue to provide investors with consistent, stable cash flow during these uncertain Economic Times and, what’s even better is that when an investor chooses a property manager to professionally manage the rental properties, they can continue earning passive income from those rentals moving forward.
About Rent Portland Homes – Professionals
At Rent Portland Homes – Professionals, we specialize in managing short-term and long-term rental properties across Beaverton, Portland, and surrounding areas.
Our company has a team that specializes in all aspects of property management including rent collection, maintenance, accounting, customer service and so much more.
If you’re thinking about converting your short-term rentals to long-term rental properties, contact us today by calling (503) 447-7735 for a quote, or click here to connect with us online.