Perhaps more than any other property industry, the short and medium term rental markets have seen the biggest changes since the onset of the global pandemic in March. There are uncertain futures for many companies such as Spotahome and Uniplaces as their core market vanished almost overnight. There are 'curated living' companies such as Sonder and Lyric who had big interest from VC capital but have seen the interest dry up. And then there is the big IPO on the horizon for Airbnb which may see road bumps and changes to its model.
Who better to speak to in order to try to understand the landscape than Pierre Becerril, CEO and Founder of Transparent, a company that specialises in providing data around the vacation rental industry.
Can you tell us a little bit about what Transparent does?
Transparent is the global leader in providing data intelligence for the vacation rental industry, tracking 35 million listings. We built the company back in 2016 with the goal to empower property managers, investors and hotels to make smarter revenue, distribution and investment decisions.
Where else to start but with Airbnb’s upcoming IPO. What is your opinion? Will you be investing?
Airbnb is the category leader in the short-term rental industry. Concretely, Airbnb has the strongest brand (today close to two thirds of its traffic is direct, compared with a little over one third for its closest competitor Booking.com) and benefits from a clear advantage in terms of inventory with around 6.6M units, representing ~75% of supply market share globally.
I am very bullish on the industry's future post covid, and believe that Airbnb is in a great position to recapture its growth, so I would definitely look at investing in the company when it is brought to public markets.
As we’ve recently seen Airbnb CEO Brian Chesky apologise for his company’s impact on cities, what do you think Airbnb’s impact has been on cities like Barcelona and how do you envision it changing?
Airbnb has brought big innovation to the hospitality industry, unlocking global scale for short-term rentals and establishing the sector in urban areas and peoples’ main residences. Sometimes innovation goes faster than regulation, so it's not surprising that over the past 8 years not everything has been harmonious from that standpoint.
I would say that by now a lot of progress has been made. We see that many cities and destinations have already adopted solid regulations to control this activity and ensure it can be carried out in a sustainable manner for all of a city's stakeholders.
Do you think others may follow Airbnb’s push towards longer-term rentals?
This week Booking.com actually announced that they were launching mid term rentals on their platform, which is a sign that OTAs (online travel agents) are eyeing the growing, global, nomadic demand of travelers who can live and work where they chose, and are seeking the comfort of a furnished rental as their temporary accommodation. In the short-term the question is: with the international student market and the corporate relocation market both on hold due to the COVID-19 crisis, how big can the demand for mid term rentals really be?
We have seen a lot of articles saying that people are increasingly looking for more rural short term and vacation rentals, is this something that your stats back up?
Definitely, we see that if urban destinations like Paris or London have struggled to attract travelers this summer, rural and seaside rentals have recovered faster, especially with domestic travelers filling the demand gap (in the US or in France for instance). We even see that current demand for leisure type vacation rentals later in the year is higher than it was this time last year (+7% demand vs. last year at the same time, vs. -22% demand for urban destinations).
Transparent’s products are marketed to DMOs and Municipalities. How has the interest from the destinations themselves evolved and what do cities themselves stand to gain from the data around short term rentals?
Interest from DMOs and municipalities has been growing over the years as the stock of short term rental beds has grown larger than the stock of traditional hotel beds in many destinations. The main interest from DMOs lies in understanding the size of the inventory, measuring the levels of demand and ADRs (average daily rates) and comparing them to the hotel industry, as well as tracking guests' origins. Most DMOs run active campaigns to bring in travelers, and Transparent helps them measure if these campaigns have an impact on those using short-term rentals. Without Transparent's database, it is very hard to accurately track these important data points.
We’ve seen the international student market all but vanish overnight. How do you see companies like Spotahome and Uniplaces adapting? What other types of demand might they tap into?
Like we mentioned earlier, a new market has emerged from the COVID-19 restrictions with the category of persons looking to leave their home and relocate to a more friendly destination. The big question is if this market will be large enough to support the mid term rental industry. I personally believe that we will see mobility resume and even grow bigger once the health crisis recovers as more and more professionals will be flexible to work remotely and companies will be more flexible with their office locations vs. having large, centralized headquarters. In the long term, I believe that this industry will gain from this crisis. On a side note, I recommend looking at this fun website tracking relocation intents.
We’ve heard from venture capitalists that there is a buzz around ‘curated rental’ companies such as Sonder. While these may not have much penetration in Europe yet, do you see them becoming successful here?
Sonder's originality is in its business model of offering branded short-term rental accommodation via its full property management model. Sonder takes on long term leases to rent back the properties short-term to travelers. This model at scale gained popularity in the US has been put in jeopardy by the COVID-19 crisis, with several companies having flamed out (Lyric, Stay Alfred, etc.). In the current environment of volatile demand, the lease model is very risky and the question is: will this shuffling reinforce Sonder's position or will it ultimately challenge its model?
We’ve seen a lot of anecdotal evidence saying that a lot of apartments are coming off short term rental platforms such as Airbnb to be listed on the long term rentals market. Is this something that your figures back up?
Actually, if we have indeed seen a small decrease of supply in April, the current levels of supply are back to where they were pre-crisis. It's true that some home owners and managers have looked at listing their properties on traditional long-term listing sites to offset the impact of the crisis on their revenue, but most of them have kept their listings on Airbnb and other platforms at the same time in order to not lose their reviews and positioning for the future, which shows that the shift to longer term rental has been seen as a temporary solution.
What is the headline from the data Transparent has been collecting around the impact Covid-19 has had on the vacation rental market?
Vacation rentals are extremely well positioned in the current market context: despite volatility of demand, occupancy is back up in most leisure markets and largely exceeds that of hotels. In parallel, ADRs have resisted better in short term rentals (in the US hotel ADRs are down 31% according to stats from STR, while average vacation rental ADRs almost back to 2019 levels). Finally, it appears that we are now living with a new nature of travelers: much more domestic, non-urban oriented, staying longer on average and looking to book with far less anticipation.