The short-term vacation rental industry may not have emerged from the past year entirely unscathed, but the category as a whole has proven itself to be stronger and more resilient than traditional lodging sectors.
"When the pandemic first hit, all the short-term rental demand fell off a pretty steep cliff," said Julie Brinkman, CEO of short-term rental revenue management platform Beyond Pricing. "But then, once lockdowns started lifting in mid-May, right around Memorial Day, we saw reservations really start to bounce back strongly, particularly in coastal and nonurban markets."
Brinkman added that, thanks to an extended high season -- with remote work and schooling options helping to drive summer-like vacation rental booking demand well into October -- a notable number of Beyond's short-term rental manager and owner clients actually enjoyed a better year in 2020 than in 2019.
"In my opinion, the pandemic has caused the market for short-term rentals to leapfrog at least a few years in terms of growth," said Brinkman. "You had Gen X and baby boomers who maybe were more of a traditional hotel demographic trying Airbnbs and Vrbos for the first time and really like it, so you're seeing growth in that overall pie of demand."
According to Nicolas Galantini, senior account manager for vacation rental and short-term rental consultancy AJL Consulting, much of the short-term rental industry's pandemic-era appeal has been fueled by one key element: privacy.
"During Covid, private space became the No. 1 amenity that everyone was looking for," Galantini said. "Everyone was really trying to limit their contact with strangers."
Many short-term rentals also benefited from a geographical advantage, added Galantini.
"You can find vacation rentals in almost every town on Earth," he said, "while for most hotels, you would need some sort of pre-Covid attraction to bring travelers to that destination. So when you had people trying to get out into open space and fresh air, they were automatically drawn to that vacation rental product."
A bedroom at an Airbnb Plus accommodation in Seattle. The company did better than its forecasted decline in revenue for 2020.
The category's strength has been reflected in several travel industry earnings calls in recent months, with Airbnb, in particular, reporting a relatively solid snapback in demand during a late February call. Airbnb co-founder and CEO Brian Chesky told investors that, despite forecasting a full-year revenue decline of more than 50%, the company's revenue was down 30% for 2020 and fell just 22% year over year in the fourth quarter. He expressed strong optimism for 2021, citing "a significant travel rebound" on the horizon.
Likewise, Expedia Group has consistently touted Vrbo as one of its sole bright spots throughout the Covid crisis. During a mid-February earnings call, Expedia CEO Peter Kern credited Vrbo with driving fourth-quarter improvements for the company, calling the short-term rental platform "a terrific use case with the whole-home market being very attractive."
Even Marriott International, which entered the short-term rental sector in earnest with its 2019 launch of Homes & Villas by Marriott International, highlighted vacation rentals during its year-end earnings call last month. Although Marriott president Stephanie Linnartz acknowledged that the Homes & Villas arm has yet to have a "material" impact "from a financial perspective," she reported robust rental business throughout the summer, with the vast majority of 2020 bookings coming from Marriott Bonvoy members.
Marriott has also grown its Homes & Villas footprint significantly, with Linnartz announcing that the business has gone from just 2,000 whole-home accommodations at launch to around 25,000 globally.
"I think that the hospitality companies who have one foot in both segments are realizing that the vacation rental industry represents a very large opportunity for them and that they need to tap into it even more than they have already," said AJL Consulting's Galantini. "Because now, the default hospitality models are completely converging."
Like Marriott, fellow hospitality giant Accor has also thrown its hat into the short-term vacation rental ring with its luxury Onefinestay offshoot, which it acquired in 2016. Late last year, the company appeared to once again be ramping up focus on the short-term rental sector, debuting a new Apartments & Villas booking platform in December.
The platform consolidates over 50,000 apartment, villa and chalet accommodations from across the company's extended-stay hotel brands, privately-owned branded residences and the Onefinestay portfolio.
Hospitality holdouts
By contrast, however, companies like Hyatt and Hilton have either offloaded early forays into the short-term rental space or eschewed them entirely.
"Hilton has always said, 'We have our hotels, and we know our swim lanes,' which certainly makes sense," said Robert Cole, Phocuswright's senior research analyst for lodging and leisure travel. "But at some point, if you have Marriott reporting great success [with short-term rentals] on their earnings calls, Hilton may start feeling some pressure and getting questions about why they're leaving that sector of the market on the table."
Meanwhile, for those who are bullish on short-term rentals, the time could be ripe for M&A activity. Galantini, who describes the current short-term rental landscape as "extremely fragmented," predicts that deal-making in the sector could pick up in the near term.
In mid-March, in fact, vacation rental management group Vacasa appeared to kick things off with a takeover of TurnKey Vacation Rentals, which manages approximately 6,000 premium vacation rentals across the U.S.
"We do see a lot of interest in the vacation rental space from [investors] who want to try to consolidate things," said Galantini. "And we are seeing a lot of conversations happening between companies looking to create something larger."