Short Rental Industry is Crashing

by Harrison Smith

In this article, we will discuss the recent headlines regarding the potential crash in the short-term rental market, also known as Airbnb rentals. Short-term rentals are a separate category of real estate where properties are bought and offered for rent on a nightly, daily, or weekly basis. There have been reports suggesting a significant decline in the revenue per available listing (RevPAL) in some markets, which could have a catastrophic impact on property owners. However, there is conflicting information on this matter, and it is important for investors to evaluate their short-term rentals and be prepared for potential changes in the market.

The Decline in RevPAL

Industry tracking website AllTheRooms has reported up to 50% declines in RevPAL in certain markets. This metric measures the average rate of the listings available in the short-term rental market. The decline in rates is attributed to several factors, including an oversupply of short-term rentals, vacationers seeking alternative accommodations such as hotels and resorts, and overall reductions in travel due to economic uncertainty. These declines in RevPAL could lead to a sudden increase in inventory if property owners decide to sell their rentals, which would have a significant impact on pricing in those markets.

Conflicting Information

AirDNA, another industry tracking website, has contradicted the reports of significant declines in RevPAL. They have stated that they are seeing declines of up to 10% in certain areas, which they attribute to vacationers being more price-conscious and changes in the available inventory. It is important to note that these measurements are comparing the current rates to those of the previous year, which was a particularly strong year for short-term rentals. Therefore, there is conflicting information regarding the extent of the decline in the short-term rental market.

The Situation in Maine

As of now, there are no significant declines in the short-term rental market in Maine. Guardian Properties, a management company in Maine, continues to rent out its managed properties at rates consistent with or even higher than last year. There is still a strong demand for vacation rentals in Maine, and a short-term rental crash is not forecasted at this time. However, it is always important for investors to evaluate their properties and be prepared for potential changes in the market.

Factors Affecting Short-Term Rental Rates

Short-term rental rates are influenced by various factors, including the state of the economy, competition, and regulation. The willingness of vacationers to pay for a rental is tied to their confidence in the economy and their perception of value. Additionally, the increasing number of short-term rentals entering the market can lead to more competition and potentially lower rates. Furthermore, changes in regulations, such as licensing requirements or restrictions on the number of rentals allowed, can impact the availability of short-term rentals.

Considering Alternatives

Given the changing nature of the short-term rental market, it is advisable for investors to consider alternative options for their properties. These options include executive rentals, which are suitable for executives or professionals in need of temporary housing, furnished rentals for traveling nurses or professionals staying for an extended period, and medium-term rentals for individuals seeking a rental for a few months. It is also important to assess whether selling the property is a viable option if the market conditions no longer favor short-term rentals.

Evaluating Your Property

To navigate the potential changes in the short-term rental market, investors should regularly evaluate their properties. It is crucial to understand the expected rates at the time of purchase and assess whether the property can still be sustained if rates decline. Factors such as the economy, competition, and regulation should be taken into account. By being prepared and aware of the signs of market changes, investors can avoid unpleasant surprises and ensure their properties continue to generate positive cash flow.

While a short-term rental crash is not anticipated in the Maine market, it is essential for investors to stay informed and evaluate their properties regularly. The conflicting reports on the decline in RevPAL highlight the need for vigilance and preparedness. By considering alternative rental options and assessing the sustainability of their properties, investors can adapt to potential changes in the market and make informed decisions. For further assistance or inquiries, feel free to reach out to Harrison at Maine Connects.

Sources: