Many short-term rental investors were still earning during lockdown with tourists and essential workers needing emergency accommodation. However, listings have dropped by 27 percent since February and some may not come back on the market.
When New Zealand’s tourism economy came to a standstill, virtually overnight, in late March, so did an income stream for many investors with short-term rentals. In early February 2020, there were 55,000 active properties on the AirBnB and Vrbo platforms, with around 25,000 bookings (45 percent).
The number of bookings declined in the first two weeks of March, with a sharp decrease as overseas visitors fled the country and domestic visitors stayed home. This drop was followed by a short spike just before the lockdown, as essential workers and those who couldn’t get home sought refuge. But in early April new bookings plummeted to around 4,000. This was just six percent of active properties (number of properties advertised).
AirBnB data showed the following drops in active properties regionally from February to June 2020:
- Auckland – down 40.4 percent
- Wellington – down 33.0 percent
- Christchurch – down 34.4 percent
- Queenstown – down 22.6 percent.
When alert level 2 was announced in May, bookings started to slowly crawl back up and by mid-June, new booking rates were back to February levels.
Based on forward bookings at mid-June, projected occupancy rates through to July indicate a renewed confidence in domestic travel. The 2020 July school holidays have a similar rate to 2019, but late July-early August and September are currently looking a bit grim. In reading these figures, these relate to a quarter less active properties than the same time in 2019.
While booking volumes are down, the average price is going up.
Despite fewer bookings on short-term rental platforms and stories of incentives and drastically reduced prices, the Average Daily Rate (ADR) (average price for every property) is higher than 2019. Over the 2020 July school holidays, the ADR for bookings is up to 15 percent higher than the ADR for the 2019 July holidays. And despite just 25 percent of properties currently booked in mid-September, the ADR is at its highest from late August to mid-September, just before the September school holidays. Perhaps investors are holding out hope for a domestic tourism rally or that promised Trans-Tasman bubble.
The media has had stories of more furnished properties coming on to the rental market, with Trade Me noting an increase in searches for these types of long-term rentals (up 35 percent in May 2020). Real estate agents have also seen an increase in investors cashing up and offloading short-term rentals due to the changing tourism market dynamics. While some vacation rentals have shifted to listing on the long-term residential rental market as owners seek more security, there are still 40,000 active properties on accommodation platforms, showing some resilience in the sector.
It’s worth noting that active properties refers to both rooms within homes, which could not be listed during alert level 4, and whole homes. While this can explain some of the decline in active properties, AirBnB data indicates the reduction in active properties is across all types of listings.
This article is part of a series on the rental market.