The Skift report published this week on “The Short-Term Rental Ecosystem” was long overdue. The short-term rental sector in the UK, and around the world, is changing beyond recognition.
New innovative start-ups, leading short-term rental providers and established hotel brands are all rubbing up against, as much as partnering, with one another, as companies of different size, scale and expertise look to develop an offering or provide a service in this rapidly changing sector.
I welcome the Skift report as a thorough deep dive into the short-term rental sector, and it throws up several fascinating insights, and will help governments, investors and consumers better understand the growing market. Below, are my six key takeaways.
1. Convergence in the travel accommodation market
Everyone in the accommodation industry is innovating and providing better consumer experiences at different price-points. Short-term rental platforms such as Airbnb are developing serviced apartment and boutique hotel offerings, while global hotel ‘heavyweight’ brands like Marriott (with the launch of Homes & Villas) are offering short-term rental properties. This overlap between hotels, serviced apartments and short-term rental is growing, and will only continue. The distinction between these sectors will become increasingly blurred to consumers, but will they care?
What matters to most to consumers when it comes to accommodation is location, price and convenience. Increasingly, they are becoming more openminded about the type of accommodation they choose. I don’t think anyone can deny that people now look at accommodation in a completely different way than was the case even ten years ago.
Awaze CEO Henrik Kjellberg neatly captured changing perceptions, when he pointed out, “it’s more about the type of trip the guest is taking, rather than ‘I’m a hotel guy’”. Less and less people look upon themselves as either ‘hotel people’ or ‘rental people’.
2. Growth of the short-term rental market
According to Skift, the global short-term rental market has grown from $40billion in 2010 to $107billion in 2018, while in the UK the sector is growing at nearly 30% year-on-year and is expected to be a £52billion industry by 2015. The hotel sector (at an estimated $600billion gross bookings) is still considerably larger but ongoing convergence between providers is blurring the lines of separation – it is all a place to stay when you travel!
3. Diversity in the short-term rental ecosystem
Although the big global platforms are the major players in terms of size (Airbnb, Booking Holdings, Expedia Group, Tuija and TripAdvisor) the short-term rental ecosystem is an increasingly rich tapestry of different organisations offering different consumer offers and types of services.
These companies range from independent hosts, host service providers, traditional holiday home managers and branded home managers to a wealth of B2B companies offering technologies and related services ranging from property operations and hardware, guest-facing tech and support services including specialist insurance and mortgage solutions.
However, this is only scratching the surface. Property portfolio managers, landlords and investors are looking at short-term rental as an alternative option to long-term lets and help cushion against the peaks and troughs in housing market. This doesn’t have to mean that properties are taken away from long-term rental, but it can help developers mitigate the cost of void periods which occur in different seasons throughout the calendar year.
4. The traditional hotels’ response has gone full circle
The response from hotels to the growth of short-term rentals has evolved and is quickly adapting to changing consumer demands. Initially, it was often to claim short-term rental had no impact on the hotel market, and then it switched to lobbying for more legislation and regulating what were seen as ‘unfair competition’ from those who didn’t have to abide by the same rules.
Now, many of the big hotel brands are either buying or launching their own short-term rental brands. I know from experience having spoken to many hoteliers at industry conferences, over the last few years, that they will all likely own a branded accommodation provider within the next five years, because they will all want to have a home brand in their portfolio. Some of them agree, but a fair number smiled and looked away. Increasingly, it looks like many of us who predicted this shift were right as the incumbents’ response has gone full circle.
5. Regulation, what next?
One consequence of the hotel brands moving into the short-term rental sector is there will be less ‘blanket’ statements or campaigns about how short-term rental is undermining the provision of quality accommodation. We should expect campaigns to be more targeted in individual markets or towns and cities, and they will likely be driven from smaller hoteliers, as well as local government representatives, who for their own reasons look to oppose the growth of short-term accommodation.
We should anticipate that ‘calls’ for more regulation will continue, but hotels will increasingly step back from criticising short-term rental as they see the opportunities to grow their own footprints.
6. Professionalisation and the raising of standards
From my own experience as founder and CEO of UnderTheDoormat, a London-based branded home accommodation provider and as Chair of STAA, the industry body for the short-term accommodation sector in the UK, I am acutely aware of the need for the sector to professionalise, while avoiding commercialisation – a delicate balance to achieve.
Professional companies have a role to play, as they work with individual owners to ensure high standards are met. It’s about providing guests with an exceptional service throughout the entire accommodation experience from making the reservation, to their arrival, through to their departure. This more professionalised approach has been key in driving up standards across the sector as host service providers and branded home managers compete to not only present their clients’ homes in the most positive light to potential guests, but also clearly demonstrate responsibility for health and safety and consumer protection.
It is why at the STAA we have championed a growing portfolio of measures with the explicit aim of helping consumers select responsible hosts and companies and to provide guidance and help to homeowners (and professional companies who manage accommodation) with all the guidance they need. It’s also why the STAA was first in the world in our sector to launch an accreditation scheme in partnership with Quality in Tourism to provide that independent assessment the standards are being met.
As the industry body, our overriding objective is to create an environment for the responsible growth of the short-term letting sector in the UK and beyond. And it’s why we work tirelessly partnering with government, related industries such as property, insurance and mortgages and with our members and hosts to provide pragmatic solutions to ensure the right tools and policies are available to help everyone to benefit from this growing sector.
Please click here to access the Skift report.