Key players in the short stay sector are collaborating to professionalise the niche, in order to retain market share gained during the pandemic.
The move has brought three key industry associations together to work on a number of initiatives. A one-day conference, organised as soon as UK government Covid restrictions were eased, saw operators, brands and technology partners bullish.
But there were warnings, too, that the sector needs to act fast to retain the loyalty of consumers who, during the pandemic, discovered short stay accommodation as a perceived safer alternative. Otherwise, hotel groups will regain the initiative as they fight to pull back lost room nights.
Merilee Karr, chair of the Short Term Accommodation Association admitted: “The industry’s been pretty hard hit, but is recovering quickly.” She said London occupancy of 68.4% in July compared with 48.9% for hotels. ADR was up 15.9% on June, and up 34.8% year on year – improvements that again outran hotels.
STAA is now working closely with the European Holiday Home Association, and Vacation Rental Management Association, with the trio delivering the London event together.
One impact of the pandemic was the short stay sector pivoting to provide temporary homes for NHS workers, a not-for-profit initiative that led to more than 1,500 homes being offered via a new platform. “As a result, we were in conversation with government throughout the crisis.” And that connection led to further discussions about public agencies using short stay providers for other types of staff accommodation.
Karr said the association overcame questions around standards and accreditations, while reformatting the NHS rental platform into a new B2B offering now called Trusted Stays. The next step will be opening up the platform to wider distribution: “We’re getting permission to get into the GDS – I think that’s game changing.”
The platform – ironically developed with funding from the UK government-backed Innovate UK programme – will launch with one GDS, before connecting with others over coming months. Karr said she discovered that other short term rental operators, such as Marriott’s Homes & Villas, and Accor’s OneFineStay had not attempted to engage with GDS distribution, or foresaw it as too difficult.
A further step, currently in negotiations, will be to bring in further stock from the build to rent sector onto the Trusted Stays platform.
Robin Rossmann, managing director at STR, said the sector had performed relatively well through the pandemic, and in London right now “they’re doing a lot better than hotels”.
“For the last decade, the hotel industry has been keeping a close eye on short term rentals.” In the last decade, he said a lot of new inventory came into the market “but hotel occupancies improved – there wasn’t a visible cannibalisation.”
William Parry of provider Altido, which has inventory based around London, Edinburgh, Milan and Lisbon, said: “We are 85% urban, and we are pretty bullish on next year. It’s not all doom and gloom – our ADR for August, in three of our four regions, was on a par with 2019 levels.”
“We’re trying to professionalise the industry,” said Parry, noting that a challenge was the uniformly high level of professional communication, in a market where the product is highly varied. “To catch up and compete with hotels is going to take us time.”
Ben Godon of Colliers said investors had woken up to the attractions of the short stay sector, not least because of its much steeper recovery curve. “It’s likely the profitability of short stay will be even higher than hotels, after the pandemic.” He said hotels would need to improve their connections with their localities, and improve their food and beverage offer, to compete. “If you’ve got extraordinary f&b, that’s got to be an opportunity to drive revenue.”
Anna Hunt, area manager at Booking.com, said the site is seeing a shift towards longer stays. “We’re really seeing the short-term rental space being the first choice.”
Pauline Houston, vice president of business development at Silverdoor, said the pandemic has impacted business travel in a number of ways: “What you’re finding is, business trips are now a minimum three days” as corporates insist on more value from a trip. “There are changes we have to make as an industry for the new normal – the travel manager’s priorities have substantially changed.”
One of those changes is how to make it easier for corporations to find alternative accommodation acceptable in terms of standards and ease of booking. “Business went to hotels, because it was easy,” said Deborah Heather, director of Quality in Tourism. And she said recent issues around accreditations and cleanliness have seen the hotel sector tripping up: “I think some of the global hotel brands have done an excellent job of undermining their own business.” Some self-certifying accreditation schemes were, she said “like marking their own exam paper”.
Houston warned colleagues of the challenge ahead: “We have a short window of opportunity,” which she put at 12-18 months, to keep the advantage. “Yes, they came to us because they want more space, they want to eat well, they want to be more sustainable. But if we do not deliver on service, ease of booking, hotels will win the business back.”
HA Perspective [by Chris Bown]: The short stay sector may have been resilient, but it still had a tough enough pandemic to realise that old rivalries need to be brushed aside, and the niche needs to work as one. They may have appealed to individual customers during the pandemic, but the real challenge, as was openly admitted, is how to make the sector appealing and easy to use, for business travellers.
That means accreditations, reassurances – and a promise of a decent, relatively consistent, level of service. Many in the sector are delivering on that already, or striving towards it, but others need pulling up to standard. Then there’s making it easy. The tenacious Karr has already persuaded the UK government to let public sector bodies book suitably vetted short stay properties, instead of hotels – few would bet against her winning listings with the major GDS players.
What was also remarkable about the summit, was the quality of technology companies attending. Some, such as Guesty and Beyond, already have a strong presence in the large US market, and are pushing at an open door as they offer their tech to a European audience that is keen to improve dynamic pricing, returns and the efficiency of property management. They are also finding hotels like the look of what they can deliver. As Guesty’s field marketing manager for Europe, Roberto Bricio told us: “We are building a bridge backwards – we now have small hotels approaching us.”
Additional comment [by Andrew Sangster]: The mantra of abductive reasoning is that if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. Short term accommodation players are increasingly looking like hotels on this same approach to logical inference. Bookability on GDS is probably the final check.
And if they are de facto hotels, they ought to be abiding by the same rules and regulations as regular hotels. Most are still not. And it is questionable how economically viable these properties are if they do comply.
For the likes of Airbnb, the most money and market share gains are made through professional investors and operators of private rentals. But they want to tell regulators all about the person renting out their spare room a few times a year. This approach will not hold water forever.
Where I live in Cambridge I know that the local government is investigating a significant number of landlords for renting out properties on a short-term basis (less than six months at a time). All it takes is a grumpy neighbour to claim and the Council takes an interest. This pattern is repeated across the UK and in many other European countries.
While it would be foolish to rely on regulation to keep the private rental sector in check, the reality is that it is a much smaller sector than hotels and do not enjoy the tailwinds that some boosters are claiming.
Analysts at Bernstein reckon that hotels will cede a small amount of market share to private rentals through 2030 but the worst it will get is 2020 when hotels had a 72% share of lodging down from 77% in 2019.
The weird conditions of 2020 favoured private rentals and hotels are expected by Bernstein to grow market share for the next couple of years, climbing back to 76% of the total by 2022. A very slow decline until 2030 will then happen until the share that year hits 73%. The notion that private rentals will eat hotels’ lunch is clearly for the birds.