When Vrbo was first launched in 1995, followed by Airbnb in 2008, short-term renting was a niche market. It has since become an incredibly lucrative, mainstream source of rental income, writes Eric Hammond.
With early forecasts for the market to reach over US$256 billion by 2030, many property owners want to know which model is more profitable, short-term or long-term. Both rental markets come with unique benefits and specific needs to excel, but more often than not, short-term renting holds the trump card. Here’s why.
While long-term rentals rely on a fixed pricing model with little room for change, daily rates in the short-term market are optimised throughout the year depending on seasonality, entertainment, holidays, and demand. Booking drivers such as international concerts, sporting matches, and summer all bring increased demand which pushes occupancy, pricing and profits - fluctuations not seen in long-term renting.
A key consideration for maximising your short-term rental returns is whether you self-manage your property, or join a professional property management company. For a higher Average Daily Rate (ADR), self-managed properties often fall short in comparison, relying on online travel agents’ pricing algorithms for optimisation. A team of professionals can implement a hands-on, data-driven revenue strategy to continuously beat pricing in the wider market.
According to AirDNA data, the ADR for self-managed properties has sat at $167 across Airbnb and Vrbo since our borders reopened in August last year. In contrast, The Stay Hub has achieved an ADR of $318 over the same period - +68% higher.
Long-term rentals often attract property owners who see the market as having a more stable stream of income. With that said, by understanding the market and implementing a revenue optimisation strategy, occupancy in short-term rentals can be consistently high and you do not need to achieve 100% year-round to see far greater profits than the long-term renting model.
Across the board for all property types, The Stay Hub has achieved an average occupancy of 91% since our borders reopened for international travel in 2022, with self-managed properties on AirDNA sitting just shy of 75%. While self-managed properties still perform well, an increased capacity for more frequent cleaning and round-the-clock customer service are both central drivers in achieving higher occupancy conversions. A reputable property management company will often outperform properties that aren’t professionally managed because they can meet both of these needs.
Lower Turnover Costs
A common misconception for short-term rentals is that frequent foot traffic through a property will result in increased damage and repair costs. In reality, short-stay guests are less likely to cause damage as their time there is so fleeting and the same chattels and fixtures are not overused. If you own a long-term rental, property damage can go unnoticed for extended periods of time while use continues, resulting in higher repair costs.
In short-term rentals, a property management company will undertake rigorous cleaning after each booking, alongside regular inspections. If damage does occur, it is spotted and repaired immediately, keeping your overall costs down in the long run.
More Control Over Tenants
You do not need to worry about rent arrears or removing bad tenants in short-term rentals. If your property is being professionally managed, every guest that passes through your house is fully vetted to ensure the safety of your property and neighbours. A property management company can also address any complaints surrounding noise, parties, or visitors as soon as they are made with a fast-acting customer service team.
Short-term rentals are highly attractive for homeowners who also wish to use their property throughout the year but still want to make a profit when not in use. The market also gives property owners the ability to avoid the complexities of Healthy Homes and the Residential Tenancies Act.
While long-term renting is still an attractive option for property owners, short-term rentals can be a far more profitable source of income. To find out what your property could earn in the market, reach out to a short-term rental management company for a free appraisal and expert advice.
To find out what your property could earn in the market, book a FREE property assessment.