The past decade has seen the short-term rental industry explode in popularity and much of this meteoric rise can be attributed to the growth of Airbnb.
While the travel and tourism industry has been one of the most adversely affected industries by the COVID-19 pandemic, Airbnb still maintains a huge grasp on the market.
London alone has over 80,000 Airbnb listings and the popularity of short-term lettings are likely to increase again as the pandemic restrictions ease towards the second half of 2021.
It’s not difficult to see the appeal of Airbnb, with holidaymakers and business people alike looking for somewhere other than a standard Premier Inn for their staycation or business trip. With the ability to rent anything from a basic single room to a yurt or treehouse with all price brackets covered, it’s a no-brainer for many.
So what impact has the rise of Airbnb had on traditional letting agents, and how can you adapt to the industry change?
What is the appeal of a short-term let?
Traditionally, letting agents define a short-term rental as less than six months, but Airbnb tenancies are normally much shorter.
London rentals are restricted to a maximum of three months, and often the holiday market will look for a fortnight at most.
While letting agents may be concerned about the loss of business, the appeal of short-term lets is undeniable for landlords. Short-term tenancies earn roughly 25% more than longer-term tenancies, even when they reach a 70% occupancy rate.
Aside from the obvious monetary benefit of short-term lets, landlords can also enjoy flexibility. They can list properties for shorter periods to fill the gap between long-term tenancy voids, or earn income while awaiting the sale of a property.
This option can be particularly advantageous for student landlords, who can make a profit from otherwise empty properties during the holidays.
Should letting agents be concerned?
While the monetary appeal of short-term rentals isn’t to be denied, they can also add additional work and require more effort from letting agents.
A high turnover rate of tenants can lead to increased maintenance costs and an insurance premium for landlords, which can in turn mean higher rent rates for tenants.
Another concern for letting agents is the worry that Airbnb and other short-term letting models take the housing stock that would otherwise be available to them.
Airbnb can also be seen as a disrupter that encourages landlords to bypass agents. With the model seemingly shifting towards short-term lettings, the face of the long-term lettings market could be changed irreversibly.
In further news, a report commissioned by ARLA has shown that active Airbnb listings have risen by 33% in a single 12-month period, and 2.7% of UK landlords have already made the switch to short-term lettings, with a further 10% confirming they were tempted to follow suit.
What are the opportunities for letting agents?
The positive news is that letting agents are expertly placed to tap into the market that is currently swallowed up by Airbnb.
A good letting agent already has the expertise and property knowledge to enter into this still-emerging market.
In fact, many letting agents can offer this service with little diversification from their current offering.
Use build to rent schemes
The Airbnb model of short-term lettings can be used to deliver value to developers of new-build schemes.
Encouraging landlords to occupy their scheme from day one with short-term, high yielding guests will generate cash flow while long-term residents are sought out.
There’s also an option to break into the holiday lettings sector if you are based in a tourist hotspot.
Monetise voids between long-term tenancy agreements
Short-term rentals are often highly seasonal, and peak periods can outperform assured shorthold tenancy agreements by up to 30%.
If you work with landlords focused on the student housing market, creating a solution where they can offer short-term lets over the summer months can be a particularly fruitful proposition.
Tackle Airbnb properties as they await sale
There is an opportunity to win more instructions, and impress vendors by offering a service that allows them to effectively utilise a vacant property as a short-term rental while waiting for the property to sell.
The vendor can be defensive on price and await the best offer, while still enjoying regular income from the short-term rental.
Tap into the holiday rental market
Traditionally strong holiday markets such as Cornwall and the Lake District are seeing increasing numbers of letting agents use their local brand and identity to create lucrative holiday rental businesses.
London, one of the most visited cities in the world, is also a lucrative holiday lettings market, and presents a huge opportunity for business.
Not only does this protect local agents from losing their market share to Airbnb, or another short-term rental company, it also expands their business.
Letting agents can offer services from buying, selling and the end-to-end management of the holiday lets on behalf of landlords.
What does the future hold for the traditional letting agent?
While you can be forgiven for thinking the rise of Airbnb won’t have any long-term effect on traditional letting agents, this short-term rental model is here to stay.
With the pandemic (hopefully) beginning to ease, travel and holidays should soon be back on the cards, and the popularity of short-term rentals shows no sign of slowing down.
The Airbnb model won’t suit every letting agent; the high turnover of tenants will inevitably create more work, time and effort. However, it may be a simple way to create more revenue without too much diversification.
Whether you plan to venture into the short-term rental market or are sticking with your business model, it’s important to do it alongside a property maintenance team you can trust.
Choosing a property maintenance company to take care of your properties is an important decision to get right, and keep your landlords and tenants happy. Get it right the first time with the help of Agent’s Army. Contact us today to see how we can help you.