Diversification – The Future of Short term Rentals
Changes in different sectors of the economy especially the travel industry due to Covid -19 have affected the short term rental business threatening its core business. Many properties lay idle for months as travel restrictions were imposed in different parts of the globe to try and limit the spread of the pandemic. Like in any other business, survival became the only strategy and this has birthed the idea of diversification. The initial model of bed and breakfast and short term stay was becoming more unreliable. Several diversification options have been tried and here are some of the most adopted.
Getting and investing in the best location can always almost guarantee returns in the short term rentals business. The problem is that best locations are the target for most investors and as such they are mainly crowded and competition is very stiff. The solution to this is in diversifying your locations to spread your investment in different markets. Traditional high traffic areas are becoming more congested and travelers are now looking for places where they can enjoy away from large crowds. Investing in different locations will ensure you get constant overall business whether you are in the high traffic areas or not.
Vary your offerings
Vacation travel business has grown over the last 10 years into a full business model now trusted by millions. More travelers are preferring to live in short term rentals than hotels and now more are coming in groups like families. Investors need to invest with the customer in mind and ensure they can accommodate individuals as well as groups. Some investors are now offering exclusive family suites to capture the particular niche. Small single user homes can be converted to multiple use and vise versa to add value to the property.
Minimize your risk
Investing is always a risk and as they say, ‘the higher the risk, the higher the gain’. Taking calculated risks is the best strategy if you want to save your business. Too much risk may work against you if things turn against you. Risks vary from low, medium and high and that’s how investors should spread their risks. The best strategy to minimize risk is to spread it as thin as possible. Investing in all the three risk levels will put you in a position to gain as well as cushion you from the risk of loss.
Short and long term options
Another growing diversification option is the convergence of short and long term rentals. Airbnb has started offering 365day leases for properties and that looks very long. It means that there is a growing demand for longer term stays which needs to be exploited. Long term stays require a different management style from short term ones. Hosts need to get ready for long stays which means they need different strategies for costing and pricing their properties. Long term stays require a more permanent approach to maintenance and a relook at also the cost and sustainability of what is offered in short term stays. Hosts need to adjust their hosting strategies and consider having professional managers for properties.