Wondering what will happen to your Fort Collins or Loveland Airbnb? After more than a month of closures due to coronavirus, Larimer County short-term rentals and accommodations can reopen April 27 with restrictions, the Larimer County Department of Health and Environment announced Thursday night.
The new restrictions on short-term accommodations apply through May 31 and include:
- A guest occupancy limit of 50 percent of units within multiple-unit lodging facilities.
- Single-unit accommodations, such as vacation rental homes and bed and breakfast inns, must limit occupancy to no more than 8 individuals.
- State and local lodging regulations, when more strict, must be followed.
- No common amenities or areas can be accessible to guests except for check-in and check-out areas.
- Restrictions may be extended or amended in response to the pandemic.
The US short term rental industry has been under constant attack in the past few years as more and more state, county, and city authorities have been applying different measures to control its spread. However, the Coronavirus pandemic is posing a challenge of a magnitude that Airbnb-style rentals have not faced ever before. As a result, many real estate investors and other experts are wondering if the current pandemic will constitute the end of the vacation rental industry. Or will Airbnb hosts be able to survive this temporary slowdown and come back as profitable and successful as before?
The Immediate Impact of COVID-19 on the Short Term Rentals Industry
Guests started cancelling their reservations on Airbnb and other home-sharing platforms as early as February, as soon as the first infected cases were reported in the US. By March, the impact of the pandemic was already sizeable. Naturally, the major cities with the highest concentration of Coronavirus infections have been most affected.
According to Airbnb data from Mashvisor, a real estate data analytics company, the occupancy rate for short term rentals dropped significantly in the vast majority of large cities. For example, the Airbnb occupancy rate in New York declined from 70.7% in March 2019 to 49.3% in March 2020. Similarly, over the same period Seattle experienced a drop from 74.3% to 54.0%. The decrease in Airbnb rental activities has been comparable in other top markets: 33.1 percentage points in Atlanta, 29.6 percentage points in Dallas, 29.3 percentage points in Boston, 28.5 percentage points in Miami, 25.8 percentage points in Austin, 25.3 percentage points in Chicago, and 23.5 percentage points in Los Angeles.
These negative trends are further accelerating in April as the situation gets worse and worse within the US. From short term rental hosts’ perspective, these considerable drops in Airbnb occupancy rate translate into lost income. Thus, many are starting to wonder how individual real estate investors will be able to cope with the crisis and keep their rental business. This, in turn, poses a question about the general sustainability of the vacation rental industry and whether it will be able to survive the Coronavirus pandemic.
Industry and Government Support for Airbnb Hosts
Despite the pandemic and the impending economic recession, there is some good news for investors in short term rental properties. By early April, the home-sharing platform had announced a $260 million relief package for Airbnb hosts and Superhosts. As much as $250 million will go towards helping hosts cover the costs associated with cancellations of reservations with a check-in date between 14 March and 31 May. This will definitely soften the negative impact which owners of vacation rentals across the nation are feeling. This move is of particular importance for full-time investors who rely heavily or even exceptionally on the rental income generated by their properties rented out on Airbnb.
The Airbnb relief package is not the only financial help which hosts will receive during the crisis. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) also provides support to Airbnb hosts who are losing income as a result of the pandemic. Under the provisions of the Act, depending on their particular situation, many Airbnb hosts can qualify for small business grants, small business loans, and unemployment assistance.
Yet another way in which some Airbnb hosts in a particularly detrimental situation might benefit from the CARES Act include the mortgage forbearance and foreclosure moratorium clauses. These apply to homeowners who have taken federally backed mortgage loans. The mortgage forbearance policy means that borrowers are allowed to reduce their monthly mortgage payments or even pause them for a limited amount of time. The foreclosure moratorium provision, meanwhile, prevents borrowers from foreclosing on properties because lenders failed to make the mortgage payments on time.
Government backed mortgage loans are not the only ones which benefit from such clauses. Many state governments have adopted similar measures to support both homeowners and real estate investors in precarious positions.
What Hosts Can Do
The above-listed policies and stimulus packages are definitely helping the short term rental industry survive the Coronavirus pandemic. However, the most significant indicator that vacation rentals will not simply go through the crisis but come out ready to continue flourishing is the steadfastness and resourcefulness of hosts themselves.
After all, operating in a challenging environment is something which vacation rental owners are used to. As mentioned at the beginning of this article, the last few years witnessed tightening short term rental regulations and laws in many US major cities as well as smaller towns. For example, non-owned occupied short term rentals are no longer legal in major tourist destinations such as Los Angeles, New York City, Miami, Las Vegas, San Francisco, Boston, Chicago, San Diego, and many others. This means that hosts are accustomed to being flexible and creative in order to retain their rental business and rental income without breaking any laws and rules.
Flexibility, creativity, and adaptivity are once again the qualities which will help investors in Airbnb rentals go through the crisis created by the Coronavirus outbreak.
For instance, many hosts have been quick to cater to the needs of a newly emerging group of hosts. Doctors and other medical personnel have been relocating to the areas that are most affected by the pandemic to help out their colleagues there. Many of them are willing to stay in short term rentals at the discounted rates which hosts are offering to them. It is a win-win situation for everyone as medical staff don’t have to share hotels with potentially infected people, and investors are able to regain some of their lost rental income.
Additionally, vacation rentals in small, secluded towns are attracting the elderly and other vulnerable groups who are looking for a safe haven amid the pandemic. Similarly, numerous people who are now working remotely choose to leave the big cities and relocate temporarily to more isolated, smaller towns. Airbnb hosts can employ different marketing techniques to attract this new segment of guests in order to bring back some of the demand and end up with a good rate of return even during these tough times.
The current COVID-19 pandemic is definitely challenging for short term rental hosts. Nevertheless, their willingness to adapt in order to retain their business is the sure sign that the Coronavirus will not defeat the Airbnb rental industry. To the contrary, as soon as things begin to come back to normal, Airbnb will once again emerge as the optimal rental strategy in the majority of US markets.
Daniela Andreevska is Marketing Director at Mashvisor, a real estate analytics tool which helps real estate investors quickly find traditional and Airbnb investment properties. A research process that’s usually 3 months now can take 15 minutes. We provide all the real estate information in easy to understand visualizations.
Message me if your thinking about buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate