Short-term rental demand rises
Providers are cautiously optimistic that the reopening of New Zealand’s borders should lead to greater certainty for the sector, finds
It has been a volatile few years for the short-term rental accommodation market, but the reopening of the borders means the future looks brighter for providers.
Demand for non-hotel, Airbnb-style accommodation has been on the rise regardless.
According to Airbnb research, 33 per cent of all global accommodation spending is expected to be spent on non-hotel options this year, up from 24 per cent in 2019.
Airbnb had a 48 per cent increase in bookings worldwide in the third quarter of last year compared with the third quarter of 2020. It is predicting this trend to continue now that vaccine rates are up around the world.
Zodiak Management managing director Stefan Nikolic says Airbnb’s third quarter was higher than preCovid levels of the same period, and this supports the idea that guests are increasingly booking short-term rentals instead of hotels.
His company specialises in the central Auckland market, which was one of those hardest hit by Covid. Although last year’s lockdown and the arrival of Omicron affected the market, bookings and average nightly rates have picked up over recent months.
In December, the company’s occupancy rate was 63 per cent and the average nightly rate was $153; in January the occupancy rate dipped to 60 per cent, but the average nightly rate was $176.
Omicron affected February and this caused the average nightly rate to drop to $141, but the business’s occupancy rate rose to 71 per cent, Nikolic says.
‘‘We’re seeing strong bookings coming in for March, and for higher nightly rates than February, so this indicates demand is increasing.
‘‘Now with the borders reopening over coming months, we should see a jump in demand in Auckland in the shorter term as well, once the main impact of the Omicron outbreak is behind us.’’
In Australia, which has already reopened its borders, CoreLogic analysis suggests the return of tourists and international students will have the greatest impact on its rental markets in the coming months. Demand for short-term rentals, particularly in inner-city areas, is expected to surge.
Commentators have already said New Zealand’s reopened borders is likely to have an impact on the rental market, particularly in Auckland.
Nikolic says there is a big shortage of short-term listings in Auckland, as many former providers got out of the market when Covid hit in 2020. ‘‘This, combined with the predicted increase in demand, should bode well for property owners who are still in the market or looking to join it soon.’’
There is no doubt that shortterm rental demand has started to pick up, Apartment Specialists director Andrew Murray says. Figures from Urban Butler show there has been a 30 to 40 per cent increase in inquiries since the borders started to open.
The biggest difference is the inquiries are for bookings a few months down the track rather than just a few days or weeks
ahead, he says. ‘‘It suggests people have greater certainty about the future and are more confident making bookings as a result. Bookings still tend to be for two- to three-bedroom properties for groups of two to four, which indicates they are not travelling for work.’’
Before Covid, demand was highest for one-bedroom apartments, and much of this was driven by business travel, Murray says.
‘‘Business travel has largely stopped. When that picks up again, probably around June or July, Auckland’s short-term market will really boom.’’
The situation for short-term accommodation markets in central Wellington and Christchurch is different, he adds. Wellington’s market is insulated as it is the seat of government, and Christchurch’s market is strong as it is the business hub of the South Island.
Scott Muirson has three short-term rental properties in central Christchurch and one in central Auckland. He says demand for his Christchurch rentals has been steady during the pandemic, and his Auckland rental has benefited from a long period of weekly renewals by several customers.
‘‘Our decision to stick with the short-term market and ride it out when Covid first hit has paid off,’’ Muirson says. ‘‘We have managed to keep going well
throughout the pandemic. The nightly rate is down on preCovid days, but our properties still return more than a longterm rental would.’’
The long-term trend towards short-term rentals has been accelerated by Covid as many people feel they are safer and more flexible than hotels, and they also offer cheaper rates, Muirson says.
‘‘It’s been busier than we expected in recent months. After Omicron peaks and restrictions ease, Kiwis will feel more confident about travelling around the country, particularly for business, and that will boost demand, too.’’
Many property owners with short-term rentals in regional holiday hot spots have done well in recent years, as the closed borders prompted Kiwis to travel domestically or take respite from lockdowns with non-city breaks.
Airbnb’s country manager for New Zealand and Australia, Susan Wheeldon, says domestic and non-urban travel has grown globally throughout the pandemic – non-urban night bookings are up nearly 45 per cent compared with 2019.
‘‘New Zealand has long been a bucket list destination for travellers around the world, and we know people will be excited to either visit for the first time or make that long-awaited return trip,’’ she says.
That will bring in tourism dollars for local businesses, which will help the economic recovery and earn additional income to combat the rising costs of living, she says.
Matt Bould is so confident in the sector’s future that he has just launched a new tiny-home-style, short-term rental business.
Hideaway Huts offers small, environmentally-friendly cabins in isolated, picturesque rural locations, such as Matamata and Mangawhai.
The company partners with landowners and then installs the cabins, which are built in Auckland and run entirely off the grid, on the agreed site. Both parties get a percentage of the revenue, and they partner with local companies to sell their products via placement in the cabins.
‘‘Our cabins are for people who want to unwind and relax in a beautiful, natural setting which allows activities such as fly-fishing, lake swimming and stargazing.
‘‘There has been good local interest and, with the borders reopening, I’m sure international tourism will return and add to that.’’
He believes inflation and its impact on building and transport costs is now a bigger headwind than Covid, but he sees scope to scale up the business.