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The Escape Home: Remember when you could score a bargain on Airbnb? Not anymore

This article is reprinted by permission from The Escape Home, a newsletter for second homeowners and those who want to be. Subscribe here. © 2021. All rights reserved. 

Are Airbnbs the new …. hotel rooms?

Remember when you could score a bargain on Airbnb? Not anymore. 

The common perception has been that short-term rentals are much cheaper than staying at a traditional hotel. And once upon a time that was true, but oh what a difference a pandemic makes. 

Hosts have seen a boon in income since the start of the pandemic. New hosts alone — those who listed property after March 11, 2020 — have earned more than $1 billion.

Also see: Airbnb, Vrbo and Vacasa vacation rental fees are making hotels seem like a bargain

Take a look at these numbers:

Average daily rates for short-term rentals through Airbnb
ABNB,
+3.90%

and Vrbo spiked in April to $245.42,  up 16.6 percent from April last year and 20.8 percent from April 2019, according to a report by AirDNA, a vacation rental data company. These rates do not include taxes, service fees and cleaning fees that are typically charged on top of rates. The report looked at 1.5 million U.S. listings on Airbnb and Vrbo.

AirDNA vice president of research Jamie Lane has a simple explanation: Average rates are being driven higher because people are opting for larger properties. 

“The homes being rented now are much larger than they were in the past and in destination resorts, small towns and rural areas,” Lane said.

Now let’s look at what’s happening with hotel room rates.

For the week ending May 15 this year, the average daily rate for a hotel room was $113.54, up from $77.12 for the comparable week in 2020, according to research firm STR. That is still below the average daily rate of $134.14 for the comparable week in 2019 (you know, pre-COVID).

Why are travelers opting for more expensive short-term rentals? It’s no surprise that since the COVID-19 pandemic began, travelers have felt more comfortable staying in homes or apartments rather than at hotels with hundreds of people. Then there’s the simple matter of supply; many hotels shut down during the pandemic. 

“Being able to rent an entire condo, home or villa offered benefits these travelers felt were important, such as more space, including possibly a room to use as a home office, and your own kitchen, which may have been essential when restaurants were closed or available only for take-out or delivery,” said Henry Harteveldt, travel industry analyst at Atmosphere Research Group. “Travelers who rented an entire house liked the added privacy and the opportunity to avoid shared facilities, such as lobbies and elevators.”

As hotels reopen, they are not yet offering the same services that they had before because many are short-staffed.

“Traditional hotels are having a hard time delivering service levels that people have grown accustomed to,” said Mark Woodworth, principal at R.M. Woodworth & Associates, a lodging research firm. “In many cases, I have the same comfortable amenities in a short-term rental that I have at home.”

Another factor: Second properties outside dense urban areas are quite popular on Airbnb and Vrbo. Many would-be hosts fled cities during the pandemic to move into their second homes, causing a drop in supply of short-term rentals as demand for them was increasing. Meanwhile, demand for urban short-term rentals in cities such as New York, Boston and Washington, D.C., declined because tourist attractions were shut down for months.

“Vacations will be longer for most as leisure travel comes back and a remote location will be preferred by some,” said Bruce Ford, senior vice president and director of global business development at research firm Lodging Econometrics. “In terms of supply, I think many of these home sharing sites have lower inventory than they did at this time than 2019 as many people may be living in their second homes and staying out of cities as remote work still is the norm.”

The rise in the cost of short-term rentals has irked many potential travelers, causing a PR problem for Airbnb. Many potential travelers took to Twitter last month to complain about their biggest peeve: the service and cleaning fees that are added onto the daily rate. 

Some examples:

“I used to love Airbnb, but those fees put me off so I’ve been sticking with hotels,” wrote one Twitter user. 

“LITERALLY I remember only a few years ago it was cheaper to stay in an airbnb, it was easy to find things for $39-$79 a night, now it’s almost triple that PLUS hundreds extra for their ‘fees,’ ” wrote another. 

Indeed, over the past year and a half, there has been a 5.8 % increase in the average cleaning fee at Airbnb’s U.S. properties to $144.80, according to Lane at AirDNA. Because of their larger sizes, destination, resort coastal, mountain, lake properties had the highest average cleaning fees. Consider this when booking your next rental: The largest average cleaning fee was $277.60 for a five-bedroom house.

Airbnb was quick to respond in a May 18 blog post. It also announced that it has assigned a team to conduct a review of the fees. The team will make recommendations by Dec. 15 “where appropriate — with the objective of making pricing even more transparent and easy for hosts and guests to navigate,” the company wrote. 

Airbnb gives its hosts the power to set their own cleaning fees and rates based on factors including home size, location, guest capacity and amenities.

“We break out the different fees clearly at multiple points during the booking process so that guests fully understand the potential charges prior to making the payment,” the company insisted. 

Airbnb said it offers hosts tips on “keeping the amount reasonable, and suggest they consider not charging cleaning fees at all.”

As a result, 45 percent of its global listings do not have any cleaning fees. For those that do, the fee on average is less than 10 percent of the total reservation cost. 

Guests also typically pay a service fee and occupancy taxes, Airbnb said. “Service fees are set by Airbnb,” the company wrote. “They help us run smoothly and cover the costs of the products and services we provide, like 24/7 customer support.”

For most stays, the service fee is under 14.2% of the booking total. Occupancy taxes are imposed by the city, county, state or country.

Hotels also have to charge for taxes imposed by local jurisdictions, but they typically do not have cleaning fees. Many do charge resort fees that often cover the cost of amenities and have also come under criticism over the years. 

Regardless of the latest flap, things are looking up for short-term rentals as people start to travel more domestically now that vaccinations are available. So consider booking your short-term rental now. 

U.S. short-term rental demand has recovered to pre-pandemic 2019 levels, according to AirDNA. In April 2021, demand increased by 66.4% over 2020 levels and 5.4% over 2019.

Of the 50 largest markets, Lane said demand growth was strongest in Gatlinburg/Pigeon Force, Tennessee; Gulf Shores/Mobile, Alabama; and Myrtle Beach, South Carolina.

“In Destin and Panama City (Florida), for instance, there’s already more demand on the books today for June and July than we saw in May and April,” Lane said. “A lot of these markets are just going to be sold out.”

Jan Freitag, national director of hospitality market analytics at CoStar Group, sees that trend continuing as more families get back on the road.

“Multigenerational travel is picking up because older people have really sequestered in the past year,” he said. “They’ve not done anything and they’ve saved a lot of money and they were the first to get their shots.” 

As for hotels, don’t expect a quick recovery until business and conference travel returns to its pre-pandemic level, and that, the experts say, probably won’t happen until next year. 

Some booking tips that have worked for us:

  • Sometimes it’s better to book for more days than you need. Many hosts give steep weekly and monthly discounts, so play around with the dates.
  • It’s not unheard of to write a host and ask for a discount, particularly if you are booking at the last minute. Be specific about why you want to stay at their property and reference positive feedback from your previous Airbnb hosts.
  • Book a new listing. While not being able to read reviews might seem worrisome, hosts all have to start somewhere, and those who have not yet been reviewed typically offer discounts. 

This article is reprinted by permission from The Escape Home, a newsletter for second homeowners and those who want to be. Subscribe here. © 2021. All rights reserved. 

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