5 ways to recession-proof a short-term rental business

This summer was unparalleled for short-term rental bookings across the globe.

July was a record month for bookings in the United States. With about 23 million nights stayed, the industry saw a rise of 18% year-over-year. Similarly, in the United Kingdom, 84% of short-term rental owners say bookings for 2022 are stronger than ever, and research shows that the number of vacation rentals in the country has grown by 40% in the last three years.

But as the year draws to a close, ongoing inflation, major global events and a looming recession threaten the industry. As it stands, booked nights currently logged for December 2022 to March 2023 are 16% below 2019 levels, and nearly 70% of economists predict that a recession will be announced in the U.S. sometime next year.

As the founder of Boostly, the leading online training provider and website design agency that gives hosts the tools to increase their direct bookings, I’ve worked alongside the short-term rental sector for years - and I know just how difficult it can be to navigate the industry in unprecedented times. 
 
Many property owners and investors have never run a short-term rental business through an economic downturn and, understandably, the concept of doing so is daunting.

While a recession doesn’t necessarily mean your business is doomed (in fact, one of the most significant growth periods in the vacation rental industry occurred between 2006 and 2012 - right through the Great Recession), it does pay to have a survival strategy in place.

Here’s my take on how property managers can protect their portfolios, weather the storm and ensure their short-term rental business survives.

1. Tap into mid-term rentals

There’s a huge shift happening in the short-term rental sector right now, and being proactive means tapping into trends and utilizing them where possible. Demand for mid-term rentals (averaging between three and nine months) is rising, and now is the crucial time to incorporate them into your short-term rental strategy.

Entering the mid-term rental space enables you to access different types of guests, from students and employees to healthcare workers, contractors and digital nomads who need to stay (and work) in places for longer. Having guests occupy your properties for extended periods not only means you’re spending less on cleaning costs, but there’s also less property management involved. Plus, you’ve got the added security that your rentals are filled during challenging times.

2. Invest in smart-home technology

There are plenty of smart solutions on the market to help you cut costs and improve the efficiency of your short-term rental, but it’s not just your budget that will thank you - guests expect it too. Equipping your rentals with smart tech can make a huge difference to your energy bills, which is crucial when navigating rising energy prices and the cost-of-living crisis.

Start with the big stuff, like smart thermostats and lighting. Investing in a Nest Thermostat enables you to monitor the efficiency of your home and make real-time adjustments to the temperature in your rental even when you’re not there, resulting in lower bills and less energy used.

Other small tech investments can make a difference too. Air fryers, for example, are far less expensive to run than a conventional oven, whereas water-efficient showerheads can save more than $70 a year on energy and water bills.

Reassessing your current appliances and energy use is a good place to start. 

3. Drive direct bookings

While there’s money to be saved in your energy costs, there’s money to be saved in how you generate bookings too. Last year, the average commission that Airbnb charged hosts was 14%. If your property portfolio depends solely on online travel agents (OTAs) like Airbnb and Booking.com, you’re paying huge fees.

My advice is to cut commission costs to OTAs by focusing on driving direct bookings. There are many ways to do this, but the most important investment you can make is a mobile-friendly website that offers a seamless direct booking experience for guests. With 66% of travelers saying they would choose to book directly with the accommodation where possible, there’s no better time than now to step away from the OTAs.

When it comes to attracting guests, an email marketing list is one of the most valuable assets you can leverage to increase direct bookings. Create a referral network, and utilize previous guests by asking if they know anyone who may be interested in staying in your properties; it sounds old-fashioned, but word of mouth is still one of the best marketing tools there is.

4. Be proactive, not reactive

At the first hint of an economic recession, companies tend to cut sales and marketing budgets. But evidence shows that the companies which focus their efforts on sales during uncertain times tend to be the ones that survive and thrive.

When other property management companies pull back, I’m a firm believer that you have to push through. In my opinion, a sensible place to start is hiring a salesperson. Parting with commission fees and base rates may make you wince when everyone else is tightening their pockets, but the benefits will outweigh these costs.

Having someone working full-time weekly generating leads, managing contacts, getting in touch with past guests and pushing direct bookings will ultimately drive your business forward. Then, task your newly hired salesperson with reaching out to local businesses and healthcare residencies to let them know your properties are available to rent on a mid-term basis.

5. Utilize online industry communities and groups 

Many online resources are available for property managers, from training academies to Facebook Groups, like Hospitality Community. My final piece of advice is to join industry groups and communities and connect with as many other industry property managers as possible. 
 
Not only is it useful to have these connections, but there’s plenty to learn too - from the pricing strategies others are using to how property owners are saving money in their rentals. It’s a good idea to bounce around ideas, take notes and, most importantly, support each other during unpredictable times. 

Key takeaway 

With a recession on the horizon, it’s time for short-term property managers to boost their strategies. Installing smart-home tech can help economize your business, online resources can be utilized to broaden your knowledge, and tapping into the mid-term rental trend can drive extra income. 
 
I truly believe that with an effective marketing strategy and less reliance on the big OTAs, we can all weather the storm - and the industry will hopefully come out the other side thriving.