Property short-term rent – can it still be profitable?
When all travel stops
In March of 2020, when most countries closed their borders to international travel, the Latvian short-term rental property market also underwent rapid changes. Within a few days, owners' calendars were cleared of all reservations for several months. As demand fell sharply, supply also fell sharply, and many of the beautiful apartments in the center of Riga available on the Airbnb and Booking.com platforms simultaneously appeared in long-term rental advertisements, thus significantly reducing long-term rental prices. Overall, the number of short-term rental properties offered in Riga has decreased by 25% over the past year (AIRDnA). At the same time, the owners of Latvian holiday homes and vacation places could look at the coming months with some positivity, because people's desire to travel won’t cease, only this time the travel had to be done within the borders of Latvia.
For some – time to panic, for others – time for opportunities
Two of the main short-term rental segments in Latvia are apartments in the center of Riga and holiday homes outside Riga. Over the past year, the largest (3 and more rooms) apartments in the center of Riga have had the most difficult time as the usual holiday trips in larger groups were not as common in 2020. For smaller apartments, this period has been a bit easier. Although the usual couple day or weekend trips from foreign tourists practically disappeared, 14-day self-isolation reservations or one-month bookings from digital nomads became a lot more relevant. At the same time, one of the most lucrative summers was also experienced by many holiday homeowners, as people wanted to get away from the more densely populated cities to a peaceful seaside house, at least for a little while.
Time to improve your offer
Those property managers and owners of short-term rental properties who have performed the best in this period have been those who responded the quickest to the changes in the market. Providing a suitable workplace and a stable internet connection so that guests can easily work remotely during their stay became very important. It also became important to offer discounts for longer bookings, perform in-depth cleaning and disinfection after each guest, or even create your own direct short-term rental booking website. Guests increasingly appreciated the unusual services of short-term rental apartments, such as cleaning during the time of the reservation or the buying and delivering of products to the home before guests begin their self-isolation.
After all, is short-term rent still profitable?
The short answer is yes! However, there are several preconditions for this. Each short-term rental property must have a clearly defined target audience and what these guests need. This includes a wide range of things, from the stable internet connection already mentioned to a flexible cancellation policy. It is also important to devote sufficient time and attention to the rental prices of your property and to adapt them to the relevant market situation, which can be helped by various dynamic price adjustment tools.
As in any industry, the profitability of short-term rental properties should be viewed as the difference between income and expenses. Although longer bookings reduce the cost of cleaning and purchasing amenities, revenues also decrease. However, if the return on a particular property is equivalent in both short-term and long-term rent, then it is worth considering some of the advantages that short-term rent provides, such as less depreciation of the property or the option to use it yourself whenever needed.
This article was originally posted on City24 real estate news on March 30, 2021.