According to the latest Euromonitor International Top 100 City Destinations Index 2022, five of the top six cities on the list also rank among the top 12 in terms of the number of short-term rentals outlets in 2022.
Paris, Dubai, Madrid, Rome and London have a great supply of short-term rentals, which is crucial for a diverse tourism product and involves local communities in the industry. The only exception is Amsterdam, which has seen a decline in short-term rental supply due to strict regulation policy.
Regulation and higher industry transparency
Amsterdam has recorded one of the highest declines in the number of short-term rentals outlets since 2019, falling out of the top 50 cities in terms of number of outlets, according to data from Transparent Intelligence. Hosts can rent only their primary residence property, and they may only do so for up to 30 days per year. Due to the growing popularity of short-term rentals, which contributes to a housing crisis (shortage of available housing, high prices) for locals in key travel destinations, Portugal has already limited the issuance of new licences to short-term rental providers, and more destinations may follow this practice.
In order to enable local authorities to manage the short-term rental business, the European Commission is proposing to increase transparency in the industry, in addition to the data on guest nights in the EU already shared publicly by the largest providers such as Airbnb, Booking.com, Expedia and TripAdvisor. Another solution to the issue could be a bigger focus on development in less popular and rural destinations, which have become much more popular during the pandemic.
Oppositely to Amsterdam, Dubai has made significant progress in the short-term rental market in terms of number of outlets. Thanks to clear legislation and taxation, as well as major events in the region, such as Expo 2020 in Dubai and the World Cup 2022 in Qatar, Dubai has moved up over 30 positions in the rank since 2019. As of 2022, the city has already secured ninth spot in terms of short-term rental outlets among all cities represented in the City Destination Index.
Key short-term rental providers have achieved record results; can loyalty boost sales further?
Airbnb currently holds the leading position in the short-term rentals market, with a 50% global value share in 2022. The company achieved its highest ever quarterly revenue results in Q3, generating almost USD2 billion in net income for the year, making 2022 the first profitable year for the company. The second largest player, VRBO, which holds a 17% value share, also recorded a positive performance in 2022. However, despite optimistic expectations for tourism growth in the forecast period, the challenging macroeconomic and geopolitical environment may increase pressure on these companies.
52% of business professionals expect that consumers’ spending on leisure travel/holidays will increase or stay the same in the next 12 months
Source: Euromonitor International Voice of the Industry: Lifestyles Survey, fielded October-November 2022 (n=1,017)
One strategy to maintain consumer attention during this difficult economic period is the use of loyalty programmes, which were previously mainly developed by hotel chains. In 2023, VRBO will join the unified Expedia Group loyalty programme, One Key. Considering that this programme covers all services of the group, VRBO can get new customers from other group platforms, and VRBO’s loyal clients will have a wider mix of services. While Airbnb has considered launching its own loyalty programme for several years, it is not currently among its strategic targets.
No more parties in short-term rental properties
One of the hottest recent technologies introduced by both Airbnb and VRBO is a party booking prevention feature. The solution allows hosts to run a more sustainable business and demonstrate greater care for local communities, as well as save on expenses for maintenance. VRBO uses a special risk score generated for every booking to identify potential disruptive events, while Airbnb, in addition to reservation screening, can also ask for more detailed guest identity verification. The issue of parties is a significant problem for communities, with some cities, such as Dallas, even desiring to ban short-term rentals in single-family neighbourhoods.
Exploring the benefits of bleisure and flexible remote work policies for business expansion
Consumers are changing their attitudes towards work-life balance and are ready to take advantage of the opened opportunities to work remotely, brought about by more flexible remote working policies implemented by many employers. This should have a positive influence on the number of bookings as well as the length of stay in short-term rental outlets, making bleisure travellers one of the focus groups. According to Airbnb, long-term stays of 28 nights or more represented 21% of total bookings and remained stable, while bookings for stays of over one week showed an increase in Q4 2022.
61% of business professionals indicated that new ways of working (remote work, work from home, contract job etc) will have a significant impact on sales in their industry over the next 12 months
Source: Euromonitor International Voice of the Industry: Lifestyles survey, fielded October-November 2022 (n=914)
Conclusion
Despite the uncertain economic situation, the outlook for short-term rental offerings is promising due to the further recovery of international tourism, especially with China reopening. With the right regulations and taxation policies, the industry will continue to grow and contribute to the growth of travel.
To review full results of the latest Top 100 City Destinations Index 2022, please visit Top 100 City Destinations Index 2022.
