The short-term rental boom: what this means for the property market

The UK short-term rental market is booming. Walk through any urban centre or visit a popular leisure destination and you'd be hard-pressed not to notice the Airbnbs and professionally managed properties. The sector is also incredibly diverse, covering everything from shared accommodation in private homes to slick hotel-like brands occupying multi-unit apartment blocks in London, Bristol, Manchester and many smaller cities. Not to mention the cottages, yurts, serviced apartments, and large homes that also make up the short-term rental accommodation space. Investment and growth The industry brings in investment, contributing £27.7bn to the UK economy and accounting for 1.4% of GDP. According to Airbnb, UK hosts on the platform earned more than £1.5bn in 2021, with the typical property earning just over £6,000, representing approximately two months of pay for the median UK household. Bournemouth, Ceredigion, East Lindsey, Norfolk, and County Tyrone saw the highest growth in earnings last year. According to Transparent, a business intelligence and data company specialising in holiday lets, the UK supply of entire homes rose 13% between 2019 and 2022 from 287,97 to 325,335. It's a sector that continues to attract investment and fuels mergers and acquisitions. Earlier this year, European short-term property management company ALTIDO, which manages properties in London, Edinburgh and 20 other cities across Europe, was acquired by Europe's largest co-living company DoveVivo. Hospitality companies, including Guesty, OYO and Sykes Holiday Cottages, continued to grow through acquisition. Changing consumer behaviour fueling growth Changing travel patterns and consumer demand has fuelled growth. Staycations and domestic tourism during 2020 and 2021 grew significantly due to travel restrictions which led to an outpacing of demand to supply. The pound's weakness has impacted the growth in inbound tourism to the UK this year, and the transformation of the 'work from anywhere' shift in office and home working culture is also impacting demand for short to mid-term stays. The burgeoning economic crisis in the UK with inflation, fuel costs, interest rate rises, and a challenging borrowing climate will further fuel generation rent. Many of this generation are less enamoured with stability and more motivated by experiences - a key customer demographic for Airbnb. The trend for shorter leases and zero commitment is only predicted to grow. Technology and professionalisation The innovation and variety of tech tools developed over the last few years to streamline the operational management of short-term rentals is astonishing. There's everything on the market, from noise and occupancy monitoring, guest communication tools, revenue and pricing management, data and business insights, voice technology, virtual concierges, keyless access, energy and water monitoring, distribution channel management, housekeeping workflow to full-service property management software. The tech takes away much of the hassle of guest and booking management, meaning that operators can focus on supply growth and owner relations. Further, there has been a drive for more 'hotel-like' experiences in short term rentals. In part because of the crossover during the pandemic of hotel customers shifting to rentals, also driving more professional operators into the space. The merging of lodging types Short-term rentals are a vital part of a larger and more significant merging of lodging verticals. Underutilised office blocks converted to apartments, underperforming hotels adding catering facilities, student accommodation turning into pop-up hotels over the summer months. Short-term rentals can be lucrative for larger asset property owners to flex their inventory and create additional revenue streams. The thorny subject of regulation Regulation, or the lack of it, is the thorn in the side of the short-term rental market. Like anything that grows very quickly, there has been a lot of conversation about how to regulate it in future. Government consultation, aimed at finding a better path for regulations, closed in September. Scotland has gone draconian in its regulatory measures which is a wake-up call to the rest of the UK. Vocal, but somewhat myopic opinions on the impact of second home ownership on communities, tend to dominate the conversation. However, organisations like the Short Term Accommodation Association and the Association of Scotland's Self Caterers are voices of the industry, aimed at bringing a more balanced perspective. Regulation should benefit the sector in the future by removing unprofessional operators, and a potential database of operators and properties could provide much needed data on the sector. In conclusion The return on investment in short-term rentals continues to climb with limited supply and increasing demand. The regulatory landscape is uncertain but unlikely to impact the professional sector negatively. Property management is a complex business, but tech tools, white-labelled solutions, and 'boots on the ground' property managers with real knowledge and insight into the market make investing in this sector a viable and attractive option.

The short-term rental boom: what this means for the property market

Jessica Gillingham, founder and CEO of Abode Worldwide, discusses the growth in the UK short term rental market

Read Next

Peel NRE submits plans to regenerate Fiddler’s Ferry

BoE raises interest rates to 4.25%

Maslow Capital delivers £114m loan to Union Property Development

British Land acquires three new retail parks for £94m

Henry Boot welcomes ‘record’ FY profit amid strong sales

Peel NRE submits plans to regenerate Fiddler’s Ferry

BoE raises interest rates to 4.25%

Maslow Capital delivers £114m loan to Union Property Development

British Land acquires three new retail parks for £94m

Henry Boot welcomes ‘record’ FY profit amid strong sales

Commercial Market Forecast shows signs of recovery, study finds

Sirius Real Estate appoints new CFO

Chancerygate begins work on Trafford Park urban development

Countryside Partnerships acquires Grimsby site for 299 homes

Wavensmere Homes unveils £170m Nightingale Quarter show home

Read Next

Peel NRE submits plans to regenerate Fiddler’s Ferry

BoE raises interest rates to 4.25%

Maslow Capital delivers £114m loan to Union Property Development

British Land acquires three new retail parks for £94m

Henry Boot welcomes ‘record’ FY profit amid strong sales

Related Articles

Commercial Market Forecast shows signs of recovery, study finds

Sirius Real Estate appoints new CFO

Chancerygate begins work on Trafford Park urban development

Countryside Partnerships acquires Grimsby site for 299 homes

Wavensmere Homes unveils £170m Nightingale Quarter show home