Spring bought with it that other annual season: protesting against Airbnb. Hundreds of thousands of people marched in Spain and with them came demands from residents around the world for action against the perceived impact of the vacation rental platform.
Housing supply is a growing problem for governments and a feature of every election campaign. The complexity and timescale of effecting real structural change means that many politicians turn instead to blaming short-term rental platforms for a lack of homes.
The truth is more nuanced, as HTL's recent report in partnership with AllTheRooms illustrates. Travel has gained momentum since the end of the pandemic, but growth has been underway for the past 25 years as budget airlines spread globally. With gradual expansion came gradual adjustment by destinations, something which has been overtaking by the recent acceleration, and the result has been complaints about overtourism and overcrowding leading to knee-jerk responses.
Tourists are being vilified, attacked with water pistols and, in the recent case of a shrine in Japan, banned altogether.
This polarization is not constructive, with tourism an important component of most global economies. Data and intelligence are needed to cool heads and create policies which promote sustainable tourism and functioning, living communities.
Overzealous or draconian laws can have a devastating impact. Blanket bans on short-term rentals limit the attraction of a destination where travelers are looking for flexible alternatives to traditional hotels, discouraging families and groups of friends. Over-legislating also deters institutional investment to the short-term rental sector, leaving the sector in amateur hands and limiting standards and transparency.
In the UK, cities currently implementing strategies to manage the STR sector include London, Edinburgh, Bristol, Liverpool, Brighton and Cambridge, with measures ranging from licensing and registration requirements to limiting numbers in certain parts of the city, or for a certain amount of time.
London’s legislation limiting listings to 90 days per year came into force in 2017 and the model has been considered other cities, despite evidence that limited resources for enforcement mean that many property owners have circumvented the rule by switching their listing to a fresh platform once their 90 days are up.
Our data has found that short-term rentals account for 8% of accommodation supply in the UK — or 770,000 listings — a 6.7% increase from 2019 to 2023. However, the number of properties available for short-term rentals in London has decreased by 24% since 2019, materially reducing density. This has been attributed to growing regulatory pressures such as the 90-day limit and licensing requirements in some boroughs.
Return on investment is another feature in driving supply in a segment where the asset is so much more flexible than a hotel. During the pandemic, there was a drop-off in use as travel was banned and many properties returned to the long-term rental market where returns were higher. This movement is typical as owners seek to move their properties to the most profitable model and makes short-term rental a moving target, where supply can vary depending on achievable rates.
A feature of the short-term rental market is its price sensitivity and owners are careful not to price themselves out of contention. Constrained supply and continued growth in visitor numbers in London saw average short-term rental rates increase by 52% over the period 2019 to 2023. This reduces the accessibility of London to budget travelers, potentially limiting total tourism revenue to the capital, but also focuses the sector on more lucrative travelers, a goal of many destinations.
In those destinations where local residents feel besieged, it can look as though tourism is out of control. This need not be the case. Instead, making a decision over the tourism demographic most desired or suited to a destination is the first step in building a strategy which works for all stakeholders.
Data and intelligence, with robust analysis, provides a unique and overarching perspective on accommodation supply within a market. This is invaluable when carrying out an accommodation needs assessment for local government which aligns with beneficial outcomes from tourism.
This can take many forms, including encouraging diversification in destinations so that they appeal to visitors all year ‘round instead of seasonally. Overtourism is not the same as overcrowding. In the Netherlands, museums have been built outside Amsterdam to take the pressure off the capital and spread the income from visitors.
The hotel sector's inflexibility is an advantage over the short-term rental sector in the eyes of planners, who can rely on the fact that room stock will not pop up one day only to vanish again the next. But the sector also needs to ensure its own future and meet the demands of guests. It is starting to take inspiration from the short-term rental sector, creating flexible accommodation and, with the rise of serviced apartments, should be considered by planners eager to diversify the accommodation offering in a location and stay in touch with trends.
Each destination is different and regulatory frameworks must address the specific needs of a market. There is balance to be found between a "not in my backyard" perspective and opening the flood gates and having a clear picture of the present creates a map for the future.
Joe Stather is managing director for HTL in the UK with Crowe UK and Horwath HTL.
The opinions expressed in this column do not necessarily reflect the opinions of CoStar News or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to contact an editor with any questions or concern.