During Episode #5 of the HCH Podcast we spoke to Simon Lehmann, short-term rentals industry guru, and CEO and Co-Founder of AJL Atelier.
Simon told us why a storm is brewing for the short-term rentals industry, how tech and AI might revolutionise the sector, and the importance of environmental issues.
Click here to listen to the podcast, which was hosted by HCH Founder, James Varley. Below are some key excerpts from the interview.
James Varley: Tell us about the current state of the industry.
Simon Lehmann: I think we're in a quite challenging period. We're in a changing period. I had a team meeting before this podcast – and to be perfectly honest, we see a very blurry picture right now. We see a lot of uncertainty.
When we analyse the data, I believe a lot of people have become very quiet. Nobody wants to really talk about how summer went and how autumn and winter look – but we definitely see compression. Leisure markets in the US have had 25% less bookings than the year before.
At a conference over a year ago, I said ‘guys it's going to get rough’ and everybody was laughing at me actually. I was taking [an] umbrella on stage and said whenever it's sunny outside you tend to forget your umbrella – but have it with you, because it's going to get rough.
In 2021, 2022, the industry was spoiled with massive demand. We couldn't do anything wrong. ADRs [average daily rates] were pushed up to the sky. Occupancy was great. The owners were spoiled with great returns on their investments and their assets. And now this is changing all of a sudden. So now, owners are reluctant to reduce rates. It's going to get very, very volatile.
I think the biggest asset that you can have now in our industry is great relations [with] your homeowners. If you don't have good relations now, it might be already too late.
Homeowners will get nervous. They will swap, they will move, they will go to other [platforms]. It's going to get competitive. That means the margins will come under pressure as well, because people will be forced to ask for less commission. So that's one thing that we definitely see happening. So, now it's time to build great relations with the owners, be transparent, take them into the boat, and show them what you can do to stabilise the situation.
Secondly, especially the UK market, has had massive times with domestic demand and domestic supply. It's been great. The pound has been going down. People were staying in England, which was fantastic. But now, all of a sudden, even that is not possible anymore. The summer hasn't been tremendous in the UK from what we're hearing.
Also, rising interest rates means a lot of people who bought properties to do short-term rentals are not making returns anymore on their invested capital. So, this is going to be tough for platforms like Airbnb. So many people were building their business on the back of one supply channel called Airbnb, right? And now, all of a sudden, their interest rates are going through the roof and they’re highly leveraged, and have hardly got any equity in these houses. They’re going to have to sell or do it long-term.
We need to be honest to ourselves and say, hey, we are in some tough times. Having said that, we've had tough times before. We had the subprime crisis in 2008, where the market collapsed. We had SARS, we had 9/11 22 years ago. We’ve had a lot of different events. Short-term rental is resilient like hell. So, it might go up and down a bit, but it comes back very fast. So, I still remain very optimistic and bullish. But now, you need to have your costs under control. You need to have good relations to your homeowners and do everything possible to go through what we're facing. And I believe we need to get ready for a bit of a rough patch for at least 18 months.
Click here to listen to Episode #5 of the HCH Podcast. For the very latest from the short-term rentals industry, including tips and advice for hosts and property managers, sign up for our weekly newsletter.
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