With the many markets in the vacation rental industry reliant on airlines to shuttle guests back and forth, property managers can in turn become reliant on local airlines for success. So what happens when a major airline goes out of business and makes it more difficult for potential guests to access your market? With Air Italy announcing their closure last month and Flybe collapsing two months after the UK Government announced a rescue, we were curious - how might this impact occupancy in these markets?
While plenty of notable airlines have gone belly up recently, perhaps the most iconic of the recent closures is WOW Airlines, with its former hub in Reykjavik, Iceland. We reviewed what happened to the short term vacation rental industry immediately following its closure in late March 2019.
For Reykjavik, 2019 was already a bit softer than the previous year, given the 25% annual increase in listings. Pre-WOW Airlines shutdown, occupancy was down 1% over the previous year. Post-WOW shutdown saw an immediate slump in occupancy, from which the market simply never recovered. After the WOW Airlines closure, occupancy for the rest of 2019 was down 5.3% on average. Even Easter, which had traditionally seen occupancy jump to the mid-70s, fell close to 9% from the previous year.
Posted Average Daily Rates (ADRs) were also affected by the shutdown of WOW Airlines, with property managers and owners chasing the falling occupancy. Rates were reduced by 9% in April 2019 when compared year over year. Again, Easter, which came directly after the flights stopped, saw rates fall 12%, and overall Revenue Per Available Night (RevPAN) fell by a whopping 22%!
While the case of WOW Airlines may be somewhat unique given that Reykjavik is almost exclusively a "fly to" market, and a market serviced by a limited number of other carriers at that, it does show how vital the amount of flight routes can be for a vacation rental destination.
Only time will tell the true impact of these latest airlines closures. We will check back in a year from now to see if there has been a noticeable decrease in occupancy for the markets that were popular routes for Air Italy and Flybe.
With current global concerns around Coronavirus let's hope that no more airlines suffer this fate, and there will be plenty of flights to help your guests get to their favorite vacation destinations!