A Deep Dive in the UK’s Short Term Rental Performance
Property Managers across the world are dealing with the consequences of Covid-19, some are sadly realizing that they might need to close down, others are implementing extreme cost cutting, while the lucky ones are concentrating on how to make the most of a rebound. In this blog, we explore how the United Kingdom’s short term rental industry is performing and understand the unique position its property managers are in.
United Kingdom in the Global Recovery
While every short term rental market has been affected by Covid, the fallout has varied wildly. The mix of drive vs. fly to, travel restrictions, shelter in place restrictions, unemployment and a host of other attributes have absolutely created winners and losers. The UK as a whole has been middle of the pack globally. A mix of domestic as well as international visitors balanced out the downturn, while lodging restrictions have played a significant role in stagnating the UK’s short term rental industry.
While the UK hasn’t seen the cancellation rate felt in parts of Southern and Western Europe, averaging around 50% cancellation rate for April and May has been painful. The good news is that Brits are optimistic that summer holidays will happen, with one of the lowest cancellation percentages for June and July. The lower cancellation rates come from rural UK markets being less dependent on OTA's as they have been self catering markets long before the rise of Airbnb.
While cancellations are one side of the coin, the bookings pace in the UK tells a mixed story. Below we look at reservations per listing by when they are received. Going into March, the UK was outpacing most other countries, and while the booking pace dropped significantly, it was again less than the majority of Europe. However, the UK has only recently started to see a moderate uptick in reservations mostly due to restrictions on short term rentals and slow to return demand.
UK’s Pricing and Revenue
While cancellations and booking pace have been caught in the Covid crossfire, the bookings that are still being made are at large discounts. Plotting year over year Average Daily Rate (ADR) comparison by check in date, shows the extent to which PMs are going to get occupancy. May ADRs have fallen from £144 to just £59, and June has seen a similar trend dropping from £168 to £63. Nevertheless, there is good news as July and especially August rates being relatively stable, with August ADRs coming in just 2% lower than last year, giving hope that the second half of the year may be a return to normalcy.
Turning to see how the cumulative effect that lower occupancy rates and ADRs has on total revenue we can see how 2020 is pacing compared to 2019. We can see that the first two months of 2020 were up year over year, before dropping off in March. Currently May and June revenue are 84% and 75% behind last year respectively. However, the key summer holiday months of July and August are only slightly behind last year, at 26% and 14%, giving the opportunity to catch back up should restrictions relax and reservations begin to flow.
The regional performance of the UK and Ireland has varied wildly with some regions shutting down altogether while others are sputtering through this time. South Wales and East Anglia have had the least amount of reservations cancelled while the majority of regions have had 50-75% of their reservations cancelled. Ireland in particular has had a high cancellation rate, which is extending into June and July at the moment.
Turning to regional booking pace on a per listing basis, all regions were hit hardest in April, while some have started to recover. London and Scotland are stagnating with booking pace growth over the last week, while North Wales and the North East have seen the highest growth, driven primarily by reservations for the Yorkshire Moors and Northumberland & Scottish Borders areas.
Deep Dive: Contrast London vs. Cornwall
To paint a clearer picture of the regional performance in the UK, we examined two opposite regions, urban London and the traditional holiday spot of Cornwall. On bookings pace alone we can see that while incoming reservations have fallen for Cornwall, they have dropped significantly in London.
More interestingly, is when these bookings are being made for. The majority of reservations for London are in the short term, with 63% being made for the next two weeks. Unsurprisingly Cornwall is seeing most of its reservations coming in for late July and early August, its peak season.
A Welcome Reprieve: Summer
As the data shows us, while the UK has fared better than mainland Europe from a cancellation and booking trend standpoint, property managers and property owners have withstood an unprecedented challenge to their businesses. We at Beyond Pricing, are encouraged by travelers booking holidays into July and August, as this demonstrates a confidence not seen in other European markets. As infection and hospitalisation rates continue to decline, we believe these increased booking and ADR trends to continue for the UK.
For real time insight into your market, be sure to check out our Coronavirus support page here. If you'd like to learn more about how Beyond Pricing's dynamic pricing solution can help your business navigate these uncertain times, be sure to give us your information here and we'll set up a time to chat.