Short-term rental companies that lease homes and condo units may be uniquely exposed to the fallout of the coronavirus outbreak.Fred Lum/The Globe and Mail
As public health officials, companies and politicians struggle to centralize a response to the novel coronavirus there are signs the decentralized world of short-term rental accommodations has its own specific vulnerabilities.
The human cost of the coronavirus outbreak continues to grow, with more than 111,000 confirmed cases and more than 3,900 deaths spread across 109 countries. The economic costs are also being felt, particularly in the travel and hospitality sector, and analysts fear short-term rental companies such as Airbnb and VRBO may be uniquely exposed to the fallout from the virus.
“Airbnb is facing the worst collapse of the travel industry since who knows when," said Dror Poleg, the author of Rethinking Real Estate and the co-chair of the Urban Land Institute’s Technology and Innovation Council in New York. "Airbnb thrives on conferences and large events, many of which are now postponed indefinitely.”
“Coronavirus is a coup de grace, it’s the last thing they needed,” said Mr. Poleg, who argues Airbnb was already facing increased competition from online travel agent giants such as Expedia and from international hotel chains such as Marriott, which may be better positioned to manage the coronavirus fallout.
A softening tourism market might be bad for investors who bet on higher revenues for housing units in the short-term market, even though if some of those units converted to long-term rentals the uptick in supply could have the effect of lessening the Toronto region’s housing affordability crisis.
“New listings are still outpacing any increase in rental demand so if we see a year over year decline in rents [last month they were flat], that would be quite bad for confidence from investors,” John Pasalis, CEO of President Realosophy Realty Inc., said.
“We have heard from investors who prefer to cash out after having a hard time renting their units,” he said, and while he thinks an uptick in defaults is unlikely, declining rental rates could slow demand for condo presales. “I believe [that] is highly possible if rental prices start trending down, and if we happen to hit a point were resale condo prices start to decline.”
Airbnb doesn’t say how many listings it has in Canada (it has seven million worldwide), but third-party sources estimate Toronto alone has more than 20,000 short-term rental locations.
Airbnb declined to provide information on whether cancellations have been up, but on message boards for Airbnb hosts in the Greater Toronto Area, the coronavirus is a hot topic. Hosts on these sites are mulling cancelling any bookings from China, or from those in the travel industry (one host who rents a room near Pearson International Airport expressed concerns about upcoming bookings from pilots and other travel workers).
“My bookings are drastically down for the first time ever and had my first cancellation the other day,” wrote one host under the name Joanne Azelis. “I’ve never been without bookings, NEVER!! It’s a massive loss of income.”
In 2018, a team of researchers at the Chinese University of Hong Kong published a survey of outbreak studies in the medical journal Globalization and Health called “The role of the hotel industry in the response to emerging epidemics: A case study of SARS in 2003 and H1N1 swine flu in 2009 in Hong Kong”. One of the key conclusions: “The travel industry contributed to the speed of the spread of this unknown disease at that time.”
In 2003, the Metropole Hotel in Hong Kong was the first site of global dissemination for SARS after a medical professor from Guangzhou infected at least seven guests and visitors staying at the same time (including two from Canada). “Afterward, the Hong Kong the health authority established Guidelines on Infection Control & Prevention in the Hotel Industry. It offered comprehensive information on ways to implement infection control measures, in particular the maintenance of good hygiene on hotel premises.” The paper concludes that Hong Kong’s increased focus on training awareness in the tourism industry paid dividends in later outbreaks of flu and ebola.
On Feb., 28, Airbnb changed its “extenuating circumstances policy,” so that hosts and guests in areas affected by travel bans would no longer face financial or platform penalties for bailing on a booking. The site’s public-facing pages do not contain guidance on hygiene and sanitation in a health outbreak and the company declined to say whether it has shared any information of that nature privately with hosts.
“The hotel companies because they are so centralized, they can respond to these things … they can make sure the rooms are sanitized, to make people more comfortable. With [the coronavirus] the last thing I want to do is sleep in someone else’s bed,” Mr. Poleg said.
The Airbnb post on cancellations also noted: “Although nobody can know the extent of the impact that the coronavirus outbreak may have, we believe that history shows that when global disruptions happen, the travel industry has bounced back in the long run.”
More than 1.4 billion tourists trips were recorded in 2018 by the World Bank, and Canada had about 20 million visitors annually. It had taken more than 15 years for those numbers to recover to that level, which they had reached just prior the devastating effects of the SARS epidemic in 2003.
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