In times of economic distress, market contractions, and government-issued shutdowns, Airbnb, VRBO, and short-term rental properties take a huge hit. If you own a short-term rental property, Airbnb rental property, VRBO property in the Orlando and Central Florida market, you may be asking yourself, "what am I going to do?" "My bookings have been completely canceled for the foreseeable future." We are currently navigating uncharted waters. Before the Covid-19 pandemic, Orlando announced in early 2019 a record 75 million visitors and solidified the ranking as No. 1 U.S. Travel Destination. Unfortunately, COVID-19 has completely rocked our world, bringing central Florida to a screeching halt. When the world goes into recession, everyday people begin to cut back unnecessary expenses. That once a year trip to Disney World gets put on hold, and booking begins to drop to non-existent as a rise in COVID-19 cases swings upward in Florida as a possible hot spot. Cancelation and limited bookings happening left and right and refunds demanded by tourists, vacation rental property owners are in a world of hurt and very concerned about what they can do next as their Orlando vacation property sits vacant. Mortgage payments, HOA dues, taxes, and utilities are still due, but the demand has completely dried up.
How Big is Central Florida's Airbnb & Vacation Rental Market?
To grasp how massive the vacation rental market is here in Florida. UCF research from College Rosen College of Hospitality Management shows that Florida's vacation home rental industry exceeds $27 billion. In 2018, more than 14 million tourists stayed in vacation rental homes in Florida. Half of Osceola counties $60 million in annual tourist development tax revenue comes from vacation rental homes. Florida alone has about 275,000 vacation rental listings statewide. So what happens when the tourist tap shuts off for your vacation rental property as a short-term rental property owner? Short answer, you pivot and adapt.
What's Next For Airbnb and Vacation Rentals In Central Florida?
Florida shatters the single-day record for confirmed cases of Covid-19 at 9,000 and Orlando leading the pack of the highest recorded cases at 5,872 confirmed infections; the only city with more reported cases has a tremendously strong vacation rental market Miami with 17,909 confirmed cases of coronavirus. The impact the virus will have on the vacation rental market will linger for quite some time. We project a minimum of 12 to 24 months of recovery for the vacation rental market in Central Florida.
Trouble in Paradise for Airbnb Owners & Subleasors
A popular trend or hack for individuals profiting from the Airbnb boom in Central Florida and the rest of the country (before the pandemic in the vacation rental industry) would be for individuals to approach a property owner that may have a furnished unit or second property in a tourist area like Disney. Sign a lease agreement with them for say $1,300/mth that allows them to sublet the property out as an Airbnb or vacation rental property. The tenant or Airbnb hacker charges $120 a night. The property has 15 nights occupied during the month bringing in $1,800; a tenant pays the $1,300 monthly rental rate to the property owner, and they've just pocketed $500. However, when a health pandemic hits, someone gets caught holding the hot potato.
The problem with these Airbnb hacks and a lease agreement for this purpose leaves the homeowner extremely exposed. That is, the homeowner likely signed a 12-month lease agreement with the Airbnb hacker "tenant" under the tenant's company name. As bookings come to a screeching halt due to COVID-19, the $1,300 a month rental payments stop coming in. The owner is then forced to pursue an eviction at the proper timing defined in the federal CARES Act. Here are a few risks of signing a lease agreement with a tenant wanting to us their corporation name or LLC:
You don't know who is living in the property or how many guests.
It is harder to evict.
They are operating a business out of your home.
Greater liability exposure.
Overbuilt Homes and Newly Planned Vacation Rental Developments.
Before COVID-19, the vacation rental market and Airbnb trend were on fire. In Central Florida, planned vacation rental communities are everywhere. You have the newly developed Margaritaville Resort Orlando, you have hospitality giant Wyndham with Caribe Cove Resort Wyndham Vacation Rentals Kissimmee, Retreat at Champions Gate, and many many more.
These communities are beautifully designed for instant relaxation and maximum vacation experience. Many of the short term rental vacation homes within the Orlando short term rental zones are constructed to have oversized floor plans. Some properties can feature up to 14 bedrooms, a stretch from even the large 4, 5, and 6 bedroom vacation homes.
Even before COVID-19, we saw the supply of vacation rental properties increase tremendously, and property owners weren't making any money on them. They have to compete with the hotel industry and the hundreds of other vacation rentals available in the area. Owners & developers implemented Disney themed rooms, furnishings & bedding with the big mouse to stand out and attract new tourists. But now owners are stuck with a vacant eight-bedroom single-family house (fully furnished) and losing their shirts every month.
Short-term Rental Property Options
Selling your vacation rental property may be a difficult task as many short-term owners are trying to unload their rental property. With buyer demand low for vacation rental properties during this time, you may get extremely lowball offers or sell way below your desired sale price. If you bought your rental property ten years ago and the home has since appreciated, you are likely in the clear, but if you recently purchased the home, selling will not be your best option.
We advise short term rental property owners to convert. Long term rental properties have a stable and profitable track record and will continue this trend. Whether COVID is here for a short time, or here for a long time, people will always need long term living options.
The last option you have as a short term rental property owner is to weather the storm, and potentially enjoy it. You purchased your short term rental property for people to enjoy, they may not be able to use it at this time, but that doesn't mean you can't enjoy it. If you live elsewhere, why not take a vacation out of it, after all, you are paying for it.
COVID Crash Conclusion by an Orlando Property Manager
With short term rental properties in limbo, Airbnb, VRBO, and short-term rental property, owners may need to seek other options to stay afloat. Determine your investment goals for the property and be adaptable during these trying times. Consider the silver lining; You still have one of the best and safest investments in your possession. Real Estate!
If you would like further information or advice on your short term rental property, feel free to contact The Listing Real Estate Management, Orlando, and Central Florida's most reliable source for long-term Orlando property management. Cheers!