10 tips to save your Airbnb in Coronavirus times

How long? - Tip 3 for your short-term rentals in Coronavirus times

Mar 13, 2020 10:16:43 AM / by Eric Bordier

Coronavirus-scenarios-for-vacation-rentals

Now that the coronavirus hits the fan, the crucial question for affected companies is "How long will it last?".  It drives decisions on what solutions you propose to your guests, how you revise prices and revenue management policies, which expenses you must cut, and whom in your team you must fire. 😓
"Prediction is hard, especially when it is about the future".  After the battle, everyone will be a general (Czech saying). And we have no crystal ball...but here are  data that we gathered on the Net, and a few assumptions that we identified that can guide us. Obviously, your feedback and thoughts using the form at the end will be useful to put all minds and information together. 



1. When the first cases are reported, it is only the tip of the iceberg, and it takes at least 8 weeks to unfold:

 

Best data and analysis I found is on https://medium.com/@tomaspueyo/coronavirus-act-today-or-people-will-die-f4d3d9cd99ca 

I found this graph most revealing : taking into account the incubation period before symptoms, you can time the epidemic in countries that have experience:
Hubei-coronavirus-chart

And see some forecasts:
Coronavirus-forecast

2. Then it seems like the evolution of the epidemic and the measures affecting travel and business depend on your country's politicians and preparedness:

 

We have all seen that graph relating treatment capacity, containment measures and fatalities:
flattening-the-coronavirus-curve

flattening-the-coronavirus-curve

Source: https://informationisbeautiful.net/visualizations/covid-19-coronavirus-infographic-datapack/ and Google News 

Let's focus on the treatment capacity part and see a few parameters/ KPIs that you can check in your country, like the test capacity and number of masks available for doctors and nurses. We can take a few examples:

  South Korea Czech Republic USA
Test capacity 15,000 per day 98 per day not long ago (source: MF dnes) and rising ?
I don't know, but check Matt Curtis's post on FB... https://www.facebook.com/Matt.Curtis.Austin?__cft__[0]=AZWmdOg5LNGUxrcyPyM4Sadd6-pbUdpMPhZythFak0487JjUqCivscTVLxUCx-GMvZGQOaRJS5BBund2eMguZxJFxqQwIETIcZXpVnxjR-2IS1otP6JSv36XJLcENJzpjQg&__tn__=-UC%2CP-R 
Total tests conducted 220 000 1800
https://www.irozhlas.cz/zpravy-domov/koronavirus-v-cesku-v-cr-aktualne-novinky-testy-testovani-laboratore_2003121913_ako
Masks available for hospital heroes I don't know, but based on https://www.straitstimes.com/asia/east-asia/coronavirus-can-south-korea-be-a-model-for-virus-hit-countries?fbclid=IwAR1Z_WHkS11idYStZcxGtwFphHM0ooMK6GNHeN025noyjy1KoF3v743xowk it seems ok.

Not enough:

https://domaci.ihned.cz/c1-66734730-rousku-nesezenete-stat-to-neumi-zajistit-kazdy-s-kaslem-muze-byt-nakazeny-rika-prezident-ceske-lekarske-komory

Solution: Accelerated process to authorize newer, more performant tests.
Widespread testing and isolation and healing of infected patients.
Confinement at home, state of emergency, travel ban.
Results Mortality rate 0.77% vs. average 3.4%
Epidemic seems contained
https://www.straitstimes.com/asia/east-asia/coronavirus-can-south-korea-be-a-model-for-virus-hit-countries?fbclid=IwAR1Z_WHkS11idYStZcxGtwFphHM0ooMK6GNHeN025noyjy1KoF3v743xowk 

 

Clearly, if your country's prepared, they might manage to save both patients and the economy.
But if it is not prepared, politicians will have to choose to save lives sacrificing the economy- and travel will be the first baby thrown away with the infected bath. Like the Italian and the Czech do.

https://l.facebook.com/l.php?u=https%3A%2F%2Fwww.independent.co.uk%2Fvoices%2Fcoronavirus-deaths-trump-stock-market-pandemic-economy-bankrupt-italy-a9394891.html%3Futm_medium%3DSocial%26utm_source%3DFacebook%26fbclid%3DIwAR2sE9mVd_FnLo66XcvUXkmAiw_AKykW3Rxp9VfvcInFgUGW8ViNPdcx78Q%23Echobox%3D1583963954&h=AT2Y7AtQvmTXQr_LR54D6uzK54TsROji5HcoCghKRNcWKNapZ9JZbHrEpw5zyk1EMVIASUkOFboS1BYt4CcRx3dgW4Josdq4ZkrOmAcUq9_mOMcmduV3J4fbMK7mGDp7bw&__tn__=%2CmH-R&c[0]=AT3k-l0Y0J2L3XxUiPDZOTIEbT-It9ctinVxNmwo4NmRuWGXDxeFhX-_2k8ejAK6AkKWA2bKIkAX0hsyjiZiAfp5liNXI_ww5DqiBc8WQLn5ppNKmi3FUOIywlmPajHHbZmMar4pURC64nND1zeeug 

 

3. Even once the real risk gets lowered, it will take quite some time to get restrictions lifted and  quite some time for people to get back in a safe travel mood:

here I like the graph  provided by Thibault Masson on https://www.rentalscaleup.com/vacation-rental-data-and-charts-coronavirus-impact/  :

No, not that one, we're beyond that...:
Vacation-rental-Airbnb-pricing-data-and-revenue-management- Keydata and Thibault Masson

The data from Keydata is good, but lines are easy to draw after a travel ban.

The one I like is that one: 

So let's assume:

- 3 months of crisis, see above. That's 3 months at 0 to 15% occupancy

- 3 months of recovery. recovering step by step to 80%.

 

4. Your options during this phase will depend on your rentals'  location and model

 
 To make a long story short:

If you are in urban rentals in a European city, on fixed rents, and Spring is your highest season,  bring all sails down - switch properties to monthly or long term rents for locals and find good activities/outplacements for your team.
If you are in a seaside destination, there is still hope left - see next point and tips

 

5. Scenarios: options, probabilities



One thing I remember from my McKinsey years is that confronted to such uncertainty, you should draw scenarios, estimate their probability, their NPV (Net Present Value). 

coronavirus-scenarios-npv

That works pretty well if you are a financial institution with access to state/central bank funding. Or a corporation with access to huge market funding (though, looking at financial markets, there will be less of these now.) 

If you are a small or medium vacation rental company with personal funding, once you have bet your house, you may find out that some of these options are not riskable for you, so NPV will not be your main criteria, but bearable risk and affordable financing will drive your property inventory, staffing, revenue management and availability choices. There it becomes essential to know better your costs including variable costs and  value scenarios accordingly (including revenues, costs, risks...). https://blog.vrpartnership.world/why-you-cannot-do-good-yield-management-in-vacation-rentals-today-revpar-is-not-enough 


6. Hope for the best and prepare the worst

  • In these dark times, you might wonder what assumptions to put in the optimistic/hope for the best scenario.  let's dream a little...the worst is not always certain. 

    A few pink scenarios to end the coronavirus crisis:
    1. A cure is found. After all, some experiences seem to indicate existing medical drugs work on the virus. It sounds like magic, but it is the kind of magic science achieved for us for centuries.
    2. A vaccine is developed. Yes, it seems it takes a year usually, but with the best scientists is the world working together on Coronavirus, one can hope. 
    3. Spring and summer heat ends the spread of the virus. We do not know about that, but the contrary is not proven either. That would save the summer season.
    4. Politicians replace travel bans with providing masks to healthcare workers, making tests widely accessible, increase healthcare capacity etc. like in Taiwan, South Korea etc. Of course today that sounds unlikely, but to paraphrase Churchill maybe we can trust them to do the right thing- after they failed with every other solution.

7. After Spanish Influenza came the roaring twenties

One thing not illustrated in the crisis recovery graph above is the appetite for life that comes after deadly crises.  Let's dream of it while we are confined at home :  https://en.wikipedia.org/wiki/Roaring_Twenties 

And that time will come, because in the grand scheme of things we are talking about a pandemic that made less victims than the yearly flu, and for which the best in class reduce mortality to 0.77% of the infected and reduce the infection likelihood:
https://informationisbeautiful.net/visualizations/covid-19-coronavirus-infographic-datapack/ 
Disease deaths-per-day-worldwide




So as much as we can feel sorry for the victims, afraid for our loved ones, and angry about our politicians, this is not the end of the world.

 

 

To be continued...we will try to post one tip a day.

 

Defense:

Tip 2: Deal quickly and pro-actively with cancellations of those at risk, and try to re-rent fast

Offence:

Tip 3: Replace foreign guests with locals

Tip 4 :  Replace senior guests with young guests

Tip 5: Target safe regions

Tip 6: identify less Coronapanic-sensitive niches

Tip 7: Revise your prices

Tip 8 : Replace short -term rentals  with medium or long-term rentals

Tip 9: Adapt all your mix, from cleaning 

Tip 10: make your bets about how long the crisis will last- and adjust your options accordingly

 

Register for our Webinar - 10 tips to save your Airbnb in Coronavirus times

The webinar is planned for Tuesday, March 17th at 16:30 CET  (that is 11:30 AM Tuesday, Eastern Time (ET)). If you cannot attend, we will send you a recording.

You can vote below for which tip you would like to read first, we'll try to prioritize.

 

Topics: vacationrentals, yieldmanagement, shorttermrentals, airbnb, coronavirus

Eric Bordier

Written by Eric Bordier