Jason Martin owns this downtown, three-bedroom condominium. He expected to earn between $7,000 and $10,000 in rental income during the two-week South by Southwest event, which was canceled.
Photo: Twist ToursAnne Carlsson was all set to earn roughly $12,000 in April from short-term rentals for her historic home on 30 acres of Kentucky bluegrass between Lexington and Louisville. Then the Keeneland racetrack Spring Meet was canceled and the Kentucky Derby was postponed until September. Ms. Carlsson’s take suddenly dropped to zero.
“This is our busy season with events. We were hoping to make up for the slow times,” said Ms. Carlsson, 44, a mother of four who lives most of the year in Gilbert, Ariz. Rental income during horse-racing season helps her maintain the house, which her grandfather purchased before World War II, and recoup the $60,000 she spent last year to upgrade electrical and plumbing systems, redo floors, update bathrooms and buy furniture. She uses the home in the summer to keep her children close to her extended family throughout Kentucky, she said.
“I had several people approach me to buy the home, but I took on the renovation and Airbnb so that I would not have to let go of it and my Kentucky heritage,” said Ms. Carlsson.
It is too soon to predict how the new coronavirus pandemic will affect the larger luxury real-estate market. But the impact is already being keenly felt by homeowners who depend on short-term rental income they derive from annual events. Amid a revenue wipe out, owners have quickly pivoted to find new customers, comply with quickly changing ordinances, negotiate with lenders and make properties useful for people caught up in the pandemic.
A bedroom in Mr. Martin’s condo, which is now on track to earn about $2,000 in short-term rental revenue this month.
Photo: Twist ToursIn an analysis of revenue from Airbnb bookings, AirDNA, a Denver-based analyst of the short-term rental industry, found that on the days that would have seen bookings for the Boston Marathon, revenue in Boston was down over 78%. In Palm Springs, the Coachella and Stagecoach festival postponements led to a nearly 50% decline; postponing the Derby and scrapping Keeneland erased 42%; Austin’s South by Southwest cancellation led to a 40% drop. The spread will likely increase for events in April because many bookings last year likely occurred at the last minute, said Eric Fullerton, director of marketing for AirDNA.
Hosts often attempt to mitigate the impact of sudden cancellations before big events by establishing cancellation policies that offer only partial refunds. But on March 14, Airbnb announced that guests could cancel and receive full refunds, regardless of hosts’ policies. Hosts said they were stunned to see thousands of dollars in stays turn to nothing in an instant.
However, on March 30, there was another twist: Airbnb announced that cancellations due to coronavirus for bookings between March 14 and May 31 that were made before March 14 would be covered by a $250 million host-relief program. Hosts will be repaid 25% of what they would have recouped under whatever their cancellation policy was when the booking was made, said chief executive Brian Chesky in a live video presentation that day. Another company program provides grants up to $5,000 to hosts who rent out their first or second homes and meet other criteria, Mr. Chesky said.
Jason Martin, 39, owns 15 condos and houses in Austin, Texas, most of them mortgaged and with between $3,200 and $5,900 in monthly carrying costs. In the dates surrounding the city’s South by Southwest festival, Mr. Martin was on track to earn roughly $120,000; his strict cancellation policy mean that he should have held on to about $60,000 when all his bookings were wiped out. Airbnb’s relief program should yield him roughly $15,000, he said.
“It’s better than nothing so it helps,” said Mr. Martin, who calculates that “the entire busy season of the year has been cut down to at best 12.5% expected revenue.”
Anne Carlsson’s family home near Lexington, Ky., was booked for $12,000 during this year’s horse-racing season. With Keeneland canceled and the Kentucky Derby postponed, she’ll earn nothing in April.
Photo: Kyle Terry/Terry Enterprise MediaJosh Reed, 24, is a newcomer to the vacation rental business: He closed on his second home in Austin three weeks ago. The former investment adviser left his job last month and launched UrbanStay, a company that both buys and manages short-term rental homes that rent for between $300 and $900 a night. His two properties were booked for a total of $17,840 for SXSW, he said.
In the wake of the SXSW cancellation, nearly all those bookings evaporated. He still faces $13,400 in carrying costs for his two properties. He paid $720,000 for a home in October and $900,000 for another one that closed on March 13. His father cosigned the loans with him, he said.
Mr. Reed said he has received 90 days’ forbearance on his two mortgages. The arrears will be tacked onto the end of the loan terms and he will not owe penalties or fees, Mr. Reed said.
In mid-March, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, and the Department of Housing and Urban Development, which oversees FHA loans, announced an immediate foreclosure and eviction moratorium for 60 days. Borrowers with Fannie- and Freddie-backed loans can call their loan servicers, tell them they have been negatively impacted by the coronavirus crisis (documentation is not required) and arrange up to 12-months of forbearance, said a FHFA spokesman. Homes with second-home or investor mortgages are included, said the spokesman. Roughly 60% of all loans are either FHFA or FHA loans, according to the Mortgage Bankers Association.
Spokesmen for Bank of America, Wells Fargo, Chase and Citibank said borrowers—even those whose loans aren’t Fannie, Freddie or FHA-backed—should call to discuss their situation and explore options.
Michael Gold and Richard Burt’s Palm Springs home is a big earner during the Coachella and Stagecoach festivals. But with the events postponed and most short-term rentals disallowed, $13,000 in April revenue has fallen to zero.
Photo: Ryan DanzMichael Gold owns a home in Palm Springs with his partner Richard Burt that was booked throughout April with visitors to the Coachella and Stagecoach festivals. As of March 10, the couple was on track to earn roughly $13,000 in April. By the next week, their bookings plummeted to zero, said Ryan Danz, chief executive of Air Concierge, a Los Angeles and San Diego-based company that manages short-term rentals in California and Seattle.
Mr. Gold, a commercial real-estate executive in Los Angeles, said that he lowered the nightly price from between $800 to $1100 to roughly $275 a night, hoping to draw bookings from city dwellers who might want to “shelter in place” in Palm Springs. The strategy appeared to be working: He got an 8-night booking in March from such a person from San Francisco just before the statewide “shelter in place” order was issued, he said. But since then, Palm Springs has forbidden most short-term rentals and Mr. Gold’s property will likely see no bookings in April, Mr. Danz said.
Andreas King-Geovanis, 30, has found himself affected both professionally and personally by the current crisis. He runs a Miami-based company called Sextant Stays, which holds the leases on about 90 South Florida properties. The company pays homeowners a steady monthly rent, then leases the homes short-term, earning an average of $500 a night, he said. So far, there have been about $800,000 in cancellations, he said.
He also owns two properties personally, including a condo in Morningside, north of downtown, where the Ultra Music Festival in March typically drives many rentals. The property was rented to a family from Denmark for $11,000 in late March and early April. They canceled immediately after the European travel ban was announced, Mr. King-Geovanis said.
He bought the property for $580,000 in 2012 and holds a mortgage on it, with carrying costs of about $4,800 a month, plus around $500 for utilities, he said. The unit normally grosses about $20,000 a month in short-term rental income, but after seeing bookings drop to nothing, Mr. King-Geovanis offered it as a long-term rental. A couple of days ago, he found a tenant who will stay until July and pay $6,000 a month, he said.
Andreas King-Geovanis typically makes $20,000 a month on this four-bedroom Miami condo. He now has a long-term tenant paying $6,000 a month until July.
Photo: Accu TourOn March 21, Miami-Dade County announced it was closing all hotels and lodging, including short-term rentals, except for “essential lodgers,” which primarily are people helping with the crisis or people who cannot shelter in their own homes. Mr. King-Geovanis is now offering all Sextant properties free to nurses and doctors; thus far, he has had 20 such bookings, he said.
Properties that allow urban dwellers to isolate themselves in more remote locations are a relative bright spot. Martin Beaurivage, co-founder of Elite Luxury Homes in Los Angeles, rents ultrahigh-end homes in L.A., Aspen, Mexico, Greece and the Caribbean. While “the vast majority of our bookings until the end of April have been canceled,” luxurious homes in Malibu are attracting interest, he said. In late March, he rented out a four-bedroom in the Malibu Hills for $60,000 for the month of April, he said.
“These are families that live in L.A., and they want to get out of town,” said Mr. Beaurivage. He is also receiving calls from New Yorkers who were visiting Los Angeles and now don’t want to return home, he said.
In Austin, Mr. Reed listed one of his properties as a longer-term rental for $6,200 a month and said he spent the early part of the week showing it to interested parties. On his other property, he has dropped rates and has received a number of bookings from people driving from other parts of Texas. He has added language to listings explaining that homes are cleaned with virus-killing bleach.
“I don’t really love the way that smells,” said Mr. Reed, “but we’re making sure it’s safe and sanitized.”
ADVICE FROM THE FRONT LINES
Short-term rental owners and managers are attempting to shore up revenues with these strategies:
- Call your lender: Josh Reed in Austin negotiated a mortgage forbearance of three months on his homes loans. He will pay nothing for 90 days, and then have those days tacked onto the back end of his loan terms, he said. Get specific with your lender to understand when the missed payments are due, credit score impact, and fees.
- Recoup with Airbnb’s Covid-19 relief program: On Monday, Airbnb announced it created a $250 million fund to repay hosts 25% of what they would have received through the cancellation policy they had in place when the booking was made. It applies to bookings made before March 14 with check-ins between March 14 and May 31. The company is also offering grants of up to $5,000 to some who rent out their first or second homes and meet other criteria.
- Switch to shorter or longer stays: Some hosts are making minimum stays shorter, to appeal to local travelers who want to stay for just one or two nights. Others are marketing property for one- to six-months stays at much lower prices than short-term rentals would typically yield.
- Cut prices: While it was still allowed, owner Michael Gold in Palm Springs offered his house at a quarter of his peak rate, and attracted a renter looking to shelter in place there.
- Market to nurses, emergency personnel and stuck travelers: Heath Green, co-owner of Kentucky Life Property Management in Lexington, is posting on Furnished Finder, a website for traveling nurses and medical personnel. He has also called local officials to say he can provide discounted properties for people who need to shelter in place or quarantine.
- Offer property free to first responders: Amid Miami’s ban on most short-term rentals, Mr. King-Geovanis is offering his company’s properties free to doctors and nurses. “This is the better thing to do ethically and will get us goodwill from the customers,” he said.
- Implement new hygienic practices: Mr. Green said properties will sit empty for three days after each use, be cleaned with bleach, and remain empty for two days before the next rental.
- Highlight isolation: Redo pictures to emphasize long driveways, private outdoor space, pools, multiple sitting areas, home offices and other aspects of a comfortable site to shelter in place.
- Market to existing or past customers: Before Palm Springs banned most short-term rentals, Ryan Danz of Air Concierge was emailing everyone who had booked one of his properties and alerting them to new, lower rates. Offer the steepest discounts to current guests, to encourage them to extend stays.
- Skip in-person check-in: Airbnb spokesman Ben Breit suggested arranging an automated way for guests to enter the property, rather than meeting them in person.
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