Busting Short-Term Rental Misconceptions



    Here we will review some common myths about the short-term rental industry that make institutions cautious to invest in this market.

    Myth 1: “There’s no regulation for short-term rentals”

    It's a common misconception that there are no regulations for short-term rentals, with the risk that local backlash unleashes a wave of new regulation that is punitive for investors. Rules on the books that apply to traditional accommodation options, such as hotels, may not always extend to short-term rentals, but there are still laws in place.

    Regulations exist, but vary greatly from place to place. For example, in Los Angeles rentals must be owner-occupied; Scottsdale is dominated by HOA restrictions; and Orlando short-term rentals are permitted but only in designated areas. This highlights the need to research and understand the specific laws and regulations in an area before getting involved in the short-term rental market.

    Ignoring these regulations could result in serious consequences, including fines and legal action.  When looking to invest in a market, investors should partner with property managers and experts like Andes STR who know the local regulatory framework and have an informed perspective of how future years may evolve.


    Myth 2: "Short-term rentals can’t compete with hotels”

    There is a false impression that short-term rentals can't compete with hotels. It is true that hotels remain the preferred choice for many people, but short-term rentals offer a complementary alternative that are not only rising in preferences, but can actually save travelers money in certain situations.  

    Prior to the COVID-19 pandemic, online travel reporting group Travel Pulse noted that an industry survey found that “60% of leisure travelers…prefer the home rental platform….[while] 68 percent of business travelers prefer hotels.”  During COVID-19, there is reason to believe preferences changed where hotel occupancy declines were almost double the magnitude of those at Airbnb, and have yet to break above pre-pandemic revenues, while the short-term rental industry has been on a record-breaking run.  Additionally, hotels have recognized the popularity of short-term rentals and many brands have launched their own version of larger apartments and homes.

    For families with six or more members, they may find it more economical to rent a short-term rental property rather than multiple hotel rooms.  In Santiago, Chile, over 38% of short-term rentals are properties have two or more rooms, demonstrating the popularity of additional space and amenities.

    So, while it may seem that short-term rentals can't compete with hotels, it's likely the opinion of a biased traveler. By providing additional space, privacy, and more unique amenities, short-term rentals are quickly becoming a popular choice for many travelers.


    Myth 3: “Maintenance costs are significantly higher than a traditional lease”

    It is a widely held belief that maintenance costs for short-term rentals are significantly higher than for traditional leases. The truth is, the brief nature of short-term stays actually helps keep properties in good condition.

    Because short-term rental properties are constantly being inspected, cleaned and prepared for new guests, they are less likely to experience wear and tear. This, in turn, helps keep the property in good condition and reduces the likelihood of costly repairs.  By comparison, long-term rentals often have a difficult time screening out high maintenance tenants, or transparent understanding of how their investment property is being kept up.

    Additionally, any potential issues at a short-term rental are usually caught and addressed quickly, which helps prevent larger future problems. Best-in-class operators, such as Andes STR, also employ guest screening and preventative maintenance programs that ensure the longevity and long-run cost savings of short-term rental properties over time.

    So, while it may seem that maintenance costs are higher for short-term rentals, the opposite is typically true. Frequent cleanings, guest screening, preventative maintenance, and efficient management of any potential issues help keep properties in good condition and minimize the need for costly repairs over the holding period of an asset.


    Closing remarks

    The short-term rental industry is full of common misconceptions, and perceived risks.  Having an aligned investment and short-term rental operating partner like Andes STR can help further demystify the industry and provide sound advice and assistance in investing in smart, low-risk, high cash flow generating short-term rental property.