Data analytics on short term rental in Portugal; impact on the national economy, controversies, and how CoVid19 can lead to drastic changes in the industry in both the short- and long- term.
data from airdna
The short term rental (STR) sector was revolutionized in 2007 when Airbnb created an entirely new multi-billion industry, currently worth approx. 31 billion dollars becoming the most dominant player in the field and contributing 100 billion dollars to the global economy in 2018. Airbnb entirely transformed the travel accommodation and tourism industry and so reshaped capital cities across the world by changing neighborhoods impacting the real estate market, architecturally, in terms of population dynamic and not least the economic impact for micro- and macro- economy alike.
Airbnb in Portugal
The STR in Portugal has been in recent years considered controversial and a subject for discussion and political debate. On the one hand, it has had a major positive impact on the local and national economy, providing needed income for many family-run businesses post the financial crisis. Airbnb statistics show that in 2018 Portuguese platform users generated more than two billion euros, placing Portugal as number ten on a list of countries measuring the impact of Airbnb generated income on the national economy. Furthermore, an Airbnb survey found that 60% of Portuguese hosts stated that home-sharing has contributed to them being able to afford their property. Until the pandemic, Portugal registered the best months ever on Airbnb. January closed with an annual growth of 82% and February doubled revenues compared to the same month of 2019, with an increase of 110% to 49.9 million euros.
The direct impact for local hosts has been evident, however, there has also been registered an indirect impact on the local community with an average of 41% of guests spendings have been in the proximity of Airbnb, boosting the local economy. Another positive impact can be seen in the rehabilitation of the inner cities, providing national architectural heritage with a needed face-lift.
On the other hand, Portugal as with many other top tourist destinations across the globe found that the STR industry has impacted the major cities and their local inhabitants negatively. Rents in the city centers have outpaced the Portuguese incomes, driving up property prices and pushing locals out from their homes, critics claiming that STR is the number one catalyst for the gentrification of the main cities in Portugal. The rise of STRs has also led to a hollowing out of the economies in the main cities of Portugal by promoting tourism above all else.
Last year the Portuguese government introduced a number of measures to counteract the negative impacts of STR and better balance the needs of tourists and priced-out locals. The new legislation is expected to be in place in place for Porto and Lisbon this year, prohibiting short-term rental in zones in the city center. However, this might change as the impact of the Coronavirus will most likely entirely alter the STR industry in the short term and maybe also in the unforeseeable future.
Already in March, at the early stages of the Coronavirus Pandemic in Portugal, the short-term rental market saw what was described by the president of the Association of Local Accommodation (ALEP) to be a complete collapse of the sector “ the situation is already one of crisis and survival, with a forecast of almost zero revenue in the coming months''. In April there was a fall of 61% in Lisbon and 48% in Porto compared to data from 2019. In March Lisbon invoiced 28.6% less than in February which translates into 4.6 million euros. In Porto, losses reached 2.1 million euros (30.7%). Losses at the beginning of April compared to the same month of 2019 already amounted to 13.6 million euros, much greater losses are expected to come.
data from airdna
Airbnb announced that all guests would get a full refund on bookings up to 31st May. To compensate Airbnb established a relief fund of 250 million dollars that will compensate hosts for up to 25% of lost income, as well as a 10 million dollar fund to aid super-hosts. For many, these measures, although welcomed, do not even cover the costs of holding an Airbnb and their future hangs in a thin thread as prospects for the SRT market loom heavily on the horizon.
While demand has drastically declined, for now, Airbnb supply remains largely unaffected however in the long-term one could expect a drastic change. Will the underlying concept of Airbnb- home-sharing and sharing spaces still be considered as a desirable accommodation option when traveling? Maybe it will not be the first choice of stay when travel bands are lifted as this pandemic has changed the general opinion of sharing public spaces. Maybe SRTs will return to long-term rentals? This, for critics of STR, would be considered a welcomed change, bringing the benefits of balancing overheated real estate rental markets by providing locals with more affordable housing.
Maybe the way we travel will change, will countryside holiday homes become more favorable for people longing for green and fresh air after long periods of lockdown in city homes. Some say that Apart-hotels will serve as the ideal accommodation choice in the future, providing the comfort of a hotel at the same time avoiding social mixing.
The STR sector in Portugal is vulnerable, built up of small companies and individual entrepreneurs (75%) who have no financial buffers and are not able to withstand this kind of blow. It remains to be seen how the Coronavirus will actually impact in the long-term both in Portugal and on a global level.