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How Short-Term Rental Data Creates Billion Dollar Commission Opportunities For The Real Estate Industry

In today’s low-yield world, with interest rates at generational lows and the stock market (and bond market) at all-time highs, real estate continues to provide an opportunity to make a solid, inflation-beating return with your savings and ample opportunities for responsibly leveraging returns with financing.

For real estate agents, commission from the investor segment of the property market forms a significant share of total commissions, with estimated commissions at $3.3 billion in 2018 and predicted to reach $4.2 billion* in 2020.

However, the growing number of agents has resulted in a real estate market that is over serviced and over saturated, placing downward pressure on commissions.

Rather than going toe-to-toe with the competition for razor-thin commissions, real estate agents in certain markets might be better off looking at, of all the places, the online travel industry for the next big real estate trend.

Track Your Competitors Occupancy Rates.

Simply add your Airbnb property URL to start selecting and tracking competing vacation rentals in your area.

Short-Term Rentals and the Real Estate Market

Short-term rentals, also known as vacation rentals or vacation homes are the fastest growing segment of the global accommodation market today. They’ve been popular in traditional markets (think Hilton Head in South Carolina or Orange Beach in Alabama) for a long time, and online booking really kicked off when online platforms like Vrbo started up in the mid-90s. Millennial demand really started with Airbnb’s launch in 2008, as they offered unique, live-like-a-local experiences that were more affordable than hotels.

As demand grew, the potential value of a property that could be unlocked by placing a vacant home on the short-term rental market increased with it. Originally Airbnb was founded as a way to make some extra cash from your home or apartment when you were out of town, but it has developed into its own asset class, with even institutional real estate investors taking it seriously.

Today, the short-term rental value of a home is forming an increasingly important part of a buyer’s investment rationale, especially given the superior rental yields available in the short-term rental market (up to 30% higher than a long term rental) compared to traditional long-term rental. 

Of course, that extra rental yield comes with a trade-off. Compared to a long-term tenancy, short-term rentals have higher management costs and higher occupancy risks (the risk of the property sitting empty if you can’t find anyone to book it, leading to less predictable cash flows. 

Educating Potential Buyers

The enhanced yield available on the short-term rental market is increasingly a major factor in a potential buyers property investment decision. There’s one problem – how can buyers know how much they can make by putting the property on platforms like Airbnb?

One option is to try and get data from local short-term rental property managers, but this isn’t a great idea – potential yields on an Airbnb investment property depend highly on the property type, it’s exact location and the amenities it offers, and a local vacation home property manager is unlikely to have very complete coverage of an area.

AllTheRooms Analytics offers a complete data solution, aggregating all listings on the major vacation rental platforms across the entire U.S. and the rest of the world too. From this we derive, using a patented process, the KPIs potential buyers need and find comparable properties in the area. In addition we provide over 4 years of historical data.

Armed with this data, real estate agents can easily show potential buyers the short-term rental value of a property, helping to close sales when the buyer is on the fence and even increase the size of offers on a home. Our data helps real estate agents tell a powerful story about the ROI of a property, and opens up a whole new channel for real estate brokers to generate revenue.

*Calcuation:

  • 2019 U.S. Median Sales Price $229,600 (Zillow, 2018)
  • Average Commission of 2.5% Earned by Real Estate Agent
  • 2018 11% of U.S. Homes Sales Were for Property Investment (WSJ)
  • 2018 Total Home Sales: 5.3 million (NAR Research)