Short-Term Rentals Emerging as a Preferred Lodging Choice Across Asia

What began as part of the sharing economy and a simple platform for homeowners to rent out their homes online is now a burgeoning industry that is starting to attract serious investment interest.

In this report we highlight the current landscape of short-term rental platforms in Asia Pacific (APAC) by listing out the global and regional platforms and understanding how the players coexist by providing almost the same service yet differentiating from each other by providing value added services like managing the properties on behalf of the owners.

Furthermore, we outline the key characteristics of the market with respect to the user penetration, level of domestic and foreign demand and demand for urban vs. non-urban STRs. The short term rentals industry in APAC is still in its nascent stage. The user penetration across countries in the region show that the Australian and Japanese markets are the most mature. 

The report also highlights that strong domestic demand correlates with dominant presence of local players and how increase in domestic demand due to Covid has further validated this. However, it is yet to be seen if we will go back to the distribution channel allocation before the pandemic once international travel resumes or if people will continue to use  local players as they did during the pandemic.  

STRs in APAC consistently outperformed hotels during the pandemic. This was possible because of diminished STR supply and healthy RevPAR levels. The demand and supply dynamics in the APAC market suggest that there were signs of oversupply in the market pre-Covid. However, 2021 was characterized by low supply but high RevPAR, indicating that STRs gained popularity during the pandemic and managed to charge higher ADRs. With no long-term history as a gauge, however, it remains to be seen how successful the STR market will be in the future.

Taking stock of the regulations in place in the top STR markets in Asia inferred that while Australia, China and Indonesia have a rather lenient regulatory structure in place, regulations in Thailand and Singapore do not allow owners of rental properties to rent their units for a short term, diminishing the value proposition of vacation rentals in these countries.

We published our latest Skift Research report on March 9. Below, we share a snippet of the report.

STRs Inching Towards Being Preferred Option of Accommodation

Covid-driven concerns over safety, crowd and cleaning protocols have made rentals a preferred choice for many consumers. STRs have consistently outperformed hotels during the pandemic. Referring to our Global Travel Outlook Report 2022, globally, STRs came through 2020 better than hotels registering a decline of -33 percent as compared to -60 percent for hotels. In 2021, it is expected to have registered a 42 percent growth, moving towards bookings returning to pre-pandemic levels by 2022. 

Asia was no exception to this trend. As per the Skift Travel Health Index scores for the Hotel and Vacation Rental sectors, recovery of vacation rentals has outpaced that of hotels in the last two years in the APAC region. 

This was possible because of diminished STR supply and healthy RevPAR levels. In 2018 and 2019 supply and demand for STRs was both growing. However, decreasing occupancy rates and revenue per available room (so-called RevPAR)pointed towards an oversupply. These growth rates came to an abrupt halt in 2020 with the onset of the pandemic. In 2021, absolute demand remained lower than 2019 levels but the RevPAR surpassed the 2019 level, indicating that STRs in APAC managed to increase their ADRs possibly because of limited supply in the market.

It must be noted that ADR increase and hence, RevPAR increase was witnessed only in countries with heavy domestic demand. For example, RevPAR in Australia, India and China increased by 46 percent, 36 percent and 13 percent respectively from 2019 to 2021 and RevPAR in countries like Indonesia and Thailand which are heavily dependent on international tourism decreased. France and the U.S., both primarily domestic markets, also witnessed an increase in RevPAR between 2019 and 2021. 

All that said, we do need to consider that while STRs have recorded stronger performance of late, the hotel sector continues to make up ground. Hotels will certainly win back some of the lost business, especially in the transient business and solo travelers segment. Data from the Skift Travel Health Index has shown that throughout 2021, hotel bookings grew faster than rental bookings in seven of the eight Asian countries analyzed. 

Whether the preferred demand for STRs is a momentary or longer-lasting trend is difficult to predict. Year 2022 will be crucial in defining long-term trends in the lodging industry.

Short-Term Rentals: Asia Pacific Focus

The STR industry in APAC is at a nascent stage with promising growth prospects. It is to be seen how the STR market matures to find its demand-supply equilibrium and market leaders.

Read More