by Pamela Knudsen, Director of Compliance Services for Avalara MyLodgeTax
As the world struggles to control the spread of Covid-19, the travel and lodging sectors continue to navigate the unprecedented turbulence and major business challenges delivered by 2020. The U.S. is showing a 50 percent decline year-over-year in digital travel sales, which are not expected to bounce back to pre-pandemic levels until 2022. Even with the promise of a pre-pandemic return to a new normalcy in the next three years, we can expect some pandemic vacation trends such as “staycations” and road trips to thrive as the world gains some control of the virus.
Here are some key trends and predictions as we look ahead to the status of short-term rentals in 2021 and beyond.
Self-regulation will enter the short-term rental vocabulary in the coming year, in step with the tightening and enforcement of local rules and restrictions. While travel during the pandemic isn’t forbidden, in many areas gatherings of more than 10 people are currently not allowed. One of the concerns amplified by the pandemic is that of renters hosting large gatherings in violation of local regulations. Hosts and property managers need to step up to ensure the long-term viability of rentals in their community, and technology can help. Services, such as NoiseAware, which allow owners to be alerted if the decibel volume in their rental goes above their indicated settings, helps ensure that guests are following local guidelines. Self-regulation, in addition to being the responsible course of action, will protect short-term rental owners from incurring fines as well as potentially losing their lodging license due to non-compliance. Fewer noise complaints means happier neighbors and a lower risk of fines. Also, it gives hosts a sense of control while off-property.
2. Remote locations are hot, and compliance will follow.
The past year has proven that travelers are not drawn to large, crowded cities during a pandemic. Secondary cities and lesser-known locations, remote and rural, are already seeing short-term rental spikes that will continue to be popular for the foreseeable future. With this change in destination preference, new and booming vacation rental areas will not only demand compliance with rules and regulations but will have an eye toward maintaining a long-term tax base backed by lodging revenues. As governments in remote locales zero in on tax, licensing, registration and other compliance areas, booking platforms like Vrbo are stepping up as responsible industry players, bringing stakeholders including hosts, unions, local government officials, and traditional lodging companies together to craft durable, sustainable agreements that allow short-term rentals to co-exist in communities. Yes, off-the-beaten-path locations will keep trending as hot rental choices, but compliance and shared responsibility will ensure enduring success.
3. Traditional lodging will show signs of life.
Hotels and motels will audition for a comeback, with early traction being seen in “drive-through” regions (think Santa Barbara, CA). As travelers begin to venture out once more, we’ll see many more road trips than vacations involving air travel. People will feel safer in their cars, and as they drive through the stops on their journeys, they’ll need places to stay. Motels and smaller extended stay hotel properties will fit the bill for some travellers and see gains in 2021.
4. Make way for digital nomads.
Remote work and school-by-Zoom allow families, couples and individuals more opportunities for free-range travel. People are tired of staring at their own four walls, and if they can work and participate in school from anywhere, why not check out a new area and have a change of scenery? Short-term rental hosts should be ready to compete for this business with corresponding amenities, including high-speed internet access, dedicated office space, mini-gyms and fully equipped kitchens.
5. Technology solutions lead the way.
Technology will be widely adopted in the vacation rental industry in 2021. During the booking stage, this includes automated pricing tools that put hosts and managers in the driver’s seat with easy-to-use apps such as Evolve. In-rental technology features will make guests feel safer in someone else’s home such as keyless entry, app-based self-guided tours, voice-enabled solutions, virtual concierge services such as Google Home or Amazon Alexa, and other touchless experiences. Technology solutions will soon be pervasive across the lodging industry, from booking stays to collecting and remitting lodging tax, and many other functions in between.
6. Short-term is in for the long haul.
As we look ahead to the future of vacation rentals, trends that took shape in 2020 have allowed us to make predictions for 2021. Hosts and property managers will start employing self-regulation tactics to ensure that guests are complying with local area guidelines. Big cities are out of favor for short-term rentals for the foreseeable future, and the shift to remote areas will push local governments to ensure hosts are compliant with existing rules and regulations, including tax collection and remittance. Successful hosts will be proactive and adopt the right automation solutions that promote long-term business success. And what about the traditional lodging sector? Motels and some extended-stay hotel properties will be first to to see signs of business recovery in select areas.
2021 promises to be a big year for vacation rental owners, who can successfully compete for the business of digital nomads by offering sought-after amenities, including reliable high-speed internet and dedicated workspaces. Finally, technology solutions that help owners solve for complexity and make renters feel safe will become mainstays of the short-term lodging experience for both hosts and guests.
Pamela Knudsen is Director of Compliance at Avalara MyLodgeTax, leading the Lodging tax team and Returns Experience/Reconciliation team for Sales & Use. She serves as a leading voice in vacation rental tax compliance and regulation, in addition to bringing in-depth experience across software/SaaS technology as well as ERP systems. Pam joined Avalara in 2012.