Demand for Short-Term Rentals Returns
Pre and Post-Covid Demand
Has demand returned for short-term rental accommodation, or are we still waiting for tourists to return to our shores after the Covid drought?
According to Tourism New Zealand statistics, just over 528,000 international visitors came to New Zealand in December 2019, just a couple of months before our first lockdown. In comparison, December 2022 saw only 359,000 international visitors arrive in New Zealand, showing we still have a long way to go before we reach pre-Covid levels of international visitors.
However, we get a better picture of the demand versus supply in the short-term rental market when we look at the occupancy rates data. The average occupancy for December 2019 was 73%, and the average for December 2022 was 73% - the same. This means there must be fewer short-term rental properties available now than pre-Covid as occupancy rates are the same, despite New Zealand having over 200,000 fewer international visitors in December 2022 compared to December 2019.
Looking at the average nightly rates for these two months, we find that average nightly rates in December 2019 were $234, and average nightly rates in December 2022 were $307 – that's a big jump! This indicates that the short-term rental properties that are currently in the market are charging far higher nightly rates than was possible pre-Covid, yet are still achieving the same occupancy rates as pre-Covid, resulting in an overall revenue increase of about 31% for today's short-term rentals compared to the pre-Covid market. If we consider the unfortunate 11.1% inflation experienced over those two years, there is still a 20% increase in revenue after inflation.
This significant increase in nightly rates suggests that more short-term rentals must be needed to meet current demand, even though the number of international visitors has fallen off so much compared to pre-Covid. If the number of listings was enough to meet current demand, then at 73% occupancy, we would expect average nightly rates to be about $260 in December 2022 due to inflation, not $307 as they were.
What happens when those missing 200,000 monthly international visitors decide to drop by?
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