Residential Based Visitor Accommodation in Waipa District

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1 Residential Based Visitor Accommodation in Waipa District Summary: Scale and scope of Airbnb June 2018

2 Authorship This report has been prepared by Benje Patterson, with the input of Paul Barkle. All work and services rendered are at the request of, and for the purposes of the client only. Neither Infometrics nor any of its employees accepts any responsibility on any grounds whatsoever, including negligence, to any other person or organisation. While every effort is made by Infometrics to ensure that the information, opinions, and forecasts are accurate and reliable, Infometrics shall not be liable for any adverse consequences of the client s decisions made in reliance of any report provided by Infometrics, nor shall Infometrics be held to have given or implied any warranty as to whether any report provided by Infometrics will assist in the performance of the client s functions.

3 3 Table of contents 1.0 Airbnb s place in Waipa District About Airbnb Overview of Airbnb s in Waipa District Characteristics of whole house listings Booking frequency of Airbnbs is low Airbnb returns are low compared to rental yields Seasonality to continue limiting rental market encroachment Comparisons to other platforms Locations of Airbnbs About the Airbnb data... 7

4 4 1.0 Airbnb s place in Waipa District This statement summarises statistics regarding the scale and scope of visitor accommodation intermediated via Airbnb in Waipa District. The aim is to understand the characteristics of what has been listed and the potential for encroachment on the rental market. At present it appears that Airbnb has not significantly encroached on Waipa s rental market. Airbnb has grown rapidly in Waipa District, but it still represents only a small proportion of the housing stock. Furthermore, low occupancy rates suggest that hosts are only opportunistically renting out their spaces at peak times. The high degree of seasonality of visitor demand in Waipa is likely to naturally limit Airbnb s encroachment into the rental pool, but we would recommend continuing to monitor statistics over the coming years. 1.1 About Airbnb Airbnb is an online platform that allows people to rent out rooms or houses for shortterm accommodation. The company acts like a broker, receiving a fee for each booking made. Airbnb is part of what is known as the sharing economy, where private individuals are able to earn revenue by selling services to other individuals facilitated by an online platform. An overview of the method used to collect data from Airbnb for this statement can be found in 2.0 About the Airbnb data. 1.2 Overview of Airbnb in Waipa District Airbnb in Waipa District has grown rapidly over the past year. In February 2018, there were 454 Airbnb listings in Waipa District, up from 252 a year earlier. Contrary to popular belief, Airbnb is not just about renting out a spare room, there are also whole houses listed on Airbnb. As at February 2018, 59% (267) of listings were for shared or private rooms, while 41% (187) of listings in Waipa District were for whole houses. The proportion of whole house listings in Waipa District was below the national average (52%). A lower proportion of whole house listings in Waipa District suggests that less of the private accommodation capacity intermediated via Airbnb is suitable for long-term accommodation. Airbnb s presence in Waipa is small relative to the housing stock. The number of whole house listings in Waipa District is equivalent to approximately 0.8% of Waipa s housing stock. By comparison, whole house listings nationally were equivalent to 1.5% of the housing stock.

5 5 Parts of New Zealand where private accommodation has caused significant disruptions, such as Queenstown-Lakes District, have Airbnb whole house listings accounting for 15% or more of the total housing stock. 1.3 Characteristics of whole house listings When looking at whole house listings, it is important to ascertain whether they are small units, or homes that could alternatively be suitable for accommodating families in a long-term rental. The data shows that of the 187 whole house listings in Waipa District, 59% were one or two bedroom dwellings, while 41% were three or more bedrooms. These proportions are similar to the national average. 1.4 Booking frequency of Airbnbs is low Understanding how frequently Airbnb listings are booked helps establish whether each listing could have been added to the general long-term rental pool. Data on booking frequency is based on statistical inference from listings calendars (for more see 2.0 About the Airbnb data ). The estimates suggest that Airbnbs in Waipa District had average occupancy rates of only 18% over the February 2018 year. By comparison, commercial accommodation in Waipa District had average occupancy of 25%. Commercial occupancy statistics include not only hotels and motels, but also backpackers and holiday parks. Occupancy rates in hotels and motels are typically at least twice the occupancy of holiday parks. The lower average occupancy rates of Airbnb listings suggest that the typical Airbnb host is only opportunistically renting out spaces at peak times. By comparison, commercial operators are always aiming to fill their rooms to maximise their return on investment. 1.5 Airbnb returns are low compared to rental yields Average Airbnb earnings appear to be significantly below rental yields. An analysis of listings prices and estimated occupancy suggests that average Airbnb hosts in Waipa District could potentially have had gross earnings of $8,500 over the 12 months to February In comparison, MBIE data shows that average rents in Waipa District over the 12 months to January 2018 were $393, which equates to $20,400 in annual gross earnings. 1.6 Seasonality to continue limiting rental market encroachment Accommodation demand in Waipa District is more seasonal than New Zealand averages. Commercial accommodation occupancy in Waipa during the low season in August is a mere 36% of its January peak. Nationally, May has the lowest average occupancy, representing 59% of its January peak.

6 6 This high degree of seasonality has limited new investment in commercial accommodation capacity in Waipa District over recent years. Over the past 10 years, the number of commercial accommodation stay units in Waipa District available has remained largely unchanged (rising from 1,003 to 1,047). At peak times and during events, Airbnb hosts have helped fill this void left by a lack of new commercial capacity. But the high degree of seasonality to visitor demand means that most hosts are unable to make year-round Airbnb returns that sustainably outstrip rental returns. For this reason, there are unlikely to be large numbers of investors in Waipa District who remove their properties from the long-term rental pool to instead list full-time on Airbnb. Rather most Airbnb hosts are likely to be continue being people opportunistically renting out a spare space at peak times. 1.7 Comparisons to other platforms Airbnb is not the only private accommodation platform. However, at present Airbnb is so much larger than any of its competitors that trends in Airbnb accommodation are indicative of the sector as a whole. In February 2018, Airbnb had 454 listings in Waipa District, while the next biggest platform, Bookabach, had just 59 listings as at 13 June Many of the Bookabach listings appear to be duplicated on Airbnb. 1.8 Locations of Airbnbs Although Airbnb does not appear to be a significant threat to the rental market in general across Waipa District, it is important to consider concentrations of Airbnbs within small parts of the district. The three area units with the highest number of listing in February accounted for half of the 454 Airbnb listings in Waipa. Karapiro had the highest number of listings in Waipa, at 81 in February Following behind was Lemington West, Lemington East, and Hautapau, with 41, 38, and 35 listings in February, respectively. Significant concentrations of Airbnbs were also present in area units in Cambridge, with Cambridge North, West and Central having 30, 23, and 18 listings respectively. Estimates of Airbnb occupancy rates to an area unit of level are consistent with the district-wide finding that Airbnbs have lower occupancy than commercial accommodation. Earnings estimates at an area unit level also show that the typical Airbnb host earns less than the average rent in the district.

7 7 2.0 About the Airbnb data Raw listings data from the Airbnb website has been sourced by a third-party provider (AirDNA). This information has been collected on a monthly basis from October Infometrics has geo-coded this information to territorial authorities, regional tourism organisation (RTO) and area unit boundaries. Data categorised this way is comparable against other publicly-available datasets. For example, comparisons can be made to commercial accommodation equivalents at a territorial authority or RTO level. Data pertaining to the number of Airbnb listings and their characteristics has a relatively high degree of accuracy, as this information can be directly observed. Insights regarding the number of nights booked will have higher margins of error as they are estimates made by AirDNA using machine learning techniques and unavailable days in listing calendars. AirDNA is able to test its models using historical data of host behaviour because Airbnb did not begin obscuring whether unavailable days were booked or merely blocked in its calendar until 2016.