Angelo Zino, Senior Equity Analyst at CFRA Research, joins Cheddar News to discuss if digital nomads are finally starting to settle down and what the effect of that could be for the short-term rental market.

Opening Bell

The Rise of Digital Nomads and Short-Term Rentals

joining us now with more on all of this is Angelo Zeno, senior equity analyst at C. F. R. A. Research, Angela, thanks for joining us. I want to start off with asking you how will Airbnb and verbal be able to actually grow as more cities are making it harder to operate these short term rentals. Yeah, no I mean thanks for having me, but you know when we start thinking about kind of short term rentals out there, you know clearly more regulation is going to make it harder, but it's not gonna make it impossible for companies like V. R. B. O. Or more importantly in an Airbnb to really kind of um list properties out there. I mean I think at the end of the day we need to find a way to kind of stop kind of individuals or companies out there from listing in illegal manner, right? Um but you know how they will be able to grow, it's really gonna be driven by share gain at the end of the day, I mean there's an ongoing preference out there for the consumer to really kind of travel using Airbnb and br br you know um you know there's a perceived safety out there using these type of platforms, you kind of get your own space. In many cases it's cheaper, there's more different types of experiences out there, so it's really gonna be driven not only by growth in the broader travel industry, but more importantly we think share gain, I mean Airbnb now about 20% of the total us lodging market in our view um that's about about, you know, about 70% points over the last three years. So the pandemic has definitely helped that, but at the end of the day it's the share game here. Yeah, Well one of the other things that has helped these, these rentals is the digital nomads, they've been traveling around the world, staying at every Airbnb and verbal they can, but do you think that they're like settling down because that can have a big effect on the market? Right. Yeah, I mean it would, I mean listen, I think clearly they're going to be, there are more people being forced back to the workforce in terms of kind of maybe instead of, you know working home five days working home, you know, 3 65 7 days a week um you know, maybe having to go in the office one or two days a week or more of a hybrid approach out there. Um, so I think to some extent you're going to see more digital nomads out there um you know, slowing down, I think at some point you get kind of bored maybe of having not having your own place out there and of course rental prices are going up significantly, that may get a lot of the digital nomads out there to kind of settle down as well, but at the end of the day, I mean you kind of look at Airbnb? S numbers here, about 1/5 of their bookings continue to be 28 days or longer in terms of average stay length Up about 90% over the last three years, by far the fastest-growing category even today. So um I think that's important to kind of keep in mind here and still remote work is expected to increase in the future because a lot of people are demanding that they have more flexibility in that in that area. So we do you think that we will see another sudden maybe travel boom and the rise in digital nomads. So you know, I don't know if I necessarily use the word boom? Um I think there's kind of a natural evolution of what we've seen here in recent years. Right. I think more individuals will continue to be selective where they choose to work um and more clearly want more of that fully remote or hybrid opportunity out there. So that being said, I think you continue to see that natural evolution no necessary kind of sudden travel boom out there, but at the end of day again this will benefit a company like Airbnb more than others across the travel industry. And then, you know, for total transparency, I used to do Airbnb myself and I used to love it. Both staying and hosting, but how has the hotel industry responded to the overall boom of short term rental properties. It seemed like they were jealous to me and trying to punch back. Yeah, Yeah, no, I mean absolutely, I mean at the end of the day when we think about Airbnb we think it continues to outgrow the industry by about two X. Here longer term. But as far as kind of how the travel industry I'd say is responding um you know I think they're just giving individuals more opportunities out there there, clearly aware with what's happening in terms of shorter term rental stays out there. So um whether it be kind of the idea of a term called apart hotels where they're kind of offering essentially double the space that a traditional hotel will offer kind of giving you more privacy with those amenities as well, introducing more extended state packages out there. So you're seeing a lot more evidence of that coming out there. I think more of the hotel industry trying to blur the lines in some cases to what we're seeing from the Airbnb s and V. R. B. O. S of the world. So in that case would you say that short term rental properties are still a good investment? You know I think at the other day it really depends on the individual out there. I mean and I know you kind of gave your personal experience out there but I think you know you can kind of get a real nice return right now especially where everybody wants to travel across you know the space in a post pandemic world but at the end of the day there is kind of a lack of income predictability, right? Um It's very time consuming in nature to do and you know typically shorter term rentals have have a much higher vacancy rate than longer term rentals. So there is that risk as well. So I think it all depends on the individual and who we're talking about in terms of um you know some of these broader hotel companies out there, but I think there's reason to believe that it will remain a good investment for many out there longer term. I saw some beautiful pictures that I would like to stay at those places. All right. But what's your outlook on the short term rental market and the context of revenge travel? Because it seems like everyone's trying to go somewhere. Yeah, no, I think you're absolutely right. I mean I'd say at the end of the day we do think there's some sort of peak travel environment that that's a pro fastly approaching here in in the summer months as we kind of go into um you know the fallen into 2023. We do expect the overall market to start cooling down a bit. That being said, we remain broadly um you know optimistic on the space in general. We do continue to see growth here in the foreseeable future just at a more ma moderate pace. I mean you kind of look at Airbnb s numbers, right? They grew about 30 we're projecting them to grow about 35 40% this year after 75% 77% growth rate last year. So the growth rates are absolutely enormous right now because of what we've seen in the current boom market going to slow down. But nonetheless, we remain pretty optimistic. Alright, well, that's some good news. Thank you so much. Angelo Zino from c f R. A. Research, appreciate your time.