The past two years have seen record-breaking growth in the short term rental sector. Demand, revenue, and supply reached all-time highs as the industry took over as the fastest growing accommodations sector. Because of this, we saw increased investment, and later widespread adoption, of proptech solutions. And now we have the technology to address everything from noise issues to water leaks.
But as we face a new year laced with challenges—like inflation, staffing shortages, and an oversaturated market—what can we expect? Specifically, what’s ahead for tech operators, and what tech trends will short-term rental property managers prioritize in the next 12 months?
In 2021, real estate technology (also known as proptech) reached its highest value of investment on record, with more than $24 billion being funneled into the industry. Given the new obstacles facing property managers in 2023, it’s unlikely that adoption rates will continue at this pace in short-term rentals, but we expect them to start plateauing.
Yet this situation isn’t black and white. Now that energy, labor, and materials prices have all increased and the global economy’s future remains unstable. However, property managers looking to combat these cost increases will seek out solutions that provide cost-saving opportunities, such as smart thermostats and home monitoring devices, by improving operational efficiencies.
Therefore, we may see property managers who’ve yet to invest in property technology begin to lean on these solutions for support in a challenging time. On the other hand, those who already have substantial tech stacks may choose to reassess and refine their investments. And those looking to improve and streamline their systems will look for solutions that can work in tandem, for a seamless, curated tech stack that’s manageable from a single platform.
Simon Lehmann, founder and CEO of AJL Atelier, summarizes the need for tech stack refinement when he says, “The perfect technology stack does not exist. Resort specialists will need different tools than urban experts. It is about picking the solutions that best integrate with your business, teams, and markets. The key is to review your stack regularly; there are new innovative solutions all the time.” AJL’s recent short-term rental tech landscape report gives a comprehensive overview of this space, detailing the top tech solutions by need and function.
Maturing of the Industry
One major downside of the sector’s success last year is that the market is now heavily saturated, both with tech operators and accommodation supply. While this on its own is not a reason for consolidation, when coupled with the increased costs of operation and lack of investments, many may choose this road in the months ahead.
In a bid to stand out among the crowd and appeal to investors, larger, more experienced companies will acquire smaller startups through mergers and acquisitions (M&As). The challenges businesses face this year also mean some smaller, struggling companies will choose this as the time to step away, as investment and recognition in an oversaturated market become almost impossible. Because of this, the short-term rental tech industry will begin to mature, as brands consolidate and inevitably have to professionalize further.
Similarly, property managers will be trying to outsmart competitors by creating winning brands able to beat not only other short-term rentals but also different lodging sectors, such as hotels. One way short-term rental property managers can achieve this is by improving their management systems using all-in-one property platforms.
The Rise of AI
Machine learning has seeped into our everyday lives, even if we’re not hyper aware of its presence. We’re likely already using some form of artificial intelligence (AI) at work or at home. Think about the face recognition technology on our mobile devices, for example. This is AI at its finest. However, this fast-paced innovation has stirred some fear around whether the technology will replace human processes. According to research, more than half believe that AI will instead create new job opportunities much like the industrial revolution.
For short-term rentals, automation and AI will act as a saving grace in the year ahead, especially now that operational costs have risen. As more property managers begin to lean on these solutions, for reduced energy spending and improved efficiencies, we’ll witness increased investment allowing the technology to advance even further.
One example of a successful AI solution in the industry is virtual assistants, like SmartHost by Xplorie. Voice-activated devices, like Amazon’s Alexa, are already widely adopted in many accommodation sectors and in general households. This automated communication has been streamlining property business operations by freeing up on-site employees to focus on higher-level tasks that better benefit the company.
Real estate investors, property managers, and hosts alike will begin to rely more on AI-driven data platforms in the year ahead. The historical and real-time analytics this technology is able to provide will help those in the industry to improve their offering. For example, property managers can utilize data to discover consumer trends and better appeal to their target market. Benchmarking will allow them to set average daily rates that gain maximum revenue while remaining competitive. What’s more, data platforms, such as Key Data, can help guide investors when making decisions about when and where they can expand their business, based on in-depth location research.
After a whirlwind year in 2022, with property management competition heating up and smart tech startups popping up, the short-term rental industry is due some refinement. This will come in the form of curated tech stacks, consolidation, and M&As, plus an increased reliance on automated and AI solutions. 2023 will see the maturing of the short-term rental landscape, paving the way for a more professional industry on par with its lodging competitors, like hotels.
Jessica Gillingham is the CEO of Abode Worldwide, a B2B public relations and content agency focused on raising the profile of transformative technology solutions operating within the global short-term rental, hotel, and “living” property sectors. With over 20 years of experience in public relations, hospitality, and technology, Gillingham is also an adviser, leadership mentor, and industry commentator. Her company sits at the heart of the developing intersection between work, life, and play in the property and hospitality markets, and partners with technology solutions playing a lead role in this transformation. www.abodeworldwide.com.