Short-term rental industry: why revenue is vanity and profitability is reality
03/17/2020|12:13:39 AM|LinkedIn

The recent placement of Hostmaker under administration in the UK, lay-offs at Lyric and the media interest around OYO’s trouble to articulate extreme growth and profitability, is raising a lot of questions in the short-term rental industry.

A lot of these questions revolve around profitability, scale, and more specifically are directed towards urban property management companies backed by VCs. 

The impact of COVID-19 has yet to fully play out in the short-term rental industry, but we are sure that the vulnerability of many businesses will become apparent. Well run companies, with profitability as a core metric, are going to be stronger and more able to sustain themselves rather than those that have only survived because of investment and are focused on revenue rather than profitability.

A lot of money has been poured into our space, making the word investment and the announcement of how much capital has been raised, a must have for some companies wishing to showcase a successful model with a bright future of unlimited growth and the promise of an achievable profitability once a critical mass has been reached. 

According to a study on the short-term rental industry, soon to be released by Phocuswright, there has been a total of 211 start-ups since 2009, which have raised in total $4,3 billion USD. 

Airbnb has flooded the market with supply and urban property managers have sprung up like mushrooms in fertile soil. However, the tide is turning now.

When asked about the industry predictions for 2020, AJL Consulting forecasted that profitability was likely to become the main focus of our industry, both for the property managers, the tech start-ups as well as the OTAs, especially in light of the looming IPO of Airbnb. 

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