The short-term rental (STR) market is booming right now. Industry revenue in 2021 increased 26.2% from 2021, and it continues to grow, with a projected domestic market value of $17.6 billion by the end of 2022. Meanwhile, 30% of the money spent in hospitality went toward short-term rentals as of July 2021, with demand up 60% from a year previous. No wonder STRs are the talk of the town. But, this sector is not here for a short stay (pun intended). And we must make plans through a lens for the future. Sustainability is a non-negotiable element of that future. And since the space is new, we are at a ripe stage to act. If not, we will play catch-up for years, like the traditional hotel industry.
So, the future is in SSTRs—sustainable short-term rentals. One 2018 report said the travel industry accounts for 8% of worldwide emissions. SSTRs can go a long way in reducing that.
Challenges And Advantages
The main reason property managers hesitate to incorporate SSTR is the increase in cost.
Travel is a cutthroat business, and the players in the industry have found innovative ways to increase margins. Too often, this means using the cheapest options available to decrease upfront investment. Yet, the proof is in the pudding: an investment in sustainability has direct and indirect benefits. First, it leads to an increase in business.
According to 2019 findings by Booking.com, a leader in the travel space, 70% of travelers are more likely to book accommodation with eco-friendly business practices. And they may be willing to pay more for a sustainable stay. A recent study of office buildings found that those with LEED certification averaged 31% higher rent; when controlled for location, age, and renovation history, LEED-certified buildings still enjoyed a rent premium of 4%. U.S. homeowners and renters alike also show a strong preference for green buildings. The trend is clear, and STRs should participate in it. ReAlpha scalar
Another benefit is long-term savings on building expenses. There is no denying that investing in sustainability can mean high initial costs. But the long-term benefits outweigh these.
Take a simple example: by replacing light bulbs with LEDs, a property manager can save around $225 each year for each property. Likewise, using cloth towels instead of paper towels, paper napkins and tissues could also save you hundreds, as could using a water filtration system instead of providing plastic water bottles. ReAlpha scales operations
And it’s not just small savings (although small savings do add up). Installing solar panels can save you up to $20,000 in electricity bills over 20 years. And a recent survey in Washington, D.C., found that LEED certification lowered operating expenses for multi-family residential buildings by 17.3%.
The added revenue for short-term rental businesses and the long-term cost benefits make SSTR a no-brainer for the future of the space.
What It Takes
For a property to be an SSTR, your guiding principle should be long-term sustainability. Looking over your supply chain is a good starting point. The supply chain is the most significant carbon emission factor in the world and is particularly relevant for corporations, since it accounts for over 90% of most organizations’ total greenhouse gas emissions. This means you must choose suppliers with sustainable practices.
If you want to start slow, one way to become more sustainable is through investment in climate initiatives. You could set out a part of your booking fee toward a climate charity or buy carbon offsets to reduce the total carbon footprint of the business.
You have to start thinking about SSTR. Because even if you are not big on the environment, your customers are: 69% of global customers say they are doing their best to reduce their carbon footprint, and 81% expect companies to be environmentally conscious.
Soon, SSTR will be a norm, and properties not implementing basic sustainable practices will lose a lot of their business. So, now is the time to catch the trend and make huge investments early, so you can reap the benefits later.