Is investing in an Airbnb a viable option during a pandemic?

This year hasn’t been kind to the tourism industry. Drought was followed by bushfires that threatened and even wiped out some small towns. Next was COVID-19, which resulted in many cancelled flights and forced accommodation closures.

The idea of earning money through an Airbnb may seem ridiculous right now. But is it?

Short-term rentals can be a great way to earn money if done right, however, there are many variables that can affect success, such as the type of accommodation, location and even strata laws in some cities.

Airbnb accommodation in major cities such as Sydney or Melbourne can be booked out year round and can command higher prices than regional areas. In greater Melbourne, there are 16,752 rentals listed on Airbnb and Vrbo. In January this year, the monthly revenue was $3262. Due to the pandemic, this dropped considerably in May to $1200.

According to Destination NSW, the Blue Mountains was the hardest hit area in terms of occupancy rate, down by 19.8 percentage points. As of July this year, AirDNA market research shows there were 1230 active Airbnb and Vrbo listings in the area.

Invest in year-round tourist hotspots

The Blue Mountains is a popular holiday destination due to its beauty and proximity to Sydney. As it attracts tourists all year round, it provides a steady income stream for hosts.

Deb Wells and Tony Morgan have been Airbnb “Superhosts” for almost six years. They use the income to supplement their pension. Located in Blackheath in the Blue Mountains, they converted a studio in the garden to a “Bungalow” which sleeps three people, and a room off the main house as a couples’ retreat called “Reconnect”.

“It works really well for us,” Wells says.

“We have four distinct seasons. In spring, the mountain gardens come to life. Sydney people also want to enjoy the winter, a lot of Christmas in July happens here. People like to see the autumn colour changes in the leaves. But this year they didn’t come, it was the height of COVID.”

Strategy for success

Now that their doors have reopened, Deb and Tony’s strategy for success has been to advertise their cleanliness. All linen is washed and dried on the hottest setting and after the place is cleaned, it’s wiped over again with antiseptic.

“I think that’s important, to make people feel safe to come,” she says.

Susan Wheeldon, Airbnb’s country manager for Australia and New Zealand says: “To date, we haven’t seen a material drop in the overall number of listings on our platform.

“Hosts on Airbnb are very much focused on how they can help their local communities get back on their feet and play a role in helping to drive economic recovery,” she says.

Are short-term rentals a good investment?

Short-term rentals can allow higher returns than long-term rentals, but the initial outlay is also higher. The property has to be furnished and then there are management and cleaning costs.

“For each person, you need three sets of everything, three sets of sheets, three sets of towels,” says Wells.

You also have to pay for water, rates, electricity, internet and cleaning for short-term accommodation.

At this difficult time, Deb and Tony’s Airbnb is busier than it has ever been.

“The minute I opened up the bookings again, they started to pour in,” she says.

“People are saying they need to get away from Sydney. They feel like they have cabin fever. Because they can’t go too far and the mountains are only a couple of hours drive, it’s very do-able.”

Short-term rental laws

In the past few years, laws have been introduced to limit short-term rentals in major cities. In Greater Sydney, if the host doesn’t live on the premises, the accommodation can only be used for short-term holiday letting for up to 180 days per year. Other councils have made the same decision.

Owners corporations in Sydney also have the power to prohibit short-term rental accommodation in strata schemes when the unit is not lived in by the host.

Many hosts choose to live on the premises for this reason and also feel the property is better protected by their presence.