The last few months have forced us to change the way we live our lives in so many ways. Just like how our daily train ride to the office has been replaced by a casual stroll to the new home office desk, our overseas vacation plans have been replaced by trips to destinations that are closer to home.
Australians spent over $65 billion on overseas travel last year. The fact that they now have to reconsider their plans signals and creates an opportunity for smart property investors.
More money in the market
Firstly, it is important to put the $65 billion that Australians spent overseas into perspective. Clearly, travellers all around the world, including those that would have come to Australia, have been impacted by travel restrictions and we would have to reconsider their spend as well. However, overseas travellers to Australia spent only $45 billion, which means that the addressable market for domestic travel is $20 billion larger than it was before.
Larger demand will inevitably create a vacation rental supply shortage in Australia, especially in the regional and vacation markets. Regional and interstate travel have always been in competition with overseas travel when it comes to Australians’ travel choices. However, with overseas travel not being an option, Australians will turn to local travel opportunities. We estimate that nearly 30,000 additional rentals will be needed to fulfil this demand, which will create upwards pricing pressure all across Australia.
Interest in New Experiences
Domestic travellers unlike overseas travellers tend to be drawn more towards alternative accommodation and family-friendly experiences. Hotels provide a great solution for a couple days stay in urban areas, whereas Airbnbs on the other hand provide a versatile selection of home-like accommodation in a range of different urban and regional settings. These are some of the reasons why interest in Airbnb has been impacted less and recovered faster than interest in hotels. The best example of this can be seen in Google search trends. When the initial set of restrictions were lifted in June search volume for Airbnb increased by more than 3x compared to the month before, while searches for Booking.com increased by only 2x.
Early numbers are promising
In line with these numbers we have seen an immediate strong uptick in booking volume across all of our portfolio in vacation areas. For example, bookings in our Cairns portfolio nearly doubled once the initial restrictions were lifted and remained stable even after they were reintroduced. We’ve also seen guests book both near-term trips, as well as trips with longer booking lead times, including those that fall over Christmas and New Years.
These numbers indicate some very interesting prospects and highlight how changes to the way we live, work and travel are reshaping the world. Wherever there is change, there is opportunity. If you are eager to learn more, feel free to schedule a call with one of our property consultants here.