Hospitality has been one of the real estate sectors most negatively affected by Covid-19. As in all U.S. gateway cities, the impact on Boston short-term rentals has been acute. Prior to February 2020, the short-term rental market in Boston had been thriving, with an estimated 61% occupancy rate during the summer of 2019, according to data from Mashvisor. But with the unprecedented drop off in domestic travel and the closing of the U.S. borders to foreign travel, short-term rentals quickly ground to an abrupt halt in March.
As a gateway city, visitors come to Boston from around the country and all over the world, drawn by the city’s various educational institutions, businesses, historic and cultural sites and conferences. In early February, the first coronavirus related U.S. travel restrictions were imposed, creating challenges for the hospitality and short-term rental sector in Massachusetts and throughout the region. On March 31st, 2020, Governor Charlie Baker announced that hotels, Airbnb units and other short-term rentals could no longer be occupied for leisure or vacation purposes pending a structured re-opening based on measurable Covid-19 related metrics.
Now, with some restrictions lifted but a still cautious consumer, short-term rental operators are struggling to maintain occupancy and cash-flow, often with changes to their original business model. Premier Capital Partners owns 110 Airbnb units in Downtown Crossing and Bay Village. Prior to mid-March the Boston-based real estate investment firm was operating at 85% capacity with primarily 2-5 night stays. In the time between the emergency order and June 8th, when some restrictions on short-term rentals were removed, Premier’s properties like many others sat empty less the occasional travel nurse, first responder, or quarantined person.
Premier’s co-founder and managing member Russ Oken, is one of those who has moved quickly and creatively to reposition their short-term portfolio during the crisis. “Shortly after international travel stopped, not only did we have to cancel all future bookings, but we had to refund them 100%,” explained Oken. “At that point, your income dries up because you’re dispersing cash to all of your previously booked customers. We exerted a lot of effort during that time to engage with the city and hospitals to see if rooms were needed,” explained Oken.
While many Airbnb portfolio operators are eligible for Small Business “PPP” Loans and mortgage forbearance, quite often such forbearance is restricted to those loans backed by federal agencies. With or without federal assistance and loan forbearance, it will be some time before short-term rentals are operating once again at full occupancy, Many owners are now pivoting to long-term rentals as universities and businesses begin to reopen.
Premier Capital Partners recognized the need for such a pivot early on. As soon as the state restrictions were lifted, the firm worked to get long-term rentals in their units. In June, they operated at 25% occupancy, slightly higher than the 2020 occupancy rate for Boston which sits at 20% according to data from alltherooms.com. Premier’s goal is to get that number up to 100% as soon as possible. “It could take up to two years for the consumer confidence to be restored, so we’re preparing for the long-haul,” says Oken who is hopeful for the future.