Lodging vs Housing: An Acrobatic Blend of Science and Art

Insights Collective

Last week, Carl Ribaudo discussed the potential long-term impacts of chronic workforce housing shortages in destination resort communities. When workforce housing is sold to become primary or secondary residences or vacation rentals, the impact on the workforce can be profound. But workforce housing is just one twist – albeit an important one – in the seemingly acrobatic behavior of changing housing and lodging unit ‘Use Types’.

While Unit Types don’t change, how they’re used does. Short-term leisure inventory is declining along with workforce housing (red) while Non-Rentals are going up (green)

When we discuss lodging inventory, we tend to think of units in their respective ‘unit type’ boxes (hotel, private home, etc.). And for brevity’s sake, we’ll say that for the most part the overall number of units in this inventory is static and that a unit type really doesn’t change. But almost any unit type can change its use type – how it is deployed – literally overnight. Unlike unit types, use types are anything but static. A destination’s overall inventory use type is highly dynamic, and only hotel and motel inventory remain unchanged; their use type is fixed in the short-term / leisure rental space. But other unit types are fungible; many change use type from month-to-month and even day-to-day, making quantification difficult and having varied local socio-economic impacts. Among the many concerns for lodging and housing stock since 2020 are the changes to the short-term / leisure use type.

Professionally managed short-term rental inventory at Western resorts is down sharply from pre-pandemic levels, and shows little sign of pickup in the months ahead.

According to data from Inntopia’s DestiMetrics program, rentable leisure inventory has been shrinking consistently since the pandemic began, and as of January 31, 2022, was down 8.6 percent on a six-month moving average compared to the corresponding pre-pandemic period in 2019/20. And while modest changes to available inventory have always been common, this sustained decline is new, even exceeding declines during and after the Great Recession. With a high-season room rate of roughly $600 per night and approximately $400 per person daily spend, the loss of 8.6 percent of units can have a staggering impact on a travel economy. But this decline in inventory feels incongruous with the sense that towns are busier than ever. So, what’s going on?

First is the migration of existing second homeowners from their urban centers to their mountain town homes, taking advantage of work-from-home and remote schooling to evolve from part-time to full-time mountain resident. Many of those units were previously used as leisure rentals that were both professionally and owner-managed (think Airbnb), but are now occupied by newly converted full-time residents. Their use type has changed from ‘2nd Homeowner, Full- or Part-Time Rental’ to ‘Primary Residence, Non-Rental’.

Second is the emergence of wholly new full-time residents (as opposed to previously part-time residents) buying inventory that was formerly part of any one of the short-term rental use-types and occupying them, again depleting leisure travel inventory.

There’s also a third condition, where units that were previously managed exclusively through property management companies are now also being listed on Airbnb and VRBO, increasing their visibility but not actual bottom-line inventory.

These scenarios are the result of a strong pandemic economy for more affluent consumers, with record-high savings, record low interest rates, and investment opportunities in mountain communities that are hard to ignore if you have the means.

And yet destination visitation is at record-levels, while short-term inventory is down. How can this be? To begin with, consumers have changed their behavior. Since ‘reopening’, the average number of persons per stay at a private home or condo has increased, with a cross-section of Inntopia partner properties citing 50 to 150 percent increases in the number of guests per booking in 2021 as folks collect family or cohorts in one location, or pool resources to meet high room rate. Additionally, professionally managed inventory is operating at record occupancy levels despite resource challenges.

These shifts in use type have contributed to increases in visitation and are putting unprecedented pressure on infrastructure, services, and the look and feel of destination communities, necessitating pushback. Steps to control visitation by regulating available rental properties will likely mitigate some of those pressures, but may also have an unintended impact on the tourism economy. Removing rental inventory that is not otherwise represented professionally can further deplete the leisure bed base and limit options to consumers that have come to expect a variety of choice. At the same time, hotel property investors, though interested in destination travel markets, are finding financing conditions tricky according to Jeff Higley, President of the BHN Group, which runs ALIS, the world’s largest hotel investment conference.

So, as destinations work to solve for issues like workforce housing, use type reminds us that there are other shifting fundamentals that can’t be ignored in the conversation. With new single use-type units like hotels and motels not likely to materialize in the near future, and new homeowners occupying many units once widely held for rental and workforce housing, the vision for the future of how a unit is used has become something akin to aerial acrobatics: that fine blend of science and art, where getting it right is a complex broad calculation that ensures everyone lands on their feet when the twists and turns are over.


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