You may not have noticed that the world’s economy has been in trouble for many reasons; if not, check your energy bills. In these situations, the rational thing to do is to cut costs, save money, and be cautious.
What has this to do with interior design?
You may ask the question, and investment in interior design seems counter-intuitive to the advice above in that it requires some expenditure, whether a simple painting of walls or a complete redesign, including building work and replacement furniture, fixtures and fittings.
These thoughts relate to the coming holiday rental challenges on price and occupancy for 2023 and 2024.
Holiday Rentals (self-catering, vacation rentals or short-term rentals) are now seen as mainstream accommodation and heavily promoted by large US corporations such as Airbnb, VRBO (Expedia) and Booking.com, not to mention hundreds of other listing sites. With over 4 million “hosts” globally, Airbnb represents the number of rented properties, which is predicted to rise further.
If you look locally at holiday destinations, many thousands of rentals are available. Devon alone has almost 12,000 listed on AirDNA, ranging from small studio apartments to houses with many bedrooms sleeping 20+. Most individual owners will use one or more of these large marketing platforms to generate interest and bookings and rely on exposure, meaning that the best properties book earlier and at premium rates. The OTAs push hard on those with great reviews, amenities, decor and design and those “hook” photos to capture the fleeting attention of browsers. These properties generate fewer complaints and the most income for these corporations, all built into their algorithms. None of this would be a problem if demand were kept consistently high. However, times are changing again.
The Covid Effect
2020 was a disastrous rental year due to the lockdown; however, domestic travel rebounded with a vengeance in 2021 and, to a modestly lesser extent, in 2022. The net effect, however, was that owners saw decent rental returns and a higher nightly rate across nearly all rental sectors. Owners using managers also experienced the same results. There was under-supply and over-demand across almost all domestic markets, especially the US and Europe (the UK included). International travel was challenging and only came back as 2022 developed and still needs to reach 2019 levels globally.
Fact 1. Guest expectations
Some of you may remember rentals with electric coin meters; guests were expected to bring towels and sheets. Some of these properties are still around, but the norm is to follow hotel rules regarding providing basic amenities. The internet is alive with complaints from guests who are expected to clean before they leave a property and are asked to strip the beds, etc. The costs allocated to cleaning, not to mention many other fees, are often considered exorbitant.
Regardless of how you run your business, the net effect is the same, guest expectations are increasing, and the mainstream marketing of self-catering can overpromise and underdeliver. Hotels are now seeing a resurgence for shorter stays as service levels are standardised, facilities are regulated, and hotels offer more flexibility on the stay duration and cancellation policies.
Fact 2. There is nowhere to turn to
England is now facing a registration scheme, already being introduced with issues (licensing) in Scotland. This will challenge the actual property’s legal position with questions about planning (accelerated by the lack of residential rentals) and safety. This may mean more people consider residential letting and stopping short-term holiday rentals. They may think twice, however, as the Government is moving to a new set of tenancy rules in 2023. There remains a delicate balance between residential and holiday lets, especially when the home is also a bolt-hole for the owners.
With higher short-term rental costs (cleaning, electricity, marketing fees, etc.), some owners want to sell their holiday homes. The market is flat or seeing a slight decline. The number of properties for sale has increased, not to 2008 levels, but is well worth watching as a weather vane of market forces. For now, however, we have an ample supply of holiday rentals across the UK, with companies such as Sykes Cottages, having over 20,000 alone, matched by Awaze (Cottages.com) and Travel Chapter coming close. That’s just three companies representing owners.
The chart below shows the Royal Institution of Chartered Surveyors (RICS) House Price Balance. This measures the percentage of surveyors reporting a house price rise in their designated area minus those reporting a fall. A level above 0% indicates more surveyors reported an increase in prices; below indicates more reported a fall.
Fact 3. Overseas travel is coming back
It is hard to get current statistics. Still, as we can see from this graph, the rebound between 2020 and 2021 reflected the desire to travel despite the challenges in force on vaccinations and each country’s challenges and restrictions.
In 2021 it is clear that this travel rise was for hot countries! Croatia, Cyprus, Greece, Spain, etc.
2022 data is only available on the Govt website up to the second Qrt of 2022 and reflects the rapid increase in travel outside the UK. This will undoubtedly continue in 2023, primarily as “cheap, fully inclusive travel” will be seen as an attractive holiday in times of economic crisis.
Visits abroad by UK Residents (000’s)
Check the red 2nd Qrt numbers each year from 2019 to 2022! For example, in 2019, the World Total was 25.76 million travellers.
A Perfect Storm
It would appear that 2023 may not be lucrative for second homeowners who offer their homes for holiday rentals. Those who use management companies will already have been contacted, no doubt, with advice on improving rental opportunities and caution on the outlook and how to add value to increase interest.
If, as an owner, you have enjoyed a couple of years of great bookings, then as you can see, we would expect the booking conditions to be more challenging in 2023. Travellers wishing to holiday in the UK will still have a more excellent selection of properties. With the economic pressure, we can expect daily or weekly rates to drop, especially on less-than-perfect properties, despite the need to cover increased costs.
High prices, and tired or less inspiring accommodation with a lack of good reviews, is a spiral of booking death, as an OTA will lower its ranking position. With so many other properties on offer, guests will go elsewhere.
Holiday rentals can suffer from years of renting. The decor can suffer and be from another era, technology can be outdated, and the atmosphere is lacking. Guests expect at least the same as they have at home, and when browsing, they are looking for comfort, experience and a space to relax.
What to do?
Properties on OTAs with 20 or more reviews achieve a 90%* increase in bookings compared to properties with no reviews.
Now is the time to consider reviewing your holiday home and evaluating a refresh with new photography to get that immediate interest and follow-through bookings, leading to excellent reviews.
Numerous papers show the relationship between hotel design, decor, and income. Through Airbnb’s meteoric rise, rental properties have resulted in most US-based reports, such as “A study by the University of Central Florida found that Airbnb listings with higher-quality interior design had higher levels of customer satisfaction and higher prices”. It doesn’t need papers to be written; it is common sense — VRBO even has a whole section of advice on this subject.
What does “Interior Design” mean in this context to you?
It is possible to do interior design yourself without formal qualifications or experience. However, knowing design principles, such as colour theory, balance, and scale, can help create a cohesive and visually appealing space. Many people find this challenging, and guidance helps to avoid a colour car crash. If you want some advice on paint trends in 2023, this link may help!
Below are a few pointers If you are considering doing the interior design yourself:
Plan: Make a detailed plan for the space’s layout, furniture, and decor. This can help you stay organized and ensure that everything fits together cohesively. Develop a clear vision for the space(s) you wish to change and determine the style, function, and mood you want to create. Start with the basics: Begin with the more significant elements, such as the layout and furniture, before moving on to more smaller details, like accessories and decor.
Functionality: The interior layout and furnishings should be functional and meet the needs of your guests. Guests may appreciate a well-equipped kitchen with all the necessary appliances, cookware, and utensils for cooking and entertaining, even if they don’t use them! Providing enough space for everyone to sit and eat together, sleep well and generally relax, especially in front of the TV, is essential. Beds alone require thought based on space, guest demographics and attention to detail on mattress comfort. Cramming guests is becoming a thing of the past. Ask how often hotels ask you to sleep on a pull-out sofa or a bunk bed.
Atmosphere: The interior should be welcoming. Lighting is essential; perhaps using lamps, not overhead LEDs, works well and is vital to create a welcoming atmosphere. The interior should have a cohesive and stylish design, with tasteful decor and finishes. The tiny touches, such as fresh flowers, plush towels, and high-quality bedding, can make a big difference in guests’ overall experience.
Outside Spaces: If you have an outside area, then do not ignore it. It is part of the offering the guest paid for. Guests may well appreciate outdoor spaces, such as a balcony or patio, that allow them to enjoy the outdoors while on vacation. Clean, uncluttered space, but with comfortable options for seating as a minimum.
Technology: WiFi is the top search or now expectation in a holiday home. Guests will appreciate the convenience of technology, such as smart home devices, high-speed internet, large-screen smart TV(s) and streaming services.
There is a lot to be considered. The points above are just simple guidelines. If you are unsure about something or need guidance, don’t be afraid to ask for help from a friend, family member, or professional designer. Overall, while it is possible to do interior design yourself, having some knowledge of design principles and being willing to seek resources and guidance when needed can be helpful.
Hundreds of commercial designers would be willing to assist you. Many have been created around the city Airbnb boom, where the properties were marketed to businessmen for shorter stays. The very nature of this scaling of accommodation allowed the wholesale purchase of furniture, fixtures and fittings and restricted the necessary individuality found in the leisure sector. All homes are different, and a 16th Exmoor cottage is wildly different to a newly launched luxury beachfront apartment. They both require an individual touch outside of a standard formulaic approach. Guests still want comfort, but they also want a unique experience. This can be helped by buying selectively, even from good charity shops, and this avoids the markup made on each wholesale item from the significant concerns.
How to Choose an Interior Designer
There are now three mainstream categories of interior design: Hotel, Residential and now Holiday Rentals. If you are considering recruiting a company or individual, make sure they have a rich history of rental experience as an owner, marketeer and ideally a manager, as not only does a home need to look good, it needs to function with minimal problems. Ask for references and how they charge, and if they mark up any materials, furniture or hardware if acquiring for you! Also, consider VAT charges!
You do not have to spend a fortune to improve your rental income and recurrent occupancy through subtle interior design. In an industry that is growing and is now seen as mainstream hospitality. Matching your home to guest expectations has never been more critical. If you want 40, not 4, bookings in 2023, then perhaps consider acting fast.
The cream always rises to the top!
To view a selection of interior design projects, please click here.