Is Short-Term or Long-Term Rental Best For My Property?

Due to Airbnb's tremendous success, the hospitality industry has experienced a transformative shift, focusing more on the mutual benefits between property owners and guests within the short-term rental market.

But with an influx of hopeful new owners observing more significant returns on their investments, traditional long-term rental owners are wondering whether their property is an appropriate fit to make the switch.

Let's look at some key benefits and drawbacks to make your decision easier.

The Short Term Rental Market

The primary benefits of owning a short-term rental are the possibility of increased profits and greater flexibility for property owners. The ability to block out personal time at your property during the summer months while still having a number of reservations is highly appealing to many, particularly those who own vacation homes that they use only intermittently.

But just how lucrative can short-term be? According to the Australian Financial Review report, the short-term rental market in Queensland’s desirable Gold Coast more than doubled its profits in 2023 from the prior year.

Recognising your property's unique features is critical to finding its sweet spot in maximising its revenue potential. Naturally, seasonal homes will see most of their bookings during the peak season, often resulting in higher profits. However, profits may drop significantly during the off-season. Although these trends are generally predictable, the inconsistency of yields and increased vacancies may deter some property owners from the short-term rental market. Cosmo utilises data-driven insights to help property owners understand their property's potential and maximise their profits, and endeavour to provide as much transparency as possible during the onboarding process.

Additionally, where price is concerned, short-term rental owners typically see higher overhead fees in utilities, cleaning, and other maintenance costs. When managing independently, there can also be unexpected costs associated with marketing, distribution and pricing analysis. Luckily, some of these costs can be offset with the ability to fluctuate pricing based on demand. Utilising a property management company like Cosmo will help minimise some of these overheads.

The Long Term Rental Market

Short-term rentals are a great option for those looking to supplement their income or generate extra profit from a vacation property while remaining adaptable to market conditions. For many, however, their properties may be a primary source of income and a critical factor in their financial well-being. The stability of the traditional long-term rental market may be a better option for those seeking a consistent income stream and lower overall variability.

Depending on the owner's preferences, either market may be beneficial in terms of control of the space. Long-term arrangements offer additional screening and liability for tenants, while short-term turnover can feel more sporadic for owners. Online rental platforms such as Airbnb have enhanced their security measures by introducing screening processes, including ID verification and guest reviews. The short-term model also allows for greater flexibility to make changes to the property to increase its value, whereas the long-term is typically on a more rigid basis, as leases are typically 6 to 12 months.

It is important to consider whether your property is most suited for the short-term or long-term rental markets. While transitioning to short-term rentals could possibly result in higher annual yields, your property may be more desirable for a long-term tenant, proving to be more financially beneficial to you.

It is highly recommended that property owners conduct an analysis to determine how their investment might perform in the short-term rental market. For comparing your property against neighbouring short-term rentals, the Cosmo Airbnb Calculator is free and available for anyone to use.

Where Cosmo Comes In

The increased overheads, regular communication with guests, and the need to be constantly monitoring market conditions can be overwhelming for a property owner starting out in the short-term rental market. Those seeking additional support to unlock their property’s potential in the short-term market can benefit from listing with Cosmo. We remove the hassle of managing bookings, pricing, guest relations, and other odd ends while streamlining the overall process for property owners.

Cosmo analyses your property to determine its marketability and pricing and how it compares to other properties in the surrounding area. We have been able to maximise our client's profits while delivering top-of-the-line guest experience all across Australia.

Ultimately, the decision to transition from long-term to short-term rentals is a personal one. It is important to consider the unique features of your property and your financial goals. Cosmo is here to help you make the most informed decision possible, and if you decide to make the switch, we will be there to support you every step of the way.