For owners of short-term rental properties in Colorado Springs, May is typically one of the busiest times of the year.
With the weather beginning to warm, vacation season ramping up and high school and college graduations bringing thousands of travelers to the city, STRs like those listed on Airbnb are usually in high demand.
But with the COVID-19 pandemic forcing the shutdown of much of the travel industry, the vast majority of those properties are now without guests — and owners are scrambling.
Most reservations were canceled in the early days of the pandemic.
“When the stay-at-home order first seemed imminent, people from all over the world were calling to cancel April and May bookings,” said Christopher Dwyer, who operates four STRs on the Westside of town and serves as property manager to two others. “And it wasn’t long before they started canceling June, so it was a cascading effect.”
The pandemic could hardly have hit at a worse time.
“It happened right at the beginning of what we call the shoulder season, where business starts to pick back up [after the winter slow season],” Dwyer said.
“And May through mid-August, maybe even into Labor Day, is the high season. So, like many other businesses, many of us make maybe half to two-thirds of our [annual] revenue during that time.”
Tracie Fowler lives in North Carolina and stays in her townhome in Colorado Springs several times a year when she’s not renting it out. She typically operates at a loss through the winter and counts on her bookings in May through September to turn a profit for the year.
“But that’s not necessarily happening this year,” Fowler said. “For April and May, we are going to be lucky to be breaking even because of the impact on the travel industry.”
Many STR owners have already lost a lot of money because of the pandemic — and because the situation is changing by the day, it’s hard to know what to do next.
“I think a large portion of the hosts in Colorado Springs have shifted from short-term to a medium- or long-term [model] in the past month or two months,” said Ryan Spradlin, a Colorado Springs STR owner and founder of the Colorado Springs Short-Term Rental Alliance.
Spradlin said he’s already shifted to medium-term rentals for a handful of his properties. Fowler is renting her STR to a tenant on a five-week lease. And Dwyer has already converted three of his STRs into month-to-month rentals until things settle down.
“There has been a lot of uncertainty about how long the cancellations might continue and into what time period,” Dwyer said. “This is a big deal … because if you know you’re not going to have bookings for one month, that’s one scenario. If you know you’re not going to have bookings for two or three months, that’s another. So if you’re not sure, you don’t know whether to go into a backfill strategy and do month-to-month rentals or long-term leases.”
Shifting to long-term leases also brings in less money. Rates for longer terms are often far less than an STR owner can make if the property has steady short-term occupancy.
“In a normal summer, long-term rentals can’t compete,” Fowler said. “But in this scenario, I’m making less [with the STR] than the people who have a [long-term] tenant in that they never have to worry about, and I work 40 hours a week.
“So in the short run I’m definitely losing. But normally [short-term renting is] a much better solution, especially for me, because I like to use my property [when it’s not being rented].”
STR owners who have shifted to longer rentals for some of their properties — like Fowler and Dwyer — have been able to avoid shortfalls when it comes to paying their mortgages.
Dwyer rents two of his STRs from their owner, then leases them out as STRs in what’s called the “arbitrage model.”
He said he’s been fortunate to reach an agreement with the owner of the two arbitrage properties in which he is not paying rent during the pandemic.
Spradlin said he’s paid down the balances on his mortgages, leaving him with low monthly payments.
“I think my situation is pretty different from a lot of people,” Spradlin said. “I know that people who have gotten in [to running STRs] in the last few years are probably struggling a lot worse. We’ve definitely seen or heard of a handful of people bail out of [their STR] and sell their properties, and I would assume that’s probably the reason why.”
For those who primarily list their properties with Airbnb — which has the lion’s share of the STR market — temporarily switching to long-term rentals could also come with consequences.
To qualify as an Airbnb Superhost — that’s a host who is experienced and has high overall ratings from guests — hosts cannot cancel more than 1 percent of their reservations in a given year.
“And you may have a booking already in August or September or October that hasn’t canceled,” Dwyer said. “So the space isn’t actually available for a long-term rental.”
Early in the pandemic, Airbnb created a new extenuating-circumstances policy on cancellations, where reservations for stays made on or before March 14, with a check-in date between March 14 and June 15, could be canceled before check-in.
Guests who canceled were given “a variety of cancellation and refund options,” according to an Airbnb statement on the policy, and hosts were allowed to cancel bookings without charge or impact to their Superhost status.
But reservations made after March 14 are not covered under the new policy, unless either host or guest “is currently sick with COVID-19.”
Canceling reservations past the March 14 deadline to accommodate a long-term renter could result in a host being stripped of their Superhost status. That would likely hurt business, as Superhost status comes with better search engine optimization, making it easier for guests to find and reserve a host’s listings.
Because there were so many cancellations in the early days of the pandemic, Airbnb kicked off a $250 million host relief program to refund 25 percent of cancellation fees for reservations between March 14 and May 31.
But local hosts say that the requirements to get relief through that fund run contrary Airbnb’s push, in recent years, for hosts to have flexible cancellation policies.
“In order to meet the criteria to actually get paid … you had to meet all these stopgaps, which were almost impossible,” Spradlin said.
Spradlin said only hosts with stricter cancellation policies received funds, and those with more flexible policies received very little compensation.
For his estimated $15,000 worth of canceled bookings across March and April, Spradlin said Airbnb paid him $115.
“And the problem with that is Airbnb has spent the last three to four years dangling the carrot in front of all their hosts saying, ‘Hey, if you use a flexible cancellation policy, we’ll make sure you get X amount of bookings and we’ll keep moving you up the search engine ladder,’” Spradlin said. “So they were constantly telling their guests that they actually didn’t want hosts to have strict cancellation policies, and then when this happened they … really only gave [relief] to people who have strict cancellation policies, which is like 1 percent of their hosts. … So really, they’re not helping anybody who actually went to lengths to help make guests happy.”
Spradlin said while Airbnb’s pandemic policies have angered some hosts, most of those he’s spoken with seem to understand the reasoning behind them.
“I think most of the hosts felt like that was a fair deal, because we weren’t going to be able to accommodate these people,” Spradlin said. “They weren’t traveling, so as unfortunate as it is and as much as it hurt everybody that is a host, I think it’s pretty easy to put the shoe on the other foot and say, ‘If I was traveling someplace, I would want a refund if I knew I couldn’t travel there.’”
“Airbnb is definitely guest-centric, and it has to be because that’s their client base,” Fowler said.
“Hosts, in my opinion, we are just vendors of supplies. So from a customer-experience perspective, I understand why they have done some of the things that they’ve done. So I don’t fault them for giving [guests] refunds.”
But Spradlin said for many STR owners who’ve had negative experiences working with Airbnb in the past, the pandemic is the last straw.
“Even well before the coronavirus, they were considered to be sort of the least host-friendly platform,” Spradlin said. “They’ve just always favored guests and their job is to put bodies in beds.
“So I think this pandemic was maybe the nail in the coffin for some people in that regard — they’re already frustrated with Airbnb and some of their general practices toward hosts, and then when this happened it made it an easy choice to move into something else.”
For STR owners taking a wait-and-see approach to the pandemic before converting their properties to other rental models, Dwyer said it’s still unclear what the STR landscape will look like in the future.
Adding to the uncertainty is Gov. Jared Polis’ safer-at-home executive order, which bars STRs from operating almost entirely. A spokesperson from Polis’ office said STRs currently cannot be rented to the public, though they can be rented to the state as part of its public health response.
But Dwyer is confident that the industry will recover.
“I think after COVID is over there will be other pandemics, but I think you’ll see people get back in after this period,” he said. “People love to travel. They love to come to the Colorado Springs area. And we have so much to offer here in terms of natural setting, hospitality, great restaurants … we just have a lot going for us.
“So I think people will come back and we will continue to see increases that are perhaps more modest, year-to-year, than in the past — but increases nonetheless.”
Spradlin said the owners who have stuck with their STRs and are riding out the pandemic have responded “in true entrepreneurial fashion.”
“We’ve been adaptable,” Spradlin said. “We’ve been creative and we’re helping each other find ways to get through this situation.”