Finding success outside the CBD
More often than not short-term rentals provide greater returns than long-term rentals. However, a common misconception is that properties need a CBD location to be successful, writes Eric Hammond.
1 April 2023
While city centre apartments are prime real estate for short stays in Auckland, you can also earn profitable rental returns across Greater Auckland, not only driven by location, and not just in the places you might expect.
Outside the CBD top-performing locations from The Stay Hub’s portfolio include suburbs on the city fringe and coastal areas. A benefit to short- term renting in these locations is that there are fewer listings, meaning less competition and higher average daily rates where demand outstrips supply.
Sought-after amenities, including off-street parking and gardens, are more prevalent outside the CBD and hold strong appeal, particularly for families. Houses with backyards can also accommodate the family dog, with pet-friendly accommodation being the most-searched amenity on Airbnb this year. In 2022, family travel saw a 60 per cent increase on Airbnb compared to pre-pandemic data and is a key focus for them going forward. Some of the most popular inclusions for families include pools and beachfront locations. Anything with a view is also a key selling point.
According to AirDNA data, since our borders reopened, short-term rental properties around the coast of Eastern Auckland have achieved an average occupancy of just over 75 per cent, from Pakuranga, Half Moon Bay and Bucklands Beach through to Howick, Cockle Bay and Botany Downs, with figures rapidly increasing moving into 2023.
The CBD and fringe suburbs in the Waitemata area attained only a slightly higher occupancy. Devonport and Takapuna topped the charts, with nearly 80 per cent since the borders reopened and over 86 per cent across January and February this year. Other seaside locations, including St Heliers and Kohimarama, have also had consistent performance that continues to increase as tourists return.
Of course, guest capacity is also a major driver for bookings. Nearly 40 per cent of short-stay properties across Auckland are one-bedroomed. These work well in the CBD, attracting business professionals, solo travellers, and couples on city escapes.
However, multi-bedroom properties can achieve a significantly higher average daily rate (ADR). Two to three-bedroom houses in the likes of Westmere, Ponsonby, Mount Eden, Freemans Bay, Herne Bay, St Marys Bay, Arch Hill, Grey Lynn, Kingsland or Morningside are particularly lucrative. The Stay Hub has a variety of properties across these suburbs, many achieving an average occupancy of over 90 per cent since the borders opened last year.
Combining multi-bedroom properties with appealing amenities can also be a winning factor. Think spa pools and decks to lounge on and watch your earning potential become sky-high.
At The Stay Hub, the ADR for two-bedroom properties has been $280 since the borders reopened. Three-bedroom properties achieved an ADR of $377, increasing to $419 across the peak months of January and February this year. Four-bedroom short-term rentals have taken in a daily average of $576, falling just shy of $600 for the beginning of 2023.
While our multi-million dollar houses with higher guest capacity and attractive amenities see slightly lower occupancy, they can also achieve daily rates of up to $5,000, making short-term rentals in the luxury travel market highly profitable. In particular, The Stay Hub’s partnership with Marriott International Homes &
Villas brings in guests where price is not a barrier.
While data across the wider market shows lower average daily rates than The Stay Hub, this is often affected by the number of self-managed properties lacking teams of experienced revenue analysts to optimise performance.
Of course, the CBD will always hold convenience and appeal for domestic and international guests. Apartments with kitchen and laundry facilities are notably attractive, where guests can enjoy the comforts of home without the often sterile hotel environment. As with the outer suburbs of Auckland, additional facilities such as pools, spas and gyms command a premium, alongside parking, which can add $30-$50 a night.
If you are unsure if your property will succeed in the short-stay market, a professional short-term property management company can provide data and advice to estimate your earnings, ensuring investors can make the best decision based on their specific property objectives.