It’s hard to believe that it has been just over a decade since Airbnb launched in Australia.
It would be fair to say that the arrival of the short-stay accommodation platform and its contemporaries, such as Stayz, Homestay, VRBO and HomeAway, have had a big impact on the holiday rental market.
It’s proved an attractive market segment for property owners.
According to data compiled by the University of Queensland, there were 251,000 short-term rentals registered across Australia in September 2022 – accounting for about two per cent of overall housing stock.
The figure is down from the peak of just under 400,000 properties in December 2019, three months before the borders closed due to COVID-19 but, post-borders reopening, the number is trending upwards again.
Over the first three months of this year, the number of properties “active” as short-term rentals increased 34 per cent, according to analysis of listings and revenue by Deckard Technologies for AFR Weekend.
Offering a property for rent on Airbnb can have its attractions – average occupancy rate of 53 per cent, average daily rate of $278, average annual revenue of $48,760, according to Airbtics, a short-term rental analytics company.
It can be a lucrative market (short-term rentals on the Gold Coast reportedly generated $83.6 million in the first three months of this year), enticing a number of property owners to go down the short-stay route.
So, it follows that some property managers are branching out into managing Airbnb properties.
The extra income from short-stays and their management is offset, in part at least, by increased maintenance, security concerns, tenant/guest vetting and tenant/guest management – and there is also the issue of appropriate insurance for the property.
Insurance options explained
While a property owner (owner-occupier) may be able to rely on a standard home and contents policy backed by the platform’s insurances and guarantees if they are offering their home occasionally via Airbnb, this is rarely an option for investment property owners.
By that I mean, a person who is using the property (which is not their primary place of residence) to generate an income from renting the home.
For these owners, leasing property is basically a business activity, for which they may need professional property management (which is where you come in!).
Investment property owners need specialist landlord insurance.
They need a policy that is designed to cover the unique risks owners face when leasing their property on a short-term basis to tenants.
Beyond cover for events like fire, storm, theft, or impact, they generally need protection against tenant-related risks like tenant damage (accidental, malicious or intentional) and loss of income.
These risks are usually only provided for in specialist landlord policies.
Of course, as a property professional, you know this.
But what you may not have realised is that your landlords may need a different type of policy for short-term rentals.
Why not just any landlord policy will do
Whether your landlord client is buying an investment property for the purpose of short-term renting or switching an existing property from standard leasing (fixed-term or periodic) to the short-stay market, they need to have the right insurance.
Depending on the landlord insurance provider, there may be a choice of policies – for longer term rentals or for short-term/holiday lets.
It’s important to be aware that the insurer may not offer cover for short-term rentals at all.
Some providers cater exclusively to the long-term market, providing cover for property leased fixed-term only.
And not all providers who do offer short-term extend that cover to platforms like Airbnb.
The cover may only be for holiday homes, corporate leasing or serviced apartments.
EBM RentCover was one of the first, and still one of the few, landlord insurance providers that covers Airbnb and other similar platforms.
Why the distinction? It’s based on the risks – and insurance is all about risk.
To put it simply, the risks involved in leasing a property to a tenant on a standard lease are not the same as renting the home to a guest for a short-stay.
Yes, some of the risks are the same – things like insured events like fire or extreme weather damage – but others are significantly different.
Take, for example, cover for the contents of the rental.
What’s provided in a long-term rental for tenant use will likely be far lower than that provided for a guest in an Airbnb property.
Even if the home is leased ‘fully-furnished’, it is unlikely to have anywhere near the amenity or inclusions of a holiday home.
Most holiday homes, including Airbnb, are fully equipped with everything the guest will need for their stay – bed linen, crockery, cookware, entertainment systems, books, sporting equipment and so on – in addition to the usual furniture, white goods, lighting, floor coverings and appliances.
The insurance for a short-term rental will usually cover all of these contents against damage, loss or theft by the guest.
A standard landlord policy including contents will generally only cover things like built-in furniture, cupboards, appliances like stoves, water heaters and coolers, space heaters and coolers, non-portable electrical equipment, window coverings (blinds, curtains), floor coverings (fitted carpets, tiling, floorboards) and fixed lighting.
Loose item cover may be offered for fully-furnished rentals, but the extent of the coverage may not run to all the amenities the owner is expected to include at a holiday home (like bedding, tableware or reading material).
Another key difference between cover for long-term and short-term is when it comes to loss of rent.
There are several scenarios where loss of rent may occur at a property leased on a fixed-term.
These include rent default, denial of access and death of a tenant.
Loss of rent is a key reason landlords need to claim on their insurance, so the common claim scenarios are usually covered by the policy.
In the main, these are a result of losses stemming from the lease being broken.
It stands to reason that when there is no lease in place, the loss of rent risks from a lease being broken aren’t present.
So when it comes to loss of rent for short-term, the cover generally applies to confirmed bookings being cancelled due to the property being damaged or due to a guest passing away at the premises.
Get the type of policy wrong, and your landlords could find they aren’t properly covered.
And that’s a headache no-one needs – including the agent managing the property.
In a nutshell, because the risks associated with long-term leasing are different to those of short-stay rentals, there are different policies.
Don’t let your landlords risk having the wrong cover, talk to your EBM RentCover Relationship Manager about short-term policies for the Airbnbs you manage.
