We’re in the midst of quite a storm. Labor shortages are evident in virtually every industry across the United States, and the standard measures of inflation have been steadily increasing for over a year, with the most recent Consumer Price Index (CPI) report still hovering above 8 percent. Most economists and financial institutions agree that a recession is on the horizon as the cost of everything from labor to manufactured products to borrowing money continues to rise.
Specific to energy, price increases are outpacing the overall inflation numbers, with the energy segment at 19.8 percent above last year. These figures are causing households across the country to fall behind on utility bills (1.3m in New York alone are at least two months overdue) as consumers are finding it more difficult to keep up with the continuing increases.
A rare bright spot amid all of these challenging data points, however, is the growth of the short-term rental market. Of the total global accommodation sector, which is projected to be worth $903 billion by year-end, the fastest growing segment has been short-term rentals (10 percent CAGR since 2018), as we continue to witness a rise in both supply (23 percent) as well as guest demand in the US (20 percent) for this type of lodging. A caveat to keep an eye on here, though, is that supply is beginning to outpace the demand, which is likely to have an impact on occupancy and average daily rates over time.
As property managers also tackle tightening regulations and increasing security risks alongside their cost and labor challenges, it’s worth considering the macroeconomic outlook for the next 12-24 months, as it’s certainly going to be different from the environment we’ve experienced for the last 10-15 years. So, as we all begin to think ahead to 2023 with business budgets in mind, how can property managers address some of these challenges?
One way is to take a deep look at how technology can help you run your business and, in particular, how it can support your bottom line, not just your topline. In my opinion, it’s important we consider how technology and, more specifically, smart home technology can help you keep your costs under control rather than just thinking about how it might generate incremental revenue via a guest fee.
How Can Smart Tech Help Short-Term Rental Property Managers?
The foundation begins with knowing what’s going on in your properties. Smart home tech empowers property managers to gain greater awareness and knowledge of their short-term rentals. From smart locks for access to monitoring technology for noise, water, or HVAC systems, these connected devices provide property managers with up-to-date info on what’s happening and who’s entering their rentals at all times.
Let’s take the example of a maintenance issue that requires a plumbing professional to come to the property during a turnover day. Using remote access management, you have the ability to create a unique and time-bound code on the smart lock for the plumber to enter the property without needing to meet them onsite and let them in. You will know when the plumber arrives at and departs from the property, which can help you verify the labor time on the invoice. And with a smart thermostat, you’ll also know if they changed the temperature during their visit and can adjust it back to your desired set point accordingly.
Control and Automation
Perhaps the most well-understood benefit of property tech solutions is their ability to be controlled and managed remotely, offering property managers peace of mind as well as a reliable way to streamline operations. The reality is that a smart lock saves a property manager’s most valuable resource: their time. Along the same lines as the example above, with smart locks, you will never need to worry about sending someone to a property with a key since you can remotely create codes from your phone or desktop within seconds.
Given current labor constraints and costs, saving people hours across a portfolio can have a significant impact on your bottom line. Imagine the scenario in which your team is stretched thin, and you have three properties with a maintenance need at the same time. Without smart locks, you may send a team member out to let the vendors in at each property, perhaps taking an hour round trip. Furthermore, the vendor at the last property has to wait for access outside the unit for 30 minutes while they’re billing at $150/hour. With smart locks, that hour of driving and 30 minutes of vendor wait time are completely avoided, saving you not only money but also freeing up your team to focus on their number one focus: delighting your guests.
Another example of remote automation that leads to direct cost savings is enabled by smart thermostats. Not only can you automate the temperature settings to adjust during a check-in and check-out, you can even set up rules to automatically shut off the HVAC system if a door or window is left open. Think about the group of two families with six kids getting ready to head to the beach on a 90-degree summer day. One of the kids inevitably forgets a beach toy, runs back into the house, and doesn’t close the door behind them on the way back to the car. Without smart thermostats in place, the HVAC system will stay set to 70 degrees for the next six hours, pumping cool air out into the front yard and working overtime trying to maintain that setpoint. With the right tech in place, you can rest easy knowing the system will automatically turn off in this situation, saving on direct energy costs (that are currently 20 percent higher than last year) as well as preventing unnecessary wear and tear on the system.
It is estimated that up to 10 percent of properties in the US have a water leak that drips away 90 gallons of water a day or more. In 2019, the insurance industry paid out over $2 billion in non-weather related water claims, and the average claim payment was $9,700. While it is great to know that insurance can help with these claims, the reality is that most of these claims don’t include coverage for lost rental nights during the repair process. Additionally, when claims are filed, they are often accompanied by premium increases of up to 10 percent. On a rental property with a $2,500 annual premium, this would result in an incremental $250 of insurance expense in addition to the lost rental revenue. But smart tech can help. With a simple, low-cost leak detection sensor, you can be notified the instant a leak is detected in a property, allowing you to deploy a team member to the property to assess and stop the flow of water before the damage becomes catastrophic. Or you can take it one step further and add a smart water shutoff valve that will automatically turn off water flow when the leak is spotted. When it comes to water issues, whether it’s a burst pipe, an overflowing toilet, or a leaking washing machine, every minute matters. Stopping the flow of water before the damage occurs can avoid major repairs, headaches, and dollar expenditures.
Similar preventative capabilities apply to noise monitoring technology. If a guest decides to throw a party in one of your properties, you may not know until it’s too late without smart sensors that can detect increasing noise levels and notify you to take action. Such incidents not only subject your property to damage, but they can also harm your reputation in the surrounding community and result in fines of thousands of dollars and even a loss of permit. It’s pretty straightforward to imagine the economic impact of losing an entire rental property because of some bad guests.
The Opportunity Gains for Investing in Smart Tech
The cost-saving opportunities of investing in smart tech are vast. Locks, smart thermostats, and noise monitors can individually benefit your bottom line, and managing them collectively in one platform can increase the impact. Given the increasing costs of energy and a challenging economy, the initial investment can be quickly recovered by reducing unnecessary energy consumption and operational inefficiencies.
Simply connecting a smart thermostat to your HVAC system has the potential to reduce energy consumption by up to 23 percent. An investment of around $500 dollars in a smart lock, thermostat, and noise monitor bundle is easily recouped by the energy and hours of labor saved along with the potential disaster scenarios avoided. If you’re not adopting this kind of tech, you’re likely missing out on thousands of dollars of savings per year.
We must reframe our thinking. Instead of seeing smart tech as an expense to be justified, we must recognize the time-saving and cost-saving benefits it brings, allowing property operators to scale and grow. The current market presents a lot of challenges to short-term rental property managers, but property technology is the future. Facing economic headwinds head on with the support of smart home technology can improve the bottom line and ease day-to-day operations, enabling a business to stand strong and continue to thrive in the face of potential adversity.
Nate Wysk is the general manager at PointCentral, an Alarm.com subsidiary. Prior to PointCentral, Wysk held the role of director of global business development at Alarm.com, where he led the international go-to-market strategy and expansion of smart home and smart business security solutions into 30+ countries.