At The Nox Group, we’re fortunate to have a broad data set which allows us to gather very detailed insight into market conditions across the entire industry; from short term to long term renting and into residential property sales. It’s quite clear to us that the market is trying to find some direction across all segments of the industry.
Our short term division via www.noxrentals.com currently manages around 120 properties on the Atlantic Seaboard, and being one of the largest luxury residential management companies in Cape Town, we’re well versed with dealing with market forces which have been at play recently:
- Ebola (2014-2016)
- Visa Regulations (2015)
- Official launch of AirBnB in South Africa (July 2015)
- Western Cape drought (2016 – present)
- Rand strengthening by approx 15% to major currencies (Dec 2017 – present)
- Political tension
The above major events have materially shaped our industry over the past few years, specifically the introduction of AirBnB and the recent drought, which has affected both the supply in the market as well as the demand for short term (holiday/vacation) rental properties. Over the past few months we’ve specifically seen an oversupply of properties in the short term rental market, leading to downward pressure on daily rates and a highly competitive market.
The “Day Zero” campaign also didn’t do anything to stimulate foreign Tourism demand but we still believe that the upcoming Summer (2018/2019) will be a good one. Cape Town will never go out of fashion, and now that the “Day Zero” hurdle has been pushed out to 2019, we’re confident we’ll be firmly back on the world destination map very soon.
It’s a bit early to provide quantified information on the outlook, but various media sources have started providing some insight from fellow industry operators:
- Fin24 – Jan & Feb bookings down between 10 and 15% (25 March, 2018)
- Fin24 – hotel reservations down 50% between April & September (25 March, 2018)
Wesgro and various industry bodies have recently discussed the impact of the “Day Zero” campaign on the local economy, but it’s difficult to quantify it. Only a matter of time will tell, but there are some interesting insights here as to why the campaign was eventually scrapped.
You may be asking, “what now”?
As a Nox Rentals Partner, you have the widest marketing platform available in the industry, with representation across 16 Online Channels in real-time. We have highly specialised automated pricing tools in place and are best positioned to benefit from the upswing in the market. We’re seeing a number of “AirBnB only” Owners leaving that platform and looking for a long term rental, which will reduce the competitiveness in the market. Day Zero is behind us, and we’re optimistic about the 2018/2019 season. Our recommendation and position on the market is as follows:
“Take comfort in the fact that you’re working with professionals, who are actively trying to get you as many bookings as possible, at the best rates one can get. It would be sensible to lower your expectations regarding revenues for the time being; the market will turn again and we’re doing everything possible to be at the forefront of that cycle.”
A final note is that the lead time of bookings (the period between enquiry and arrival) has reduced dramatically over the past year. Approximately 75% of our bookings have less than a 30 day lead time, so forecasting is challenging. Do not be concerned if your calendar is wide open for months in advance, it is in line with recent trends and it will fill in.
We truly believe that you will struggle to find a Management Company that can offer you better returns on your property. Backed with a comprehensive Property Management service, you’re in good hands. If you do feel uneasy about the rental outlook, we will gladly assist with a Long Term rental or Sales valuation via our Real Estate division at www.noxproperty.co.za.
Please feel free to get in touch with your PRO or Nick if you have any comments on the industry or the performance of your property.