Mobile World Congress (MWC) Barcelona is a trade show dedicated primarily to the mobile communications industry. Hosted annually by Fira de Barcelona Gran Via, the conference attracts around 110,000 potential short term rental guests to Catalonia’s capital city. However, as with many other international events, concerns over the outbreak of coronavirus have resulted in the 2020 event, due to take place 24-27th February, being cancelled. The cancellation of an international conference of this scale has wide ramifications, and we have looked at the data to help you understand the impact to vacation rental property managers (PMs), online travel agents (OTAs) such as Airbnb, guests and the city of Barcelona.
The might of MWC
At the end of 2019 Barcelona was home to 22,199 short term rentals, but with such a substantial attendee count, it is easy to appreciate the weight of MWC within the vacation rental market. In fact, the conference days alone can account for over 30% of February revenue for property managers. Let’s look at an analysis of Airbnb reservations data from February and March 2019, to understand Barcelona’s short term rental financial gain from last year’s event.
Average daily rate is indicated at €73 for bookings across comparable periods in February and March 2019, excluding those conference days. Conference days meanwhile averaged a huge 221% higher at €235 per night. To put this into context, analysis of rates around the Champions League final in Madrid last summer showed that while the baseline rate for ‘normal’ weekends through May and June was €90, the ADR for the weekend of the match was 96% higher at €176.
This same reservation data also suggests that non-conference dates through the same period averaged at 56% occupancy, while the 5 conference nights experienced a lift to 81% on average.
Looking at the achieved 2019 rates from above in combination with reservation numbers, we were able to estimate that the total revenue from bookings 24-28 February 2019 was over 7 million euros. Accounting for baseline revenue, we estimate the MWC 2019 Airbnb revenue to have been around 5 million euros.
The impact of MWC cancellation
Further analysis has allowed us to estimate the revenue lost by property managers, guests, booking platforms and the city of Barcelona as a result of the cancellation.
The financial damage to hosts, guests and the OTAs themselves hinges largely upon the cancellation policies applied. Click for more information on the policy options offered by Airbnb, Booking.com, VRBO – Airbnb and Booking have also released further advice for reservations affected by coronavirus at the links below:
Largely, it seems that while extenuating or forced circumstances apply for those guests travelling to MWC from mainland China, for all other guests, the normal policies will apply – and less than 14 days before check in, service fees will not be refunded for any policy.
Cost to PMs
So what does all this mean in terms of real cost to the vacation rental property managers of Barcelona? We found that 54% of Airbnb listings adopted cancellation policies returning a full refund within a timeframe, while policies returning a 50% refund within a timeframe represented 45% of listings. This means that, assuming 100% of bookings associated with MWC are cancelled, PMs stand to lose up to €4 million in booking revenue through refunds. Since we inferred cancellation policies from Barcelona’s dominant OTA – Airbnb, policy expression may not be fully representative of the market – non-refundable bookings are not accounted for.
Of course we must consider that it is likely that not all reservations associated with the event will be cancelled, and further that availability resulting from the actual cancellations may be re-booked.
In order to understand the reality for individual property management companies, we spoke with a major property management company in Barcelona. Their revenue manager estimates that while MWC was projected to bring them to 97% occupancy through its duration, around 18% of those bookings were cancelled in the 24 hours following the event’s cancellation. However, they have also already received some ‘replacement’ bookings. Booking data suggests that around 11% of occupancy could be re-couped between the time of writing and the conference period. Assuming a ‘new bookings’ ADR 10% lower than baseline for February/March due to the small lead time, PMs could recover 180k, or around 5% of what they may lose overall.
The greatest challenge for PMs according to our Barcelona PM, is reacting to this new problem quickly and effectively, and reassessing rates for available listings is central to that.
If we look at real changes in Barcelona’s occupancy and advertised rates between 10th and 17th of this month, we can begin to understand the impact of the cancellation to the short term rental market.
The graph below compares advertised rates around the dates of the conference before and after the event was cancelled; following cancellation, average rates for MWC nights dropped 28% from €323 to €232, while non conference dates fell by only 3%.
Prior to the cancellation of the event, prices were being advertised 115% higher through the conference than other days, whereas subsequent to the cancellation, prices are averaging only 58% higher. This suggests that a significant proportion of PMs have recognised the cancellation and taken the decision to lower their rates.
Meanwhile, considering occupancy, we can see from the last graph that the cancellation has had a noticeable impact upon the percentage of Barcelona listings occupied during MWC, with a 9% reduction in occupancy for conference dates. However, as average non-conference dates occupancy has seen an increase of 7% between snapshots taken on 10th and 17th of February, it would be fair to assume that the truer measure of the cancellation effect to occupancy is closer to 16%.
Cost to Guests
With all these same numbers in mind, guests stand to have 3.9 million euros of the total MWC booking revenue refunded – equivalent to 77%. That leaves around 1.2 million euros in cost to the guests, which in this instance will likely be largely absorbed by attendee companies.
Cost to OTAs
While guests travelling from a country subject to an epidemic qualify for total refund review, only 6% of MWC attendees registered as Chinese in 2019. Those cases may require more complicated and substantial refund processes, but meanwhile there are still 94% of reservations that fall under normal cancellation policy rules.
Where this is true, OTAs will retain their commission or service fee, as well as increase their profit with additional rebookings. Airbnb for example takes 13% on average of each reservation. 13% of our total estimated MWX booking revenue comes out at almost €700k, while following our earlier assumptions about rebookings will bring the platform a further 23k euros in commission.
Cost to Barcelona
Aside from the vacation rental industry itself, there are of course impacts to the local area. Assuming all 110,000 visitors would have paid the €2.25/per day tourist tax rate, the city of Barcelona stands to lose up to a quarter of million euros in potential earnings per day as a result of the cancellation. If each guest stays for 5 nights, that makes a total of €1.25 million potential lost revenue in taxes alone through the duration of the event.
However, if we also consider wider revenue generated for Barcelona by the event and its attendees, losses are even more sizeable. According to Le Monde, the organisation of the event creates 14,000 temporary jobs, while the rippling effect of the conference is estimated to generate in excess of 450 million euros for the city.
It is clear that the Mobile World Congress stood to generate Barcelona and its vacation rental market a lot of revenue, and that the event’s cancellation is a blow. Event cancellations are, however, a common occurrence, and the critical thing for short term rental property managers is having the awareness and information to make the appropriate and timely strategic adjustments necessary to minimise damage. We can see from the above analysis some of the effects and behaviour changes of the market, which goes some way to indicating these strategic adjustments. Market intelligence is the only way to ensure that your strategy is informed and proactive – if you wish to learn more about what data can do for you, please book a demo here.