b'
On today\\u2019s show we\\u2019re talking about the challenges that many property owners will be facing during this unprecedented time in modern history.
\\nWe don\\u2019t know if the Covid-19 crisis is merely a blizzard or an entire winter. Depending on the answer to that question, the extent of the economic damage can vary widely. Most people can survive an economic blizzard. Things slow down for a few days. Everyone gets their shovels out and digs out. A few days later life is back to normal. In an economic winter, a different approach is required.
\\nToday\\u2019s discussion is a microcosm of the hundreds of similar situations that are happening in industries all over the world. If you\\u2019re in the restaurant business, if you\\u2019re a taxi driver, if you\\u2019re an airline pilot or flight attendant. Hundreds of millions of people are being directly affected economically by the current outbreak. The real estate example we\\u2019re focusing on today is short term rental properties.
\\nI\\u2019m an owner of a portfolio of properties in the Rocky Mountains. A current search shows over 300 listings available for next week. Normally at this time of year, we\\u2019re running about 80%-90% occupancy.
\\nThis past weekend, AirBnB changed its extenuating circumstances cancellation policy. This policy over-rides the policy that each AirBnB host lists for their properties.
\\nWe have seen a flurry of cancellations over the past three days. In many of those cancellations, guests have been making false claims in order to qualify for a full refund. The AirBnB policy says:
\\n\\u201cWe may be able to give you a refund or waive the cancellation penalties if you have to cancel because of an unexpected circumstance that\\u2019s out of your control. Below is a list of circumstances covered by our Extenuating Circumstances Policy. Before you cancel, check that your circumstance is included in the list below and that you can provide the required documentation.\\u201d
\\nIn my case, my properties are not in a location that has identified any Covid-19 cases. As such, unless the guest is unable to get to the location due to, say, a flight cancellation, they would only be entitled to a 50% refund and not be entitled to a 100% refund.
\\nAs an AirBnB host, we want to be sympathetic to guests who are genuinely afraid of traveling in today\\u2019s environment. I cancelled two trips to Europe and paid a 50% cancellation fee to the AirBnB host in Rome.
\\nThere are three main questions that need to be answered.
\\n1) Are we going to be unsympathetic to guests who want to cancel?
\\n2) Has the guests false claim that the property is infected going to stigmatize the property and lead AirBnB to improperly flag the property as having a problem?
\\n3) How will the property pay its bills in the coming weeks and months?
\\nSome people may experience travel disruptions due to flight cancellations.
\\nClearly we are sympathetic. I would not choose to be traveling right now. At the same time, we have bills to pay, condo fees that are due and mortgage payments that are due.
\\nIn our case, we have a cash reserve that will carry us for a period of time. But that cash reserve never contemplated 0% occupancy for an extended period of time. We are probably not alone in that regard. We will have to tap additional resources in order to cover the negative cash flow.
\\nA 2019 report by the JPMorgan Chase looked at 1.4 million small businesses with a business account at the bank and found 29% were unprofitable, and 47% had less than two weeks of cash liquidity. That means that nearly 76% of US small businesses could be insolvent in less than a month.
\\nYou should take immediate steps right now to reduce expenses and conserve cash.
'