Context: When occupancy sizzles but profits don’t

Through 2024–2025, Australia’s rental market stayed tight while mortgage costs rose. Independent analysis of the housing system in 2025 reported elevated growth in both prices and rents nationally, underscoring sustained pressure on supply. That supply‑demand imbalance rewarded stable, long‑term leases more reliably than volatile short‑stay bookings in many suburbs. Property agents now report fewer investors acquiring assets for short‑term accommodation, with buyers preferring longer leases for steadier returns.

Three forces are reshaping the short‑stay equation:

• Cost‑to‑serve inflation: Cleaning, linen, insurance, utilities, and frequent maintenance have outpaced nightly rate increases in many areas. Unlike long‑term tenancies, short‑stays carry hotel‑like operating costs.
• Platform risk: Customer acquisition for short stays depends on search and listing platforms. The ACCC notes that Google controls nearly 94% of search in Australia (as of August 2024), concentrating discovery and advertising spend. That fuels paid media dependency and higher customer acquisition costs for short‑stay operators.
• Macro uncertainty: The Reserve Bank’s August 2025 Statement on Monetary Policy revised GDP growth lower across the forecast window. When growth expectations soften, strategies that tame cashflow volatility gain appeal with lenders and investors.

Decision: A mid‑sized agency and its investor clients pivot

Anonymised for commercial sensitivity, a mid‑sized property management firm operating in a major Australian capital re‑evaluated its short‑stay portfolio in early 2025. After modelling yield volatility, operating effort and compliance exposure, the agency recommended a structured transition to long‑term tenancies for a significant subset of its book. According to the agency, approximately 50 properties under management were converted from short‑stay to long‑term leases over the period.

The investment thesis: long‑term leases deliver lower gross revenue per night but higher net operating income stability, simpler compliance, and better bankability. In practice, that stability supports valuations, expedites refinancing, and reduces working‑capital spikes associated with seasonal troughs.

Implementation: A playbook for stabilising yield

The agency followed a five‑step plan aligned to a business fundamentals framework (revenue, cost, risk, and capital):

1. Portfolio triage: Rank properties by volatility and cost‑to‑serve. Inner‑city studios with high cleaning turnover and limited average daily rate (ADR) growth were first to move; premium coastal homes with strong off‑peak demand were retained on short‑stay where justified.
2. Yield modelling: Build a rolling 12‑month cashflow comparing short‑stay net after fees, operations and tax to long‑term rent net of property management fees and standard landlord costs. Sensitivity testing for occupancy, ADR, and cleaning costs informed which assets would outperform on long‑term leases.
3. Compliance sweep: Map local requirements (strata by‑laws, council permits, and caps) to avoid regulatory whiplash—a recurring risk in short‑stay. Long‑term tenancies simplified licensing exposure.
4. Channel reset: Reduce paid acquisition reliant on search and listing platforms; pivot to long‑term tenant channels and corporate relocation relationships. Platform concentration, highlighted by the ACCC’s 94% Google share, was treated as a structural risk to short‑stay marketing economics.
5. Ops tech retooling: Reconfigure property management systems for long‑term workflows—inspections, maintenance scheduling, arrears, and bond management. The agency explored AI‑assisted pricing and risk scoring, while noting a 2025 study on Australia’s AI ecosystem flagged a commercialisation gap; off‑the‑shelf proptech was prioritised over bespoke builds to manage cost and execution risk.

Technical deep dive: Why net beats gross in short‑stay versus long‑term

The apparent allure of short‑stay comes from gross yield headlines, but the operating model is more akin to hospitality than tenancy. Consider the unit economics:

• Revenue drivers: ADR and occupancy in short‑stay are highly seasonal and event‑sensitive; long‑term rent is contracted and predictable across the year.
• Cost stack: Short‑stay requires cleaning per turn, consumables, furnishings depreciation, dynamic marketing, 24/7 guest support, and higher insurance premiums. Long‑term eliminates most of these, substituting property management fees and periodic maintenance.
• Working capital: Short‑stay cashflows whipsaw with peak/off‑peak cycles, stressing mortgage servicing in quiet months. Long‑term rent supports even debt servicing and superior serviceability ratios with lenders.
• Platform dependence: Discovery costs compound in short‑stay due to reliance on dominant search and listing ecosystems; long‑term channels depend more on local PM networks and tenant demand, especially in undersupplied markets.

Results: Measurable stabilisation and operational simplification

• Scale of change: Approximately 50 properties transitioned from short‑stay to long‑term under the agency’s management, reflecting a material reweighting of its portfolio.
• Revenue volatility: The agency reported a notable reduction in month‑to‑month cashflow swings for participating owners, improving debt‑service confidence during off‑peak periods.
• Cost profile: Operating complexity dropped: fewer turnovers, simplified compliance, and reduced paid media reliance. Marketing costs fell as properties were leased through established tenant pipelines rather than high‑cost short‑stay channels.
• Bankability: More predictable net income strengthened refinance conversations with lenders, aligning with a macro backdrop where the RBA expects weaker near‑term growth and investors prize resilience.

Market trends and competitive dynamics

Broader market signals reinforce the pivot. Australia’s rental undersupply and elevated rent growth create a tailwind for long‑term tenancies. Housing supply initiatives under the national Housing Accord, while ambitious, are widely assessed as falling short of immediate demand, keeping vacancy rates tight in many postcodes. At the same time, the marketing economics of short‑stay remain exposed to platform concentration in search and listing ecosystems, compressing margins as acquisition costs rise.

For early movers, competitive advantage lies in smart asset selection: retain short‑stay only where ADR resilience and year‑round occupancy outstrip the cost stack; otherwise, bank the premium of stability. Investors who implement dynamic portfolio rules—reallocating between modes quarterly based on data—can arbitrage shifting demand without wholesale strategy changes.

Lessons: A practical roadmap for decision‑makers

• Run net, not gross: Build a true P&L for each property. Many short‑stay assets look strong on ADR but weak on net once cleaning, consumables, insurance and acquisition costs are included.
• Stress‑test debt serviceability: Model low‑season scenarios. If cashflows threaten mortgage obligations, preference long‑term leases or blended strategies (e.g., 9–10 month fixed lease plus limited event‑based short‑stay windows).
• De‑risk platforms: Treat search and listing channels as concentrated counter‑parties. With Google near 94% search share locally, dependence on paid discovery for occupancy is a structural margin risk.
• Adopt pragmatic proptech: Use proven pricing, maintenance and arrears tools. Given Australia’s AI commercialisation gap highlighted in 2025 ecosystem research, buy over build to reduce execution risk and speed time‑to‑value.
• Align with regulation: Map council and strata rules. Long‑term leases generally simplify compliance, reduce reputational risk, and can command better lending terms.
• Create an “optionality” strategy: Set criteria for switching modes at property level. Quarterly reviews enable tactical pivoting as supply, events, and macro conditions change.

Bottom line: The short‑stay story in Australia hasn’t ended; it has matured. In a tighter, more regulated, platform‑dependent market, stability is a competitive asset. Investors and managers who run disciplined, data‑led portfolio playbooks—pivoting where net returns and risk dictate—will out‑earn those chasing headline yields.