The twin disasters of bushfires and coronavirus have devastated Australia's tourism industry resulting in a massive decline in visitor numbers and booking enquiries.

Key points: A glut of properties in the short-term rental market is causing housing stress with a lack of rentals available for long-term tenants

A glut of properties in the short-term rental market is causing housing stress with a lack of rentals available for long-term tenants Airbnb recommended that owners in Cairns reduce their prices due to a decline in bookings for the region

Airbnb recommended that owners in Cairns reduce their prices due to a decline in bookings for the region Some landlords are opting to switch out of the previously lucrative short-term rental market due to a decline in consumer demand

That downturn is causing some Airbnb operators in the Far North Queensland tourist city of Cairns to rethink their future on the platform.

February is traditionally the low season in the tropical hotspot due to the hot and humid weather, but Brian Kovacs, who runs an Airbnb hosting service, said this year is looking particularly grim on the booking front.

"This time last year, we were fully booked for February and half of March was booked as well," Mr Kovacs said.

"February 2020, we've got 50 per cent vacancies and we're struggling to secure a booking."

Airbnb sent an email, automatically-generated by an algorithm, to hosts in Cairns advising them that bookings were down by 38 per cent for February and to drop prices.

The potential visitors Mr Kovacs has communicated with are particularly nervous about coronavirus.

"The enquiries that we're getting, they're cautious [and asking] 'have you had a guest staying at your property lately from China?'" he said.

Airbnb's Australian media representatives declined to comment, saying any link to bushfires and coronavirus would be speculation.

Airbnb sent an email to hosts in Cairns recommend they up their minimum prices for February. ( Supplied )

Shortfall not covering overheads

Mr Kovacs, who also works in the local real estate industry, remains bullish about Airbnb and the short-term-stay market, but said he was starting to advise some the clients in his portfolio of 11 properties to switch to long-term residential tenancies.

In the current climate, revenues are not covering overheads.

"When you're an Airbnb host, you've got all the bills to pay — internet, electricity, rates, body corporate fees, cleaning, replenishments — everything is paid by you," he said.

"Whereas, if the property was on the residential market, you just pay the ownership costs, council rates and body corporate fees if you've got a unit, and everything else is paid by the tenants.

"Where they were Airbnb, or where they were considering doing Airbnb, after we sat down and went through all the options and numbers, we mutually decided they're probably better off on the residential rental market."

Airbnb sent an email, automatically-generated by an algorithm, to hosts in Cairns advising them that bookings were down by 38 per cent for February and to drop prices. The company's Australian media representatives declined to comment saying any link to bushfires and coronavirus would be speculation.



Cut-throat competition in already-stressed market



Mr Kovacs' business partner, real estate principal Billy Gartner said there were other factors at play, in particular, the oversaturation of listings on the gig economy platform.

"The one-bedroom, the two-bedroom units, rooms in houses, that's the part of the market that's really become saturated," Mr Gartner said.

Real estate principal Billy Gartner says the Cairns Airbnb market is oversaturated while the long-term residential rental market was stressed. ( ABC Far North: Brendan Mounter )

"What was probably getting $95-a-night two years ago is down to $70-75-a-night for the simple reason that [there are] so many mums and dads with one [an investment property].

"They're competing with each other by dropping the prices and that's affecting the whole market."

Mr Gartner said the popularity of short-term-stay booking platforms, in particular Airbnb, has resulted in landlords shifting away from long-term residential tenancies in the pursuit of a higher return.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 6 minutes 5 seconds 6 m Airbnb dividing tourist towns ( Erin Parke )

The supply issues created in the permanent residential market has forced rents up through bidding wars with scores of prospective tenants turning up to open homes.

"The residential market in Cairns is classed by the valuers now as being 'stressed' and the next step is 'crisis' because we don't have enough permanent rentals available," Mr Gartner said.

"We've got an oversupply of short-term accommodation in Cairns and a serious undersupply of permanent rental accommodation.

"Residential rental prices are going up and up and up; every time a lease expires we're putting [rents] up $5 to 20 a week."

Is the short-term-stay market contributing to homelessness?



While higher rents might be a boon for landlords, those supply-and-demand constraints can be a burden for society's most vulnerable, according to Kathleen Flanagan from University of Tasmania's housing and community unit.

Kathleen Flanagan says an increase in the short-term-stay market is making it harder for people to find a place to live. ( Supplied: UTAS )

"Homelessness occurs when local housing markets are under pressure, when rents are higher than people's incomes," Dr Flanagan said.

"The people that tend to lose out in that competitive process are the people on lower incomes, people in insecure work, people from particular racial backgrounds, single parents, people who might have a mental illness or a disability."

Cairns already has one of the nation's highest rates of homelessness per capita and a residential property vacancy rate of around one per cent.

While the data was not available for what impact the short-term-stay boom has had on the Cairns rental market, Dr Flanagan said other cities like Hobart have seen a drastic decrease in housing stock for long-term tenants.

"There's increasingly evidence that it has had an impact, that it's contributed to a reduction in long-term private rentals or that it's destabilised rental markets," Dr Flanagan said.

"We're seeing those impacts across the country but it's obviously quite localised in the way that they play out."

Dr Flanagan also blamed decades of underinvestment in social housing as a major contributing factor for homelessness.