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This was meant to be Airbnb’s year. The year when the company, which was recently valued at between $50bn and $70bn, went public. It is now worth less than $30bn. Even before coronavirus, Airbnb was struggling to turn scale into profits. The company lost $674 million last year as costs soared to $5.3bn. Behind these numbers are Airbnb’s hosts, who range from retiree holiday home owners to investors with vast but flimsy rental empires. While the former will lament the loss of a reliable secondary income, the latter now face financial ruin as their business model – a sort of ponzi scheme built off the back of Airbnb’s market-busting rental yields – turns to dust in the grip of coronavirus.
There’s an article in the Wall Street Journal today titled ‘A Bargain With the Devil’-- Bill Comes Due for Overextended Airbnb Hosts. Unfortunately, WSJ is a paid site, so most here probably won’t be able to read it, but it’s worth the read if you have access. There’s not much information in it that most of us don’t already know, but it doesn’t have the same sleazy feel of having an agenda or taking sides that almost all articles on Airbnb have had in the past several weeks (e.g. the Wired Magazine article linked above).
For some reason I didn’t hit the paywall! I thought the WSJ article was similar to the Wired minus the hyperbole. The AirBnB empires built on credit are now collapsing. I’ve seen individual hosts discuss this in my city. The local “pros” began switching to LTR in late February. I’m glad journalists are starting to take the topic up. I really want to see how LTR prices are affected as former STR units come on the market. Who was right in the “AirBnB v. Affordable Housing” debate?
Doesn’t the covid variable makes this an unreliable result? If there is a recession prices are going to be down anyway. But people will also have less income so things still won’t seem very affordable.
I think Airbnb will survive but the STR market is changing. If Airbnb doesn’t survive there will be another way to get bookings.
People who purchased properties they can’t support without ST rentals will probably be in trouble.
People with STRs and a traditional income may find themselves without that job. Originally they were not over-leveraged but now they may not can support the STR Property.
STRs will eventually return. Lasting until then will be the challenge.
None of us can continue doing business as we were, whether it is our cleaning processes, booking back to back rentals, what we provide (e.g. foods, cleaning supplies, paper product, etc.). We will figure it out.
IIRC, during economic downturns rents don’t significantly drop in urban areas that already have housing affordability issues. But a lot has changed since the 2008 recession. Airbnb itself is a variable that wasn’t a significant factor in the housing market last time, yet alone covid. I hope a journalist or academic runs the numbers. Here in Seattle, I know many hosts have moved to LTR, and I’d love to see the data on how that has affected the rental market.
I think it’s not really relevant. Anymore than “the other factors” issue. Just because every single city doesn’t have an affordable housing issue and the ones who do may have other contributing factors doesn’t mean that Airbnb isn’t having an effect on affordable housing. The conversation doesn’t imply that it is all-encompassing.
Supply and demand have an effect and Airbnb changes the supply (dramatically in some places). And I don’t think it’s only about supply. It also effects those that don’t stay in STR but go back to LTR. Places get fixed up and then the prices are higher if they do go back to LTR. There are also the expectations of income of former hosts who keep prices higher when they go back to LTR. And I don’t think it’s possible that its effects in some places doesn’t eventually have effects in other places (e.g. it’s not happening in a vacuum).
Just saying—Airbnb’s affect on affordable metropolitan housing is mentioned both in this thread and others. Airbnb didn’t create the STR market. VRBO & Homeaway & Craigslist existed prior to Airbnb.
The anti-Airbnb press calls the rented house trashed by partiers an Airbnb rental although it was really rented via VRBO. The press blames Airbnb rentals for landlords converting their rental units to STR.
This feels like we are falling into the same trap.
True that as far as the media is concerned Airbnb has become the generic name for short term rental accommodation. In just the same way, we use brands as nouns - Band Aid, Jet Ski, Kleenex etc.
STR has been around for hundreds of years and the only thing that today’s platforms have done is move it online, the same as shopping, banking and so on. And they made it easy for what I’ve heard referred to as the ‘hobbyist’ host to create a business. By the same token, investor hosts jumped on the bandwagon. Some of these, especially the investor hosts, will have a hard time, if indeed they can survive.
I always hate that term “hobby” when referring to an Airbnb host- it gets used mostly by big, multi-property earners who seem to think that just because someone only hosts a private room in their home or a suite or maybe a granny flat, it can’t be considered to be any kind of real job. They seem to think that if you actually have interaction with your guests, maybe have a chat over coffee in the morning, that makes it a “hobby”.
A hobby is something people do in their leisure time for pleasure. I’ve never considered pulling other people’s hair and soap scum out of the shower drain, washing mounds of bedding and towels, scrubbing every nook and cranny of the guest space on my hands and knees to be what I would call a a hobby.
And this is also perpetuated by people who say that hosts “shouldn’t depend on STR income”. It’s a business and a job and you could really say that about any business or any job. There are many that are more risky and less reliable, but for some reason it gets singled-out. I mean, it’s not like we opened a restaurant or something
I suppose it depends on your definition of “ok” and of “when”. In the short term, post lock downs, in many countries travellers may be booking, but until borders reopen fully it’ll be limited to the domestic market.
Medium term, say over the next twelve months, I don’t think anyone really knows what the effect will be on the travel and hospitality industries. Many commentators are forecasting increased flight prices, especially in Europe. The likelihood is that short city break market will be reduced, drastically, which will hit many STR hosts in the most popular destinations.
As regards to Airbnb, they’ve been burning through their cash, even before this current crisis, so who knows. The increased service fee to guests now puts them on a par with BDC, when you look at the hosts return versus the overall cost of the booking.
BDC are a far better company to do business with, in my opinion, and we’ll be concentrating our efforts to get guests from them and HA once things settle down a bit.