AirBnB protest ad, photo by Alper Çuğun, Aug. 7, 2016, https://www.flickr.com/photos/alper/ https://creativecommons.org/licenses/by/2.0/
Airbnb, the online home-sharing marketplace credited with revolutionizing travel and creating a new income stream for homeowners, is reaching saturation and partly to blame for the housing crisis, according to some market watchers.
“The AirBnB phenomenon is a perfect example of how an interesting idea gets completely over-leveraged by people who see nothing but dollar signs,” financial analyst Michael A. Gayed wrote in the Lead-Lag Report. “Then we get the inevitable bust that implodes and resets the entire market. We saw it during the tech bubble in the early 2000s. We saw it during the financial crisis. It looks like we could be setting up to see it again in real estate.”
Did Airbnb destroy the American dream of owning a home?
Here are five things to know.
The U.S. had 660,000 Airbnb listings in 2022 and 7 million listings worldwide.
In 2021, Airbnb saw a 280.2 percent increase in net income after suffering a setback during the covid pandemic in 2020, like other travel-related businesses.
Revenues increased by 40 percent in 2022, a second year of growth after a 31 percent decrease in 2020.
However, Airbnb’s market value has experienced a decline of 34.3 percent since the beginning of 2022, wrote David Anthony Scott, a marketing and management consultant for vacation rentals, small lodgings and hotels, in an article posted on LinkedIn.
Revenues per listing dropped by nearly 50 percent in May 2023 compared to May 2022 in cities including Phoenix, Arizona, and Austin, according to data from AllTheRooms, a provider of short-term rental analytics. This stoked fears of a housing market crash, Newsweek reported.
Based on AllTheRooms data, Nick Gerli, CEO of Reventure Consulting, a company that offers advice to homebuyers and real-estate investors, sent a tweet that went viral, saying he believes that “the Airbnb collapse is real.” Gerli warned his followers to “watch out for a wave of forced selling from Airbnb owners later this year in the areas hit hardest by the revenue collapse.”
Not everyone accepts the accuracy of the data from AllTheRooms, Newsweek reported.
Revenues per listing are down for Airbnb in 2023 by a little more than 3 percent — not by 40 percent — argued economist Jamie Lane, senior vice president at AirDNA, a company that tracks performance and monitors trends in short-term rentals.
Data from AllTheRooms shows 1 million Airbnb/VRBO rentals in the U.S., Gerli wrote in late June, “Compared to only 570k homes for sale. Creates huge home price downside if struggling Airbnb owners elect to sell.”
All the areas where Airbnb revenue losses per listing are approaching 50 percent—eastern Tennessee, central Texas, the Pacific Northwest and the Mountain region—are likely to see less-seasoned Airbnb owners being forced to sell, according to Gerli.
Airbnb owners who bought property in the last two years and have a mortgage are in trouble, Gerli wrote. “They got in at a high price. And have a high monthly payment. And little margin for error. They could be some of the first to sell later in 2023 when the season ends.”
The pandemic slowdown followed by post-pandemic travel demand and a massive increase in Airbnb supply caused an inevitable crash, according to Gerli.
“The pandemic is over. Fewer people are working from home/vacationing in states like Montana, Texas, and Tennessee,” he wrote. “So the demand is way down. Just as the Airbnb supply went way up. So you get a crash.”
People saw the success of owning an Airbnb and started getting greedy, Gayed wrote.
“If you’re able to rent out a room for X dollars, you can make even more renting out the entire house. And if you can do this with one house, you can do it with five houses. Then, the sky becomes the limit in terms of the income you can generate on AirBnB properties.”
Wanna-be real estate moguls started buying up properties to convert them into AirBnB rentals, and figured the income would pay the mortgage on their permanent residence, making their homes ‘(and hopefully properties as well) “rent-free.”
“It’s a fine idea that works for a while until too many people try to pile in and it renders the entire market unstable,” Gayed wrote.” That’s what’s happening now and it threatens to take down the entire real estate sector with it.”
Airbnb property owners or hosts can make far more money renting short-term than they can by collecting monthly rent from traditional renters. This may help explain why the sale of vacation homes skyrocketed by 44 percent in 2020. Many people and real estate investment firms snatched up property to use as short-term rentals, The Motley Fool reported.
In fact, about 25 percent of hosts on the Airbnb platform own almost two-thirds of the listings, contributing dramatically to the growth of Airbnb, according to the watchdog group Inside Airbnb. The return on investment is just that good.
Airbnb hosts grabbing property the second it hits the market reduces the housing supply for families and other would-be homeowners. Renters have been hit especially hard as rental costs rose around the U.S. by an average of 15 percent between 2021 and 2022.
“There’s nothing inherently wrong with short-term rentals,” Dana George wrote for The Motley Fool. “The problem is that local governments have a tough time reining in the number of short-term rentals operating in their cities. The overwhelming number of Airbnbs makes it difficult to provide enough housing for permanent area residents.”
