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Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 310 | August 18-24, 2023

Is the Airbnb Dream Dead?

By Natalie Lung and Jesse Levine | Bloomberg Businessweek | August 10, 2023

Listen the Extractive Summary of the Article

Founded in 2008 as a way for travelers to find unique and affordable places to stay around the world, Airbnb Inc. has not only disrupted the hotel industry with its success but also created a whole new class of homebuyer: the short-term rental speculator. But lately hosts have hit a wall: Short-term rentals in Orlando and the surrounding suburbs saw revenue per available room drop 6.4% in the first half of this year. Online, it’s been dubbed an “Airbnbust.” Creeping angst about the phenomenon started spreading last fall on the internet and in host chat groups. 

That may be an exaggeration. As a company, Airbnb is still reaping the benefits of high interest in travel, and people are still seeking out its listings around the world. It recorded 115 million nights, tours and events booked in the second quarter, up 11% from a year ago. Its share price is up over 60% this year, riding high on a recent earnings report that named this year’s second quarter the most profitable one yet. But Airbnb’s corporate earnings don’t tell the whole story either. The market is experiencing a shakeout that will reward winners—with the right location, amenities and price—and punish losers.

The pandemic has a lot to do with the turmoil. At first, as people sought sanctuary from crowded cities and relished the prospect of a yard and a home office, demand spiked for rentals on sites like Airbnb and Expedia Group Inc.’s Vrbo.   As the Covid-19 restrictions subsided and people returned to their former lives in cities, they rented out the homes they’d bought, flooding the market. Airbnb ended last year with 6.6 million global active listings, excluding China, some 900,000 more than it had at the beginning of the year. By the end of the second quarter of this year, it had more than 7 million. That glut has led to as much as a 13% decline in host revenue in 32 of the top 50 largest short-term rental markets in USA  in the first half of this year.

It’s not that people aren’t traveling. Open Instagram: It seems as if half of its users are in Italy now. But what kind of travel and where has had a big impact on Airbnb hosts in the US. Americans are prioritizing trips to Europe and Asia this summer after some of the world remained closed to international travel last year, while a strong dollar is discouraging foreign guests from visiting the US. Extreme weather conditions such as the heat dome that plagued the Southwest and flooding in the Northeast have also deterred visitors.

Hotels, shunned during the pandemic for their germy common areas and elevators, are popular again, not least because they don’t ask guests to take out the trash. A shift in work policies has also called more people back to the office, giving them less flexibility to skip town for weeks or months at a time.

Making good money from a short-term rental isn’t as easy anymore as leaving the key in the mailbox and clean sheets on the bed. As Airbnb’s popularity has increased, so have guests’ expectations. The surge in demand has led to high turnover, and many hosts have come to depend on management companies to deal with cleaning and maintenance and have increased their cleaning fees as a result. With so many available properties, guests can afford to be picky. High-end kitchen appliances and modern furnishings are the new normal. Amenities such as pickleball courts and the ability to bring pets can help listings get booked.

3 key takeaways from the article

1. Founded in 2008 as a way for travelers to find unique and affordable places to stay around the world, Airbnb Inc. has not only disrupted the hotel industry with its success but also created a whole new class of homebuyer: the short-term rental speculator.
2. But lately hosts have hit a wall: Short-term rentals in Orlando and the surrounding suburbs saw revenue per available room drop 6.4% in the first half of this year.  Online, it’s been dubbed an “Airbnbust.” That may be an exaggeration. Airbnb recorded 115 million nights, tours and events booked in the second quarter, up 11% from a year ago. Its share price is up over 60% this year. 
3. But Airbnb’s corporate earnings don’t tell the whole story either. The market is experiencing a shakeout that will reward winners—with the right location, amenities and price—and punish losers.

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Topics:  Hospitality, Accommodation