Photo Credit: Photo Credit: Brandon Griggs
Too Many Rich People Invested In Airbnbs, More Than A Million Remain Unoccupied
The trend of the Airbnb boom appears to be on the decline for many hosts. Threads across social media platforms from Twitter to Reddit are revealing the frustrations users feel when booking. Now, hosts are feeling the impact as travelers opt for alternate accommodations.
According to market analysts, many U.S.-based Airbnbs are sitting empty because wealthier people and investors listed short-term rentals on the site, in an attempt to capitalize on the pandemic-fueled travel influx.
Short-term rental listings increased significantly to 1.38 million in September, a 23.2% year-over-year increase, according to AirDNA.
Too many rich people invested in Airbnbs. Now they’re sitting empty. A record breaking 1.38 million stays are unoccupied according to a new study.. pic.twitter.com/NOXB60aBqD— SAY CHEESE! 👄🧀 (@SaycheeseDGTL) November 8, 2022
Supply Increased As Demand Slowed Down
The surge in supply is due, in part, to a 235% increase in luxury second home and investment property sales from April to June of this year compared to pre-pandemic levels, as noted by TIME. These homes serve as seasonal or recreational use properties, making them prime for Airbnb when their owners aren’t using them.
As lockdowns came to an end, pent-up travel demand led to a spike in short-term rental bookings. The lucrative market attracted former long-term landlords to shift toward shorter stays while institutional investors started scooping up large quantities of properties to rent out on Airbnb and other platforms.
“2021 was a bumper year for short-term rentals in the U.S., largely thanks to pent-up demand after lockdowns giving a huge boost to domestic travel,” says Jamie Lane, AirDNA vice president of research. “Over the past few months, supply has increased to catch up to and even overtake demand growth, pushing occupancy down as bookings are spread across more properties.”
Occupancy rates fell in 31 of the top 50 largest U.S. short-term rental markets from July through September, according to AirDNA. In August, AirDNA reported that markets where supply had grown by more than 50% had an average occupancy decline of over 10% and saw revenues drop by 8%. “Properties that are in markets with the greatest supply growth are seeing the biggest declines in performance,” Lane says.
Despite the squeeze some hosts are feeling, Airbnb reported its “most profitable quarter ever.”
“Demand is still rising every month, and so are Airbnb’s bookings and revenue,” says Lane. “Although hosts in some markets are seeing a correction after a pandemic-driven boom, on the whole, demand remains very strong and we aren’t yet seeing an ‘Airbnb bust.’”
The Good News For Travelers
The increase in supply means more options to choose from. While prices remain high, for now, increased supply means the ability to be more selective about the properties and hosts travelers decide to book with.
If a host is unfairly assigning menial chores to guests or making them pay unreasonable fees, it’s not going to benefit their business, says Neal Carpenter, the owner of short-term rental consulting service The Air Butler.
“If you [as a host] are asking people to do more than what’s fair and reasonable and common, that’s a problem,” Carpenter says. “If you’re trying to charge exorbitant cleaning fees and profiting, that’s questionable behavior.”
If occupancy rates continue to drop in more destinations, price rates are likely to be pushed down as hosts bid to get more bookings, according to AirDNA.
“The growth of short-term rental listings is causing nightly prices to fall and reducing the profitability of owning these vacation rentals, which should result in more long-term rental supply, helping to bring rents back down,” says Taylor Marr, deputy chief economist for real estate brokerage Redfin.
A Word Of Advice For Hosts
Neal encourages Airbnb hosts to “put [themselves] in travelers’ shoes” if they want their property to stand out. “If you’re noticing a dip in bookings, look at your competition and make consistent updates to your property,” he says.
Another Airbnb host, Jim Ewing, shares, “It seems like a lot of people are kind of fed up with Airbnb and they’re angry about how some hosts treat them now. I’m curious to see if my timing for leaving the short-term market is the right move, and if in six months or 12 months, Airbnb becomes a bad investment for people.”