Yahoo Finance ‘Every single house on our street’ is becoming an Airbnb, says host amid surge in listings
Los Angeles-based YouTubers Kristen and Michael knew their only chance at buying an income-generating property during the pandemic was to venture into the California desert. Last year the couple bought and renovated a 2 bed-1 bath ranch near Joshua Tree National Park. The couple, who asked to go by their first names only, listed it on short term rental platform Airbnb (ABNB) as "Seventh Ray House."
“Even during the slow months, even during the summer, we got booked over every weekend,” Michael told Yahoo Finance.
Roughly a year in, and dozens of YouTube videos about the experience later, the couple is definitely noticing more competition.
“Every single house on our street that has sold within the last year is becoming an Airbnb or has become one,” said Kristen. “And we were one of the first in our neighborhood, actually, that did that.”
Airbnb listings skyrocketed during the pandemic. As it stood in September, 54% of active listings have been added to the platform since 2020, according to AirDNA, a short term rental (STR) data and analytics provider.
Active Airbnb offerings in the third quarter of 2022 jumped 17.5% year-over-year, and 22.1% from the same period in 2019.
The spike in short term rental listings coincides with the pandemic housing frenzy as mortgage rates touched all time lows last year.
Property Management Inc, a property management and real estate services franchise in the U.S. says it added 46% STR supply to its portfolio over the last 12 months
“We’re going to see this [short term rental] industry grow by 2031. This is not going to slow down. We see the money coming in,” PMI’s executive director of short term rentals Marianne Heder told Yahoo Finance.
Throughout much of the pandemic, hosts were able to command top dollar for their dwellings. Remote work and consumers flush with cash helped fuel demand. Airbnb average daily stays cost 5% more than a year ago, and 40% more compared to two years ago.
Rental requirements by some hosts such as cleanup tasks before check-out, and a lack of transparency in upfront pricing on the platform recently drew criticism via the viral hashtag #Airbnbbust. (The company recently announced changes to address those complaints.)
The online backlash also highlighted screenshots of some STR hosts wondering why their occupancies had recently fallen. That prompted predictions of what could happen to the short term rental market amid a much anticipated recession.
But for any hosts experiencing fewer bookings, the problem may have more to do with supply than demand, which remains strong.
Airbnb recently posted its most profitable quarter ever. Nights and experiences booked in Q3 grew 25% compared to the same period last year. Globally, guest arrivals during the quarter exceeded 90 million—a record level.
“Despite a lot of consumers pulling back on spending, the one area that I haven't seen them pull back on as much is travel,” Brian Chesky, co-founder and chief executive officer said during the company’s earnings call on November 1st.
“Just like people continue to travel this quarter, we expect really strong demand for Airbnb next year,” he added.
A lot of people thought this was 'going to be like printing money'
Hosts Kristen and Michael shared they saw a slowdown in bookings in September, though they didn't have comps to compare with last year. It also could've partly had to do with Airbnb's algorithm, different travel habits, and again—more listings.
“One of the things that we've seen is with the influx is, you have to differentiate yourself somehow," said Michael. “Being like, how can we make this listing competitive.”
He added, "A lot of people that thought that getting into this was just going to be like printing money. I think they're starting to find out that it's a business."
More listings, higher property maintenance costs, and a slowing economy could prompt STR owners in certain areas to expand into other rental strategies, says PMI’s Heder.
“This industry will require you to pivot, and pivot quick,” she said. “I’m predicting that it will be more of a mid-term rental type market.”
If online searches are any indication of what's to come, the industry could see more hosts entering the market.
“In the last year alone, we've had 30 million visitors come to Airbnb to learn about hosting,” Airbnb’s Chesky recently told Yahoo Finance Live.
The company started during the Great Recession as a way for home owners to earn extra income.
“I think this is going to be in some ways similar to 2008,” said Chesky. “A lot of people that weren't considering hosting are probably now considering it.”
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
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