Landlords switch to long rentals as COVID hits European short-stay market on Airbnb

Where regulators have failed, the pandemic has succeeded.

As countries impose severe travel restrictions and virus variants spread across borders, Airbnb owners are ditching short-term stays for tourists and betting on long-term rentals for residents instead.

The change in preference has hit the company hard.

In 2020, revenues fell 30% compared to 2019from 4.8 billion dollars to 3.4 billion dollars (from 4.07 billion euros to 2.89 billion euros).

The double-digit drop, however, did not deter the platform from going public on Wall Street. In December, the shares were initially listed at $68 each and have since tripled in value, although they have had several ups and downs.

Airbnb is now hoping that last year’s market volatility and consumer reluctance give way to a strong tourism rebound in 2021, fueled by widespread vaccination.

But the extreme impact of COVID-19, which has altered virtually every aspect of life, could turn temporary changes into permanent behaviors.

“Many landlords have decided to take their homes out of the short-term rental market and into the long-term rental market,” said Mario Breglia, president of Scenari Immobiliari, an independent research center focused on real estate, to Euronews.

“There was a sudden increase in the supply of rental homes in Italy that we hadn’t seen in decades. Owners did their math and preferred to earn a little less over a year, but with a good tenant who always pays.”

Popular European destinations such as Budapest, Rome and Amsterdam are seeing a sharp drop in the number of Airbnb listings available. In Prague, registrations fell by 50% in 2020, according to analyzes by AirDNA.

Rise and backlash

Since its launch in 2008, Airbnb has become the go-to website for affordable housing. Its global popularity is two-fold: on the one hand, it offers budget-conscious travelers significantly cheaper options than hotels; and on the other hand, it offers owners an easy way to earn money from their properties.

Airbnb, which stands for “Airbed and Breakfast”, is currently available in 100,000 cities in more than 220 countries and regions around the world. The platform has around 5.6 million active listings and 4 million hosts (owners). According to company dataeach Airbnb host earns an average of $7,900 (€6,710) per year.

But as his popularity and name recognition grew, so did the risk of a backlash.

The expansion of Airbnb accommodations for tourists has been linked to a sharp rise in rental prices for residents, especially in Western capitals and other major cities. A study 2019 by Harvard Review Business found that “a 1% increase in Airbnb listings is causally associated with a 0.018% increase in rental rates and a 0.026% increase in house prices”.

Considering that the company’s average year-over-year growth is around 44%, “this means that, overall, colocation growth through Airbnb contributes about a fifth of the increase annual average rent in the United States,” according to the study. said.

Cities like Paris, Barcelona, ​​Berlin and New York have already introduced measures and regulations to limit the number of short-term listings that each owner can offer and the duration of these rentals.

The backlash against the company is similar to other face-offs between digital and traditional businesses, such as taxi drivers versus Uber, newspapers versus Facebook, and movie theaters versus Netflix.

Airbnb defends arguing that its business model “directly benefits communities”, helps owners pay their bills and allows tourists to spend more money on local businesses.

The European countries that recorded the greatest economic benefit in 2018 were France ($10.8 billion), Spain ($6.9 billion), Italy ($6.4 billion), United Kingdom ($5.6 billion), Portugal ($2.3 billion), Germany ($2.3 billion), Greece ($1.4 billion) and the Netherlands ($1.3 billion), the company estimates.

Tourism-dependent countries like Spain and Greece are now leading the cause for an EU-wide vaccine passport, which the European Commission introduced – significantly modified – at the beginning of March with the aim of making it operational before the summer. The green pass is expected to help the travel industry, including Airbnb and other hospitality services, bounce back from a calamitous 2020.

Affordable social housing

The debate now focuses on how to coexist with Airbnb, whose main intention is to continue to grow, and how to deal with its harmful side effects.

The International Union of Tenants argues that European governments should use money from the EU’s €750 billion recovery fund to follow the example of Lisbon and Barcelona. As two of Europe’s most attractive destinations, both cities have been increasingly beset by so-called ‘hit-and-run tourism’, a term applied to short, intense stays .

Seeing that rent prices were becoming prohibitive, local councils in Lisbon and Barcelona began buying houses available on Airbnb and turning them into social housing.

“We now have a huge amount of money coming to European states to kick-start their economies. Many of them think this is an opportunity to change the whole housing market and use the EU [recovery fund] money to build a non-profit housing sector towards more affordable long-term housing,” said Barbara Steenbergen, Executive Committee Member of the International Union of Tenants.

However, EU competition law only allows public investment in housing for low-income people, leaving out the middle class, which also suffers from unsustainable rental prices across the continent.

Members of the European Parliament urge the European Commission and national governments to act and recognize “access to decent and affordable housing as an enforceable human right”.

“A home is considered affordable if the tenant’s remaining budget is at least enough to cover other essential expenses. While this threshold is currently set at 40%, more than a quarter of European tenants of commercial accommodation spend a higher percentage of their income to rent,” lawmakers said in A resolution adopted in January.

In a thinly veiled attack on Airbnb, MPs pointed out that “the expansive growth of short-term vacation rentals is taking homes off the market and driving up prices, and can negatively impact livability in centers services” and called on the Commission to leave wide discretion to national and local authorities to “define proportionate rules for hospitality services”.

The text collected 352 votes for, 179 against and 152 abstentions.

Leïla Chaibi, a French MEP member of the La Gauche group, was one of those who supported the resolution.

“When you allow investment in affordable public housing, you basically influence the private stock because it drives the price down. You have the market advantage of low-cost housing, so I think that’s the main tool to use,” Chaibi told Euronews.

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