Athe irbnbs are empty. Or so it seems to some Airbnb hosts, even though the company has reported its “the most profitable quarter ever” tuesday.
Some social media users have been speculating for weeks that ‘the Airbnbust is upon us’, as one viral tweet read. The conversation swept across a number of social platforms, from Twitter to Facebook to Reddit, and it also includes other short-term rental platforms like VRBO.
Their concerns are well-founded — some short-term rental hosts are seeing a sharp drop in occupancy rates as the holiday season approaches. But it’s not because people don’t want to travel. Instead, market analysts say many US Airbnbs are empty because so many wealthier people and investors have listed short-term rentals on the site, following a pandemic-fueled boom. .
The number of short-term rental listings available in the United States soared to 1.38 million in September. That’s a 23.2% year-over-year increase, according to rental analytics firm AirDNA.
This means that hosts are feeling the pinch of a high-supply market and consumers could be on the verge of getting better deals, after months of soaring accommodation prices.
Explain the surge in supply
“2021 has been a banner year for short-term rentals in the U.S., largely due to pent-up demand following the shutdowns that significantly boosted domestic travel,” said Jamie Lane, vice president of research at AirDNA. “Over the past few months, supply has increased to catch up and even outpace demand growth, driving down occupancy as bookings are spread across more properties.”
This is partly due to the number of more affluent buyers who have purchased second homes since the start of the pandemic. Buoyed by then-low interest rates, extra savings and the ability to work from anywhere, white-collar workers have flocked to buy vacation properties over the past two years.
A report this week by real estate broker Pacaso found that sales of luxury second homes and investment properties were up around 235% from April to June this year compared to pre-pandemic levels. These are homes sold for $1 million or more that are designated for seasonal or recreational use. by Pacasso the researchers found that sales of these properties increased nearly 25% year over year during this period.
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Last year, months of pent-up travel demand sparked a surge in short-term rental bookings at many second-home hotspots. These occupancy peaks led to a sharp increase in short-term offers, as former long-term owners moved to short-term owners looking for higher returns and institutional investors have started picking up masses of properties for rent on Airbnb and other platforms.
“Much of the supply in these markets has shifted from the sell market and the long-term rental market to the short-term rental market amid a surge in demand for Airbnbs and other vacation rentals,” says Taylor Marr, deputy chief economist. for Redfin real estate brokerage.
Now, says Marr, things have changed: “Rapidly rising mortgage rates and fewer homeowners motivated to sell now have kept house prices high and the affordability crisis raging.”
The agreement with high demand
Hosts complaining of low bookings weren’t expecting anything: Occupancy rates fell in 31 of the 50 largest U.S. short-term rental markets from July to September, according to AirDNA. In August, AirDNA reported that markets where supply had increased by more than 50% saw average occupancy declines of more than 10% and saw revenues fall by 8%. “Properties that are in the markets with the strongest growth in supply experience the biggest declines in performance,” Lane says.
But with some Airbnb hosts experiencing declining occupancy rates and the country’s economic outlook uncertain, Airbnb is having a banner year overall.
“Demand continues to grow each month, as do Airbnb’s bookings and revenue,” says Lane. “Although hosts in some markets are seeing a correction after a pandemic-driven boom, overall demand remains very strong and we are not yet seeing an ‘Airbnb meltdown’.”
Airbnb itself says that in turn, hosts are successful in booking guests on the platform. “Amid new economic pressures, more and more people are looking to take advantage of the space they have to earn extra income, and fast, with most newly activated listings being booked faster than there is a year,” said Liz DeBold Fusco, spokeswoman for Airbnb.
However, even though people still want to book Airbnbs, there are a lot more choices. This has led to lower occupancy rates in some markets, which has strained some hosts.
Jim Ewing is an Airbnb host whose social media post about his property’s occupancy rates sparked the original viral tweet about an Airbnb bankruptcy. He had posted on a Facebook group “Airbnb Superhosts” about his struggles. Ewing told TIME his property in Desert Hot Springs, Calif., went from 80% occupancy to 0% last spring and hasn’t rebounded since. “We haven’t had a single booking since June,” he says.
The town of Desert Hot Springs, where Ewing began listing his Airbnb property last October, is located in the Coachella Valley. It’s one of the markets where occupancy rates have dropped the most by percentage over the past three months, according to AirDNA.
“When we first signed up last October, we had every weekend covered. And then from November to April, we had between 70% and 80% occupancy every month,” he says. “This year we had no one in October and we had no one booked for November…So it was extremely slow.”
The advantage for travelers
So far, Airbnbs’ high supply hasn’t lowered vacation rental prices for travelers. AirDNA reports that, in September, average daily rates posted their highest annual growth rate since April. September also marked the first month since April in which the growth in the average daily rate exceeded the rate of inflation.
However, in mountain and lake destinations where occupancy rates have fallen, the average daily growth rate was significantly lower in September. According to AirDNA, this means that if occupancy rates continue to fall in more destinations, fares are likely to be lowered as hosts try to secure more reservations.
The short-term rental market is much more competitive than before, says Neal Carpenter, owner of the short-term rental advisory service The Air Butler. Carpenter has been an Airbnb host for eight years and currently hosts 17 units, all located within 10 minutes of downtown Nashville, Tenn.
“In Nashville, an ad that might have been quite successful five years ago is probably no longer competitive if the host hasn’t updated the property, amenities, photos, all those sorts of things,” he said.
For travelers, increased supply means the ability to be more discerning about the properties and, by extension, the hosts they deal with. If a host is unfair to guests by assigning them menial tasks or charging them unreasonable fees, it won’t benefit their business, Carpenter says. “If you [as a host] ask people to do more than what is fair, reasonable and common, that’s a problem,” says Carpenter. “If you’re trying to charge exorbitant cleaning fees and profit from it, that’s questionable behavior.”
Providing personalized customer service will have a ripple effect on future bookings, as customers will always look for properties that have good reviews, Lane says. “We see properties with good reviews, reasonable cleaning fees, and popular amenities able to maintain and even increase their occupancy levels,” he says. “It’s becoming more and more important for hosts to pay attention to their performance and guest reviews.”
What’s next for Airbnb pricing
If interest rates continue to rise, investing in short-term rentals will become an increasingly unattractive prospect, Lane says. This could lead to a slower rate of supply growth, meaning that this excess supply could be temporary.
“The growth of short-term rental listings is driving down nightly prices and reducing the profitability of owning these vacation rentals, which should translate into longer-term rental supply, helping to drive down rents. “Marr said.
In the meantime, Neal says Airbnb hosts should “put [themselves] in travelers’ shoes if they want their property to stand out in a crowded field. “If you notice a drop in bookings, look at your competitors and make consistent updates to your property,” he says.
For some hosts, this tougher landscape means it’s time to get out of the short-term rental game. Ewing says he is currently looking for a long-term tenant for his property instead of continuing to rent it out for shorter periods on Airbnb.
“It seems like a lot of people are fed up with Airbnb and angry with the way some hosts are treating them now,” he says. “I’m curious to see if my timing to exit the market in the short term is the right choice, and if in six months or 12 months Airbnb becomes a bad investment for people.”
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